AppLovin’s third-quarter earnings report showed a 68% year-over-year revenue increase to $1.41 billion, surpassing analyst expectations by $70 million. Adjusted EBITDA rose 90%, and EPS increased 96%. However, an ongoing SEC probe of its data collection practices could impact its near-term performance, notably its core Axon platform.

AppLovin’s growth accelerated after expanding into digital advertising with acquisitions and launching the AI-powered Axon platform. It sold its mobile gaming business to focus on AI-driven advertising in non-gaming markets. The SEC probe and allegations of data collection violations could hinder its future prospects, including a potential bid for TikTok’s international business.

Short-sellers accused AppLovin of pulling user IDs from major apps to create targeted ads, particularly through its Axon platform. The SEC investigation could impact its valuation and growth trajectory. Analysts project revenue and adjusted EBITDA to grow at a CAGR of 27% and 42% from 2024 to 2027, primarily driven by the AI-powered adtech platform.

While AppLovin’s valuations seem reasonable, the SEC probe could lead to a decline if it escalates into a lawsuit. Insider selling and regulatory risks suggest caution for investors. AppLovin shows long-term growth potential, but addressing these issues is crucial before considering a significant investment. It remains a speculative play in the evolving AI adtech market.

Read more at Yahoo Finance: AppLovin Beats Earnings, but the SEC Investigation Is the Real Story Investors Should Be Watching