AppLovin (NASDAQ:APP | APP Price Prediction) might become a $1 trillion company in the next five years, which means the stock would have to more than quadruple from current levels. The adtech company uses artificial intelligence to optimize ad campaigns in real time, which requires much less maintenance for business owners. Growth rates have been impressive, and as it adjusts its services so that more small businesses can use it, AppLovin can bite into some of Facebook and Google’s online ad market share.
AppLovin Has A Large Unaddressed Market
AppLovin prioritizes online ad placements in mobile gaming apps, but it has expanded into apps in other industries. Its new Axon platform aims to serve more businesses and is gearing up for a broad rollout in 2026 after a successful launch for invite-only companies.
The market opportunity is significant since AppLovin can soon work with any business that wants AI-optimized campaigns. However, the adtech firm has still delivered excellent growth for current investors. Revenue surged by 68% year-over-year in Q3, and if that growth rate remains high, AppLovin may become a $1 trillion company by 2030.
It would follow in the footsteps of Facebook and Google as online advertising giants that reach a trillion-dollar valuation. Net income growth makes it even more likely, as profits almost doubled year-over-year.
Stock Buybacks Are On The Rise
Investors aren’t the only ones who are feeling good about AppLovin stock. The company’s executives told shareholders that they increased AppLovin’s share repurchase authorization by an incremental $3.2 billion, bringing the total authorized amount to $3.3 billion. This figure represents more than 1% of AppLovin’s market cap, and if the company makes further buyback upgrades, the stock may rise even more.
AppLovin certainly has the financials to support additional buybacks. The adtech firm wrapped up Q3 with $1.7 billion in cash and cash equivalents. Its cash position exceeds current liabilities, and cash doesn’t even include all of AppLovin’s current assets.
As revenue and profits continue to surge, the balance sheet will look even more attractive and support more share repurchases. Each of those buybacks will reduce the total supply of shares and increase the value of each remaining share.
The Online Ad Industry Is Robust
AppLovin is one of the emerging leaders in a high-growth industry that continues to reward its top players. For instance, Meta Platforms (NASDAQ:META) and Alphabet (NASDAQ:GOOG) had Q3 revenue growth rates of 26% and 16% year-over-year, respectively, demonstrating that the online ad market is still hot.
It’s not just the tech giants, either. Pinterest (NYSE:PINS) and Snap (NYSE:SNAP) delivered 17% and 10% year-over-year growth rates, respectively, with most of their revenue coming from online ads.
With many advertising stocks posting double-digit revenue growth rates, it stands to reason that the industry is still growing at a fast clip. AppLovin is one of the top beneficiaries since it grows much faster than its competitors while boasting incredible profit margins. For instance, AppLovin wrapped up the third quarter with a 59.5% net profit margin. Alphabet was the second-closest among the listed adtech stocks with a 34.2% net profit margin.
The industry’s tailwinds and AppLovin’s unique product can lead to a $1 trillion market cap within a few years.
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