It’s All APPening At Axon/ Applovin

I have concluded that great growth stocks are always controversial. Some people, like me, optimists, feel excited and speculate about a golden future (literally), while others are always expecting Murphy’s Law to kick in, whatever can go wrong will, and look for safer havens, which often prove more dangerous than they appear. One of my mottos is that investors should embrace risk, not shy away from it.

When I am looking at a stock like Applovin, which arouses especially divided views among investors, from those who applaud a great growth share in the making to those who seem to think the whole thing is a con, I take the obvious approach. If everything appears to be going swimmingly, I believe it is indeed going well. I also trust the CEO unless he is somehow found to be untrustworthy. I have no reason to doubt that Applovin CEO and co-founder, Adam Foroghi, is one of America’s great entrepreneurial CEOs. He is still young, already a serial achiever, and I think the best is yet to come.

Q3 was another very good quarter. Our performance was strong with gaming advertising continuing on a solid trajectory. Our teams delivered multiple incremental lifts in our core models this quarter. And our MAX supply-side platform, one of the best indicators of our end market growth continues to grow at very healthy rates. We also opened up international traffic for advertisers promoting websites or shops in Q3 ahead of schedule.

Adam Foroughi, CEO and co-founder, Applovin, Q3 2025, 5 November 2025

Boston Consulting had a matrix where they divided businesses according to their stage of development. There was the twinkle in the eye businesses, the cash-hungry growth businesses, growth businesses which were sufficiently mature to generate cash while still growing, and the mature businesses, not growing much, if at all, but throwing off loads of cash.

Two of these categories, the best two, apply to Applovin. Applovin’s gaming-related advertising platform is a cash-generative growth star as described above. It also has an exciting emerging growth business which has just launched.

I’m particularly proud of our team because even while executing a strong quarter, we also delivered our major October 1 launch of our self-service platform and referral form. We did so without any significant hiccups, no major bugs and effective filtering out of low-quality ad accounts, something I was personally monitoring closely. This speaks volumes about our ability to automate and execute. I know everyone wants stats on how self-service is going. And instead of something specific around accounts or ramp-up since we’re still very early, I’d like to point out a stat which I watch very closely.

While it takes a while for new customers to get going, to integrate, to learn how to use our system and to ramp spend, we’re already seeing spend from these self-service advertisers grow around roughly 50% week-over-week. It’s too soon to be significant, but this type of early growth gives us even more confidence that our platform will excel at being an open platform to any type of advertiser.

Adam Foroughi, CEO and co-founder, Applovin, Q3 2025, 5 November 2025

There are no sure things in investment, but they think this new business opportunity has massive potential.

Our focus for Q4 and 2026 will be the following, with priority always given to improving our models for all advertisers. We’ll continue tuning our onboarding flows and ramping more AI agents into the workflow to support a seamless experience for new advertisers. Once we’re satisfied with the quality and experience, we’ll open the platform broadly beyond referral basis. We’ll be testing generative AI-based ad creatives. Over time, if we can move to mostly automated creative generation, we believe user response rates to more customized ads on our platform will materially improve. We are actively testing paid marketing to promote the Axon Ads platform to new customers. We’ll continue tuning this acquisition method so that when we launch the platform beyond referral in 2026, we can scale advertiser count without a reliance on a large sales force. If we maintain execution discipline, we are well-positioned to acquire a large volume of new advertisers in the coming years.

We believe that giving our powerful recommendation engine, a more diverse set of advertisers to recommend will dramatically improve conversion rates, paving the way for elevated growth rates for years to come. It’s worth noting the backdrop. The market is recognizing our platform, our scalability and the reach we offer our partners and the institutional dynamics that come with the S&P 500 inclusion are already in motion. At the same time, we continue to operate in an environment of heightened scrutiny around data, privacy and ad tech practices. We remain committed to strict compliance, transparency and execution excellence.

To conclude, we delivered a very strong Q3. We are executing on our strategic priorities, and we are confident that our best days are ahead as we broaden access to our self-service platform and scale globally.

Adam Foroughi, CEO and co-founder, Applovin, Q3 2025, 5 November 2025

Like other US stocks, it will be increasingly about AI at Applovin. They already generate a billion impressions a day on their platform for their users, but they only get paid by impressions, which convert to purchases. In effect, they get paid for performance, so they need more impressions, but most of all, better performance. And this could be coming.

Yes. I mean, look, we’ve always said we serve a lot of impressions to a lot of users a day, over 1 billion users a day. So we’re in a world today where the biggest lever for growth on our business, given what we report on a net revenue basis is increasing the conversion rate. And that happens from a couple of things. You’ve got the model enhancements, which we always talk about. Those are super impactful in increasing conversion rate. That’s a continuous effort. We are in the very, very beginnings of understanding how to work with neural nets and these AI technologies. I mean if you think about this industry and the core AI industry is only a few years old of engineers really being able to extract this kind of value out of these tools and technologies across a broad range of industries.

