AppLovin: the worst stock in the S&P 500 is making more profit than ever

September 2016. A small company in Palo Alto, California, announces it has been bought. The buyer is a Chinese fund, Orient Hontai Capital: $1.42 billion for a company with little more than a hundred employees, which in four years had raised just $4 million from private investors. Its founder, Adam Foroughi, presents it as the biggest sale ever for a smartphone advertising company.

That sale will never happen. The US government steps in the way, and the founders are forced to keep the company. It is their good fortune: today AppLovin is worth about $130 billion on the stock market, more than ninety times that price. And yet, for much of 2026, it was the worst stock in the S&P 500, the index of the 500 largest American companies. How is that possible?

"We care much more about where we will be in three to five years than about the price at which we will trade today." — Adam Foroughi, co-founder and chief executive of AppLovin, to Bloomberg on the day of the listing (April 15th 2021)

The trader who didn't want funds

Adam Foroughi was born in Iran in 1980. His family emigrated to the United States to escape the war between Iran and Iraq. He studied at Berkeley, worked as a derivatives trader and then founded two small online marketing companies. In 2012 he founded AppLovin with two friends, John Krystynak and Andrew Karam.

The idea came from a concrete problem. Apple's and Google's stores hold millions of apps, and almost all of them disappear without anyone downloading them. Whoever makes a game needs advertising to get found. Whoever already has a game with lots of users can earn money by showing other people's ads. AppLovin steps in between and brings the two sides together.

What is unusual is how it grew. In Silicon Valley almost all startups live for years on venture capital, the funds that invest in young companies, before earning anything. AppLovin didn't. According to Fortune it was profitable by the end of its first month, and until 2016 it had raised only $4 million from private investors, among them Maynard Webb, a former chairman of Yahoo's board.

Blocked by Washington

When Orient Hontai's offer arrives, CFIUS steps in. It is the US government committee that reviews purchases of American companies by foreigners, on national security grounds. The fear is that AppLovin's user data could end up under Chinese control.

In November 2017 the purchase falls through. AppLovin and the fund rewrite the agreement: instead of buying a majority, Orient Hontai lends the company $841 million and settles for a small stake. The founders stay in charge.

In July 2018 a new partner arrives, this time an American one. The private equity firm KKR buys a minority stake for $400 million, valuing AppLovin at $2 billion. Explaining the investment to Reuters is Herald Chen, the firm's head of technology and media. Years later Chen would become AppLovin's president and chief financial officer.

The shopping spree

With that money AppLovin starts buying. In 2018 it takes MAX, a system that makes ad networks compete in real time for every single slot inside an app. Then it buys video game studios, including, in 2020, Machine Zone, the maker of Game of War. In 2021 it acquires Germany's Adjust, which measures whether advertising campaigns really work. In October of the same year it announces the purchase of MoPub from Twitter for $1.05 billion in cash.

Why would an advertising company buy video games? Because games produce data: who downloads what, who pays, who plays for months and who quits after a day. On the day of the listing, Foroughi explained that the data collected by its own games gave AppLovin a concrete edge over competitors, though not over Google and Facebook.

Listing, crash and a rejected offer

On April 15th 2021 AppLovin lists on the Nasdaq under the symbol APP, at $80 a share. The debut goes badly: it opens at $70 and closes its first day at $65.20, 18.5% below the offering price.

The worst comes in 2022. A blow from Apple weighs heavily: with App Tracking Transparency, introduced in the spring of 2021, every iPhone app has to ask permission before tracking the user across other apps. For anyone selling targeted advertising it is an enormous change. In 2022 AppLovin's revenue grows by just 1%, and the stock loses about 89%.

In August 2022 Foroughi tries for the big prize: he proposes a merger with Unity, which makes one of the most widely used graphics engines for building video games, valuing it at $17.54 billion in shares. But Unity already has a deal to join ironSource, a direct competitor of AppLovin, and its board rejects the offer unanimously.

AXON, the engine that changes everything

While the stock collapses, inside the company work is under way on the new version of its machine learning system, that is, software that learns from data to make ever more precise predictions. It is called AXON, and version 2.0 arrives in 2023.

AXON does something simple to explain and extremely hard to do: it decides which ad to show to which person and at which moment, so that whoever pays gets the maximum return. The results arrive quickly. In 2023 revenue grows again, by 17%, and then growth accelerates further. By November 2024 the stock is up more than 600% since the start of the year and, according to Dow Jones Market Data, is the second-best American stock among companies worth more than $10 billion.

In 2025 AppLovin makes its final choice. On June 30 it completes the sale of its video game division, ten studios with their titles, to London-based Tripledot Studios, in exchange for $400 million in cash and a stake of about 20% in the buyer. From then on AppLovin no longer makes games: it is purely an advertising platform. In September 2025 it joins the S&P 500.

How AppLovin makes money

Think of a free game on your phone. Between one level and the next, an ad appears for another game or an online shop. Behind those few seconds there is an auction lasting a fraction of a second.

