Shares of app monetization company AppLovin(NASDAQ: APP) are absolutely skyrocketing on Thursday thanks to impressive financial results for the third quarter of 2024. As of 10:30 a.m. ET, AppLovin stock is up about 48% and had hit an all-time high at over $250 per share. For perspective, it traded at under $10 per share at the end of 2022.
One of the hottest growth stories out there
In the prior quarter, AppLovin's management had said it would generate revenue of $1.135 billion and have adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $650 million, both at the high end of guidance. But in Q3, the company had revenue of $1.2 billion and adjusted EBITDA of $722 million, beating guidance on both points.
For the upcoming quarter, AppLovin's management expects to grow its revenue by 31% year over year at the midpoint of its guidance. And adjusted EBITDA is expected to be up about 58%. Both of these numbers are a step back from Q3 growth rates of 39% and 72%, respectively. But there's a reason this guidance still impressed investors.
Just over a year ago, AppLovin launched a new iteration of its artificial intelligence software, which immediately catalyzed growth. It was reasonable to expect improved results during that first year. But the company is now beyond the one-year anniversary. And yet it's still churning out profitable growth at a greater-than 30% pace.
How AppLovin hopes to sustain its growth aspirations
AppLovin's management believes it can grow 20% to 30% annually over the long term. And investors might be taking note of something co-founder and CEO Adam Foroughi said in the Q3 earnings call: "We're increasingly confident this vertical will scale significantly in 2025 and become a strong contributor for us over the next year and beyond."
The vertical Foroughi was talking about: AppLovin's software is primarily used to monetize mobile games. But it's piloting a launch into the e-commerce vertical, and it's a big success so far. In short, AppLovin's business is booming in its core market. And now it seems that the company will sustain its profitable growth trajectory by branching out into new areas, which could drive stock returns over the long term.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AppLovin. The Motley Fool has a disclosure policy.
