AppLovin Corp (NASDAQ:APP) experienced a notable decline in its share price after the company issued first-quarter revenue guidance that markets judged insufficiently bullish, even though the firm had exceeded fourth-quarter sales forecasts.
The stock moved lower by 5.54% following the update. AppLovin said it expects sales in the first quarter to range from $1.75 billion to $1.78 billion, a figure that sits above analyst forecasts of $1.70 billion but nevertheless failed to allay investor concerns about intensifying competition for advertising budgets.
For the fourth quarter, AppLovin reported strong demand for its advertising services and for AI-powered tools, outcomes that helped it beat sales estimates. The company also pointed to a gaming business that continued to run ahead of internal expectations, contributing to the better-than-expected-quarter.
Despite those positives, market participants focused on pressure from larger technology platforms and emerging ad channels. In particular, Meta Platforms was singled out as a competitive overhang.
J.P. Morgan weighed in with a cautious note on AppLovin's sensitivity to shifts in Meta's advertising spend, writing: "Meta is the only one that we believe has merit, with APP shares likely to remain sensitive to any spikes in Meta spend." The bank added that AppLovin is "operating at a rare level of scale, growth, and profit" and that the company "continues to execute well." Still, J.P. Morgan said it would remain on the sidelines because APP shares are "highly volatile, Meta likely to remain an overhang, and we think the most bullish e-commerce expectations are likely to be slightly tempered coming out of earnings."
Needham offered a more positive read on the quarter, reiterating its Buy rating and $700 price target. The firm said it is raising its 2026 adjusted EBITDA estimates by 4%, driven by what it sees as stronger e-commerce revenue. Needham noted that AppLovin addressed investor concerns about market positioning relative to rivals including CloudX, META, and Project Genie. While noting the competitive landscape is "increasingly fluid given the pace of AI advancements," Needham said it believes the company is "well positioned to defend their market position."
The juxtaposition of solid fourth-quarter results and a first-quarter revenue range that, while ahead of consensus, failed to inspire confidence left investors weighing execution against competitive risk. The company’s near-term guidance and the evolving ad market dynamics appear poised to remain focal points for traders and analysts in the coming weeks.