AppLovin (APP) is quietly building an ad behemoth that could step on Amazon’s (AMZN) turf.
Once primarily known as a mobile game publisher, AppLovin has transitioned into a pure-play software and AI-driven ad tech company. It now acts as an infrastructure layer, connecting thousands of advertisers with mobile app publishers to sell ad space in real time.
“AppLovin should definitely be able to compete with DSPs [demand side platforms] like Amazon outside of the walled gardens if their AXON machine learning advertising engine continues to successfully onboard non-gaming advertisers,” Morningstar analyst Mark Giarelli told Yahoo Finance.
That engine, AXON 2.0, is the proprietary AI brain of the company. It uses massive datasets from mobile users to calculate which consumer is most likely to click buy for a specific product.
Giarelli’s bullishness on AppLovin is backed by a fiscal profile that makes even household AI names look sluggish. In a research note, Giarelli points to AppLovin’s Rule-of-40 score (a gold-standard metric combining revenue growth and operating margin), which recently clocked in at 151%. For perspective, Nvidia’s (NVDA) notched 120%, while Palantir (PLTR) came in at 114%.
This efficiency suggests that AppLovin isn’t just growing for the sake of scale, but is doing so by focusing on high profit and lean growth. Its stock has jumped 50% over the past year.
Bank of America lead analyst Omar Dessouky argues that Wall Street is fundamentally underappreciating a “second growth curve” for AppLovin. BofA expects AppLovin’s total revenue in 2026 to reach $9.3 billion, a forecast of nearly 70% growth compared to 2025.
Dessouky models $2.7 billion in 2026 e-commerce net revenue, which is the cut AppLovin pockets from online transactions. He estimates the platform will see $6.7 billion in total ad spend from its merchants.
This represents a leap from 2025, when AppLovin’s overall advertising revenue crossed $1 billion per quarter.
“Footprint growth is real and accelerating,” Dessouky noted. A critical part of this expansion is the “Axon pixel” — a snippet of tracking code that e-commerce merchants install on their websites. This pixel reports back to the AXON 2.0 engine, telling the AI which ads led to a sale so it can optimize the next round of targeting.
According to BofA’s third-party data, installations nearly quadrupled in late 2025 as merchants prepared for the holiday stretch. Fueling this is a key partnership with Shopify (SHOP), including a one-click integration that allows smaller merchants to sync their entire product catalog with AppLovin’s network.
This strategy lowers the barrier for thousands of direct-to-consumer (DTC) merchants as they look to bypass platforms like Amazon and find customers directly within high-attention mobile gaming formats. BofA has maintained a Buy rating and a $860 price target.
Moreover, AppLovin’s pivot to general merchant availability in the first half of 2026 could show Wall Street it’s missing an “asymmetric upside,” per BofA. The company is betting that 30- to 60-second ad videos are better suited for “educating and persuading” consumers on differentiated products — like health, beauty, and home goods — than the high-velocity feeds of Meta (META) or the search-heavy trenches of Amazon.
The shift also comes at a time when the broader ad tech hierarchy is being reshuffled. BofA points to the rapid consumer adoption of AI assistants, such as OpenAI’s (OPAI.PVT) ChatGPT, Google’s (GOOG, GOOGL) Gemini, Perplexity (PEAI.PVT), and Elon Musk’s Grok chatbot, as a fundamental threat to the click-and-search model.
This disruption is creating a clear divide between those adapting to a new reality and those falling behind. While the Trade Desk (TTD) has historically been the sector’s growth darling since its IPO in 2016, it currently finds itself in a “penalty box” until it can prove its resilience against Amazon’s encroaching influence, Morningstar’s Giarelli argues.
“Amazon, with its scale and financial strength, is a formidable competitor that can pressure TTD’s growth arc,” he said. Shares of TTD have plummeted roughly 73% in the last year amid slowing revenue growth and executive turnover.
Despite AppLovin’s momentum, the growth story is not without its thorns.
Skepticism continues to restrain the company’s valuation multiple as questions swirl around the black-box nature of the Axon engine and ongoing scrutiny from the Securities and Exchange Commission regarding data-collection practices.
The company has also had to play defense on the legal front. AppLovin has denied allegations of money laundering and market manipulation, recently slamming a report from short seller CapitalWatch that targeted its capital structure.
Giarelli noted that while regulatory probes don’t always result in fines, the risk of retaliation from the likes of Meta or Google — which could restrict AppLovin’s tracking pixels — remains a credible threat that keeps many conservative investors on the sidelines.
Ultimately, AppLovin’s trajectory in 2026 remains a classic asymmetric bet. If the e-commerce expansion scales as BofA’s data suggests, the company could see a massive re-rating of its stock as it moves beyond the gaming label. In a worst-case scenario, if it falters, it remains a cash-generating machine with a durable moat in the mobile world.
“Even as the market remains unconvinced, that skepticism sets the stage for positive surprise,” Dessouky said.
Francisco Velasquez is a Reporter at Yahoo Finance. Follow him on LinkedIn, X, and Instagram. Story tips? Email him at francisco.velasquez@yahooinc.com.
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