So as this goes forward, we’re going to have consistent incremental improvements and sometimes large, sometimes small, but additive to high impact on driving up conversion rate from technology lifts. Then you’re also going to get advertiser density expanding paired with our recommendation system, giving the model the chance to personalize the advertising to the user better. If we have less advertisers and less categories, we just have less to show. So you can’t get a diverse set of content to the customer to maximize that conversion rate. Both those things are just going to naturally happen as we go forward.

The third piece that I touched on to your phrase you repeated, is that generative AI-based creative. Today, in our advertising system, the advertiser can do almost no targeting. They can pick their country, they can put in their economic goals, they can put in a budget and off they go. The one manual lever is creative. And in particular, in the shopping category or in this like website advertising business, a lot of the customers come on board and they don’t have a creative that’s adapted for our platform. The average viewership of our ads is roughly 35 seconds. The average viewership of an ad on social is roughly 7 seconds. So a lot of these customers are coming in and just porting a short ad and trying to replicate what they have on social on our platform, and it’s mismatched. It diminishes their possible conversion rate.

So what does that mean? Well, when we get into a world where we can use generative AI tools to automatically create ad creatives on behalf of these customers, they’re going to get to a point where they can actually expand their conversion rate. We’re doing nothing more other than just expanding the count of creatives into our system and ensuring that the types of creatives in our system follow best practices on our platform and doing that at no cost. And so we’re really excited about where the tools in the marketplace are going. That’s something we’re going to be testing in short order here.

Adam Foroughi, CEO and co-founder, Applovin, Q3 2025, 5 November 2025

What everybody wants to know is how the newly launched Axon advertising platform will perform. Below are some thoughts from Foroughi.

One of the simpler mathematical functions is extrapolation, right? So like we’re starting pretty early here. It’s a month in. And it does take a while for these customers to ramp up. Remember, ours is not a plug-and-play solution. They got to come in. They have to integrate pixels. They’ve got to go live. All of that takes time. So just to get to a point of go-live is a week plus usually. Some can do it very quickly, but it’s not common to be able to do it in a day. So you have a period of lag time from October 1 to even a cohort going live. And then this cohort is not as big as what the absolute numbers were that we reported, I think we disclosed in Q1 this year of how big that cohort last year swelled to.

But given the ramp-up, the ramp-up is really swift. So we’re excited that if this continues to compound at the rate it is and then you keep adding new customers, this thing is going to then snowball on itself. And the true value for us right now is not to go, “Okay, how do we extrapolate this out to when customers in this category become a bigger and bigger part of our business?” It’s more are we actually building a tool that we have confidence is going to succeed in converting a lot of customers over time. And that breaks down into a few things we look at.

Of course, I get excited by seeing scaling spend, but I’m more excited about the fact that we didn’t introduce a ton of bugs. We didn’t have a bunch of customer complaints. We didn’t bring in low-quality advertisers. Anything that was low quality was automatically kicked off the platform. So the team enabled a whole bunch of tools to get a product release that was not immaterial into market in a seamless manner. And now we’re in a point of optimization. One point of optimization that’s key is when a customer signs up, is it easy for them to understand the value proposition and get through integration to the point of go live? That’s something we’re really focused on optimizing because as we mentioned, we do want to eventually promote the Axon platform to future customers. And if we want to do that, just like any advertiser in the world, we’ve got to optimize our conversion funnel.

The other piece that’s important is our teams are constantly working on embedding tools into the interface, so large language model powered tools that allow the customer to get support without interfacing with us. We’re not seeing a huge influx of customer support tickets. We’re seeing these customers go live, be able to manage themselves, get best practices extracted out of the tools we’ve enabled in the dash, and that’s fantastic to see. So what I look at when I see this ramp-up is not I’m extrapolating to how is this going to become billions and billions of dollars. It’s more that the fact that it’s working already a month in, and we’re not getting bombarded with customer complaints, and we’re not seeing a ton of issues implies that we’re on the right track to eventually get open in ’26 and really be able to bring in a ton of advertisers over the following quarters and years.

Adam Foroughi, CEO and co-founder, Applovin, Q3 2025, 5 November 2025

There is a hint of what may lie in the future.

We’re not — we’re probably far away from the point where the model itself can recursively just go and create more content and just bring more ads into the system. But we’re probably not very far away, and I’m hoping, in a matter of weeks or months to be able to test generative AI-based creative that we create with a little help, some tooling on top of the large language models and then submit to the advertisers for approval. That in itself can really explode the count of ads on the platform. And so that’s not far off.

