AppLovin posts stellar 59% jump but SEC probe looms large

Shares of AppLovin climbed more than 5% in after-hours trading Wednesday after the artificial intelligence-driven advertising platform delivered first-quarter results that beat Wall Street on every major measure. Revenue surged 59% year over year to $1.84 billion, adjusted earnings cleared estimates and profit margins remained among the highest in the technology sector. The results extended AppLovin’s streak of beating revenue expectations for every quarter over the past two years — a run of consistency that has made it one of the more closely watched names in AI advertising, despite the controversy that has followed the company in recent months.

A decisive beat across the board

AppLovin posted adjusted earnings of $3.56 per share in the first quarter, clearing the $3.49 consensus estimate compiled by FactSet. Revenue of $1.84 billion surpassed the $1.77 billion Wall Street had projected, representing a 59% increase from the $1.48 billion the company reported in the same period of 2025. Adjusted EBITDA of $1.56 billion rose 66% year over year, topping the $1.50 billion analyst estimate and reflecting a business that continues to generate profit at a pace that few technology platforms can match.

The after-hours gain of more than 5% to $493 followed a regular session in which shares closed down nearly 2% at $468.83 — a drop that reflected the cautious mood that has surrounded the stock for much of 2026. The after-hours pop signals that at least some investors believe the strength of the fundamentals is significant enough to cut through the noise that has weighed on the stock all year.

A rough stretch despite strong fundamentals

AppLovin‘s financial results have continued to impress throughout its period of controversy, but the stock’s performance has told a different story. The company ended the first quarter down 44% — the largest percentage decline among S&P 500 companies during the period — a drop driven less by the underlying business than by a combination of external factors. The stock remains down 30.4% for the year through Wednesday’s close, though it has gained nearly 55% over the trailing 12 months, a gap that reflects the divide between short-term sentiment and longer-term conviction among investors who believe in the platform.

The SEC probe that won’t go away

The most significant cloud over AppLovin’s stock is an ongoing probe by the Securities and Exchange Commission into whether the company violated platform partners’ service agreements to enhance ad targeting. Reuters reported in February that the investigation was still active and ongoing, while noting the agency had not accused AppLovin or its officials of any wrongdoing. Short sellers have amplified the pressure with multiple critical reports — the most recent arriving at the end of March — accusing the company of impermissibly pulling user identifiers from apps operated by major platforms including Google, Meta, Snap and TikTok to improve the targeting effectiveness of its Axon advertising engine.

What AppLovin actually does and why it matters

AppLovin’s platform connects mobile app developers and game publishers with advertisers by using AI to match the right ads to the right users at scale. Its Axon engine drives that process, analyzing behavioral data to deliver targeting precision that traditional digital advertising cannot replicate. The company has been expanding aggressively beyond its mobile gaming base into e-commerce advertising, a vertical analysts regard as the next meaningful revenue driver. Analysts project full-year 2026 earnings per share at approximately $15.79, representing a 57% year-over-year increase, with the e-commerce push seen as the primary catalyst behind that projection.

A gap between the business and the stock

AppLovin generated a full year 2025 total revenue of $5.48 billion, marking a 70% increase, while generating $1.31 billion in free cash flow in the fourth quarter alone. Few companies in the current market present as stark a divergence between financial performance and stock price behavior. The regulatory overhang and short seller pressure have kept institutional buyers cautious, creating a gap that Wednesday’s first-quarter results may begin to narrow — provided the SEC investigation moves toward resolution rather than escalation.

For investors who have held through a difficult stretch, the after-hours gain offered a measure of validation. Whether it marks the start of a sustained recovery will depend almost entirely on how the regulatory story develops.

Source: Barron’s