AppLovin, the top tech stock of 2024, jumps another 45% on earnings growth

AppLovin Shares rose 45% on Thursday after the online gaming and advertising company issued guidance that was well above estimates and reported better-than-expected earnings and revenue.

The stock jumped above $245 in early afternoon trading. It is up 515% this year, according to FactSet data, far outpacing all other tech companies valued at $5 billion or more. The rally has pushed AppLovin's market cap to over $80 billion.

LSEG said third-quarter revenue rose 39% to $1.2 billion, beating the average estimate of $1.13 billion. Earnings per share of $1.25 beat the average estimate of 92 cents.

For the fourth quarter, AppLovin expects revenue of $1.24 billion to $1.26 billion, representing growth of about 31% in the midrange. Analysts had expected around $1.18 billion.

AppLovin was founded 12 years ago and went public in 2021, sparking a wave of online gaming enthusiasm that has prevailed in the Covid era. Meanwhile, the company's gaming division is experiencing relatively slow growth, but its online advertising business is thriving thanks to advances in artificial intelligence that have led to improved ad targeting.

AppLovin attributes much of its growth to its AI advertising engine called AXON, especially since releasing the updated version 2.0 last year. The technology helps deliver more targeted advertising on the company's mobile gaming apps, and it also works for other studios that license the software.

The company said software platform revenue rose 66% to $835 million in the quarter, driven by improvements in AXON's models.

“As we continue to improve our models, our advertising partners will be able to successfully spend at scale,” the company said in a letter to shareholders.

While revenue is surging, Wall Street is particularly drawn to AppLovin's profitability. Net income in the quarter rose 300% to $434.4 million, or $1.25 per share, compared with $108.6 million, or 30 cents per share, a year earlier. The software platform had an adjusted profit margin of 78%.

“AppLovin continues to impress with outsized revenue growth and incredible EBITDA conversion,” Wedbush analysts wrote in a report Thursday. They recommend the stock as a Buy and increased their price target from $170 to $270.

AppLovin CEO Adam Foroughi, whose net worth rose by more than $2 billion to about $7.4 billion on Thursday, gave an update on the company's e-commerce pilot. The technology allows companies to offer targeted advertising in games.

“In all my years, it's the best product I've ever seen us bring to market, with the fastest growth, but it's still in the pilot phase,” Foroughi said on the earnings call. E-commerce “seems to be so strong that we think it will have a financial impact on the company in 2025 and then over the long term.”

—CNBC's CJ Haddad contributed to this report

REGARD: AppLovin “kills Unity”