On one side are the app developers, who have ad slots to sell. With MAX they make ad networks compete and sell each slot at the best price. On the other are the advertisers, those who want to promote themselves, who use AXON to choose whom to show the ad to. Adjust measures whether the campaign worked. AppLovin earns from what the advertisers spend.

The strength is that the system feeds itself. The more advertising passes through AppLovin, the more data AXON has to learn from. The more it learns, the better the ads perform. The better they perform, the more advertisers spend. According to the company, its network reaches more than 1.4 billion people a day.

For years almost all the advertisers were other games. Since 2024 AppLovin has begun bringing online shops and other brands onto the platform too, and at the end of June 2026 it opened up the Axon Ads Manager to everyone, the tool with which anyone can create a campaign on their own, without going through the company's staff. It is the main bet of the coming years: proving that the engine works outside the world of video games too.

Short sellers and the SEC

Growth this fast also attracts those who bet against it. Short sellers are investors who profit if a stock falls: they sell borrowed shares hoping to buy them back for less. Some publish reports explaining why, in their view, a company is worth less than the market thinks.

In February 2025 Culper Research and Fuzzy Panda accuse AppLovin, among other things, of systematically exploiting app permissions. In March Muddy Waters, one of the best-known short sellers, arrives, claiming that AppLovin collects user identifiers from other platforms in breach of their rules. AppLovin rejects everything, and Foroughi calls the reports full of inaccuracies.

In October 2025 Bloomberg reveals that the SEC, the American authority that oversees the stock market, has opened an investigation into the company's data collection practices, prompted by a whistleblower's tip and by the short sellers' reports. The stock loses 14% in a day.

The SEC chapter closes in August 2026: the chief financial officer, Matt Stumpf, announces that the authority has concluded its review without recommending any action against the company.

2026: profits up, stock down

AppLovin starts 2026 at about $674 a share. At the end of October it is worth just over $228, and no stock in the S&P 500 has done worse since the start of the year.

Source: Yahoo Finance, weekly closing prices. Data as of 6 November 2026.

There are several reasons. The first is the starting price: at the end of 2025 the stock was worth 51 times the earnings expected for the following year, a valuation that leaves very little room for error. The second is the climate: in 2026 software and digital advertising stocks were sold off across the board, partly out of fear that artificial intelligence could change the way people discover apps and products. The third is a mistake by the company. On August 5th AppLovin presents a second quarter with revenue below expectations and weak guidance: its models improved more slowly than usual, and the computing costs to train them rose. The next day the stock loses 19.7%.

And here is the paradox. While the stock was collapsing, expected profits were rising. Analysts now estimate earnings per share of $16.65 for 2026, more than the $13.67 they expected a year ago. What fell was the price/earnings ratio, that is, how much the market is willing to pay for each dollar of profit: on the eve of the November results the stock traded at under 13 times expected earnings, half its average of the past five years. In other words, the company was not earning less: the market was trusting it less.

The November rebound

On November 4th 2026 AppLovin presents its third quarter, and the numbers are the best in its history. Revenue rises 55% from a year earlier, to $2.18 billion. Net income grows 72%, to $1.44 billion. For every dollar collected, the company keeps 66 cents of net profit.

The forecasts for the fourth quarter, between $2.37 and $2.40 billion in revenue, beat what analysts expected by more than $100 million. The board adds another $3.2 billion to the share buyback programme, which thus rises to $3.6 billion. Foroughi, meanwhile, admits that the August misstep was the company's own fault.

On November 5th the stock gains more than 30% in a single session, the biggest rise in the S&P 500 that day. On November 6th it climbs again and closes at $391.22, for a market value of about $130 billion. In five sessions it has recovered 71% from its late-October low. But it is still about 42% below its price at the start of the year.

The doubts to keep in mind

The first concerns where the growth comes from. According to the chief financial officer, the record quarter was driven mainly by mobile gaming, thanks to improvements in the models, which have in any case only been partly rolled out. Advertisers outside video games are growing, but AppLovin no longer publishes revenue broken down by sector. To know whether the e-commerce bet is working, you have to trust what management says.

The second is competition. Unity, the same company that rejected the 2022 offer, has seen its advertising system, Vector, grow 126% in a year.

The third is the legal fronts and the control of the company. The SEC investigation has closed, but a class action is under way, that is, a collective lawsuit brought by law firms on behalf of some shareholders. And with the structure chosen at the listing, Class B shares, the ones not sold on the stock market, carry 20 votes each, against just one for the Class A shares bought by investors: whoever buys the stock on the market has little weight in decisions.

The fourth is volatility. In five years the stock lost 89% in one year, rose more than 600% in another, lost more than half its value in 2026 and recovered 71% of it in a week.

AppLovin was born without the money of the big funds, was saved by a blocked sale, bet everything on an algorithm at the worst possible moment and gave up its games to become an advertising machine that keeps two thirds of its revenue as profit. In 2026 it posted the best results in its history, and in the same year it was the worst stock in the S&P 500. Was the crash a mistake by the market, or a warning?