Should Investors Buy AppLovin Stock After It Dropped by More Than 40%

AppLovin (NASDAQ: APP) operates an advertising platform that connects businesses that want to display ads on mobile apps with app companies selling ad space. It became a hot name in the adtech industry a few years ago, and its shares surged from just under $10 at the start of 2023 to more than $700 at the end of 2025.

Investors who missed out on that rally have been given a second chance. A broader correction among software-as-a-service (SaaS) stocks has resulted in AppLovin shares dropping by almost 50% from their 2025 highs. They are still off by more than 40%. A short report from CapitalWatch also hurt the stock at the start of 2026, but, under legal pressure, the short-seller retracted some of its allegations in late February, saying that they were “inaccurate.”

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Although any big dip will frighten investors, this one looks like a buying opportunity, particularly if AppLovin can maintain its growth rates.

AppLovin is one of the few growth stocks that can deliver strong top-line growth while boasting net profit margins above 60%. That’s not a one-year blip, either. AppLovin’s net profit margins first soared in 2024, going from 19.4% in 2023 to 49% in 2024. Then, AppLovin delivered a 62.6% net profit margin in 2025.

Revenue growth didn’t slouch over this stretch; in Q4 2025, sales were up 66% year over year. AppLovin also has a pristine balance sheet. It has an attractive 3.32 current ratio, showing it has plenty of money to cover its near-term liabilities.

That strong balance sheet means AppLovin’s growth is sustainable.

While artificial intelligence (AI) has helped some business optimize their services and generate more revenue — just ask AppLovin — the fears that this technology will replace an array of software offerings are overblown. This fear is the major reason AppLovin is down from all-time highs. Anthropic released Claude Cowork in January, and its agentic AI plugins made it easy for people to have Claude perform many tasks that have up until now been best handled using subscription software titles.

Concerns that AI will crush the business models of SaaS companies — the SaaSpocalypse — are why the benchmark S&P Software and Services Select Industry index is down by around 23% year to date. Yet strong overreactions on Wall Street are nothing new. It wasn’t long ago when ChatGPT was being dubbed a “Google killer,” but Alphabet is adapting to AI quite well.