Adam Foroughi, CEO and co-founder, Applovin, Q3 2025, 5 November 2025

Everything makes me think something exciting is happening at Applovin.

I mean I’ll say the one thing about our business always is we don’t try to think about what’s happening outside of us. This is something that’s outside of our control. It’s up to the platforms, regulators and then the content creators. It’s not up to us. What’s up to us and inside our control is how good our tools are. Q3 was driven by what we said on the earnings script. The models continue to get better, iterative improvements in the template, more advertisements on the platform, more advertisers on the platform, all of that’s compounding to really quick growth rate even in the core category.

We’re still believing very confidently in this 20% to 30% long-term growth rate in our core category. But even in the core, we’re beating that. And then now you’re layering on, on top of that, all this opportunity with the self-service platform. So we’re really excited about where we are focused on what we have underneath our control.

Adam Foroughi, CEO and co-founder, Applovin, Q3 2025, 5 November 2025

Everything about this company tells me they are at the dawn of a period of exciting growth that is going to be super-rewarding for investors.

I mean, it’s been a year since we’ve had this product, right? So the team is continuously improving the product. So the return on ad spend for the customers have gotten better. The tooling has gotten better. We went from the old dashboard to the Axon Ads Manager. So the tools that they have at their disposal has gotten better. The customers’ understanding of our platform has gotten better. Just that nuance on ad creative that ours are 35 seconds on average, whereas social is 7 seconds. It took months with a lot of customers to explain that fine detail. And that if you’re not building a 45-second ad, you’re going to lose to your competitor.

So all these things just compound. We’re 1 year into a product in a very large advertising market, competing with other companies that are years or decade plus into that same market. So as you build better tooling and as you get a better understanding of your tools, you see the effect compounding, the knowledge compounding, the usage compounding. And so we’re seeing trends that are positive. But this thing is going to take time to build at the level that we want to build. We’ve been in the gaming business for 13 years. We’re clearly the best channel for the gaming customers at this point. We think we can replicate that success across all these other categories. And as we build to the scale that we’re accustomed to operating at, you’d expect a lot of compounding success over time across knowledge, usage and tooling.

Adam Foroughi, CEO and co-founder, Applovin, Q3 2025, 5 November 2025

What I keep seeing is that Foroughi believes that Applovin has an incredible opportunity.

There’s a long way to go, we think, just because we have so little advertiser density today. There’s never been any company that’s been set up like ours in the advertising space in history. Where — what we reported, I think it was in Q1 was $11 billion plus of ad spend. And then the disclosures we’ve given you across web advertisers and gaming advertisers puts it in the low thousands. So you’ve got such a high amount of spend for such a low amount of advertisers across over 1 billion daily active users.

Well, what happens when we get more density? You get more data, you get more density, you get more time to improve your models, that conversion rate is going to go up. If you think about social. It’s not like there’s more users on social. The growth in social has consistently come from the last few years, more customers getting a higher conversion rate because just the technologies are getting more powerful. And so we think we’re going to see the same thing, but we’re going to be able to pair it with this advertiser recruitment. And we’re starting from such a low point, there’s going to be quarters, possibly many years of growth in conversion rate to come before we start worrying about supply.

Now that said, we’ve talked about — it is interesting to us to go help the broader set of publishers, both in the open web and connected TV to better monetize. We get pinged all the time. It’s no secret that we’re really good at performance advertising at this point. So at some point, we would like to broaden out the supply base as well. Because, why not? That builds a really good growth catalyst into the future. But today, we’re really heads down focused on the demand side of the platform because there’s so much work to do there. At some point, you’ll see us talking about both sides.

Adam Foroughi, CEO and co-founder, Applovin, Q3 2025, 5 November 2025

Share Recommendations

Applovin. APP

Strategy – Keep Buying Applovin Shares

I think Applovin’s biggest problem is that three years ago the shares were below $10, and today they are around $650. This huge built-in profit creates a massive drag on the share price. Eventually, it will be absorbed, and the shares will move ahead strongly, driven by explosive fundamentals.

As we are seeing with OpenAI, it is incredible how rapidly a business can grow in value when driven by exciting fundamentals. You need to be a believer to invest in Applovin, but I think believers are going to reap spectacular rewards.

Just highlight one line from the quotes.

“There’s never been any company that’s been set up like ours in the advertising space in history.”

That seems to me pretty unequivocal, and the advertising space is a big space.

The other thing the analysts picked up on was:

“We’re already seeing spend from these self-service advertisers grow around roughly 50% week-over-week.”