9. AppLovin Corporation (NASDAQ:APP)
Market capitalization: $79.61 billion
Forward P/E: 12.06
Expected forward revenue growth: 28.88%
Number of hedge fund holders: 88
When 53% Growth Still Leaves Investors Asking for More
AppLovin Corporation (NASDAQ: APP) illustrates how demanding the market can become once a company develops a reputation for exceptional growth. Second-quarter 2026 revenue reached $1.924 billion, up 53%, while adjusted EBITDA increased 58% to $1.614 billion. That translates into an adjusted EBITDA margin of approximately 84%, although this measure should not be confused with net profit or free cash flow. The company generated $863.3 million in quarterly free cash flow and reported diluted earnings of $3.76 per share. Those are substantial results by ordinary standards. Unfortunately, companies with extraordinary expectations rarely get graded on an ordinary curve, especially when investors have become accustomed to management clearing its own targets.
Chief executive Adam Foroughi addressed that issue directly on the August 5 earnings call. Revenue finished just below the midpoint of guidance, while adjusted EBITDA came in below the guided range. His explanation focused on the timing of improvements to the advertising models, rather than deteriorating advertiser demand. As he put it, “the next step-up in model performance landed just after quarter end.” The distinction matters because better recommendations can help advertisers achieve their target returns and justify additional spending. Management also discussed expanding beyond gaming into consumer advertising. That creates another growth opportunity, although it leaves investors watching whether broader adoption can make quarterly performance less dependent on individual model upgrades.
The third-quarter outlook called for revenue between $2.055 billion and $2.085 billion, with an adjusted EBITDA margin of approximately 83%. During the second quarter, share repurchases and equity-award tax withholdings together cost $551.3 million. Looking further ahead, Foroughi said management believes the business can compound at roughly 30% annually as gaming improves and consumer advertising expands; that remains an ambition, rather than an assured outcome. For investors comparing cheap growth stocks, the relevant test is whether spending on larger models produces enough additional advertising revenue to preserve cash generation. Algorithms may do the matching, but advertisers ultimately decide whether the results deserve another portion of their marketing budgets.
Ranking rationale: AppLovin Corporation (NASDAQ: APP) places ninth with 88 hedge fund holders in the supplied dataset. Its 12.06 forward P/E and 28.88% expected revenue growth meet the screen, while strong cash generation supports the valuation discussion. Model execution and advertiser returns remain the business indicators to monitor.
