AppLovin seen as better AI bet than ARM on valuation

What happened

AppLovin is expected to deliver 42% year-over-year sales growth and 58% earnings-per-share growth for 2026, driven by its AI-powered advertising platform and expansion into web and e-commerce advertising. ARM, by contrast, is projected to grow sales 21% and earnings per share 19%, supported by data-center royalty revenue that more than doubled year over year and close to 50% share among leading hyperscaler cloud compute deployments.

Why it matters

AppLovin trades at a forward 12-month P/E of 25.64X, below its median of 34.89X, suggesting a more attractive valuation. ARM trades at 175.65X, well above its median of 123.38X, reflecting steep investor expectations. AppLovin's stronger earnings momentum and operational efficiency in converting growth to profit make it the more compelling near-term opportunity despite ARM's quality ecosystem and exposure to long-term AI and cloud infrastructure trends.

What to watch

AppLovin's self-serve Axon Ads rollout is expected during the first half of 2026, which the company sees as a potential turning point for broadening adoption among non-gaming advertisers. The expansion of its generative creative technologies, including interactive landing-page generation and future video-ad tools, is expected to strengthen campaign performance and improve conversion metrics.