"AI + Digital Advertising"霸主 Applovin(APP.US) Shatters "Software Stock Doomsday Theory"! AI dividends are embedded into performance, with Q4 net profit soaring by 84%

Focusing on the leader in AI applications for “AI + digital advertising,” Applovin (APP.US) announced after the U.S. stock market close on Wednesday Eastern Time its Q4 and full-year results for fiscal year 2025, ending December 31, 2025. The company’s actual performance and future revenue outlook both comfortably exceeded the recent significant upward revisions by Wall Street analysts. As global funds have continued to flow into AI computing infrastructure and AI application software sectors in recent years, Applovin’s stock price surged by 712% in 2024 and by 110% in 2025. This growth is not only due to investors betting on AI applications accelerating penetration across various industries, leading to valuation increases, but also thanks to Applovin’s strong earnings growth.

For global software stock investors, Applovin has responded to short-sellers with robust performance and convincingly demonstrated that the market’s doom-and-gloom narrative about the “software apocalypse” driven by the rise of proxy AI agents, such as those from Anthropic, is overly exaggerated and driven by panic. The market has completely mispriced platform-based software giants with solid fundamentals that focus on “AI + core operational workflows.” AI-powered proxy workflows for “automatable white-collar tasks” do indeed impact valuations (hence the market’s systematic sell-off of functional SaaS software), but for large platform software companies that control core operational processes like data flow, content distribution, and transaction execution, AI acts more as a demand accelerator.

Therefore, Applovin’s latest strong performance and future outlook demonstrate that platform software giants managing critical enterprise workloads are unlikely to be fully replaced by AI agents or generative AI applications. Instead, their fundamentals may benefit long-term from AI, reinforcing their long-term bull case. Buying on dips remains the optimal strategy to respond to potential stock price corrections of these software companies.

Applovin’s latest Q4 results show total revenue of approximately $1.658 billion, surpassing the recent upward revisions by Wall Street analysts—who had expected around $1.61 billion—representing a year-over-year increase of 66%. GAAP net profit was about $1.1 billion, up 84% year-over-year. Q4 GAAP earnings per share were $3.24, far above the Wall Street consensus of about $2.96 and the $1.73 from the same period last year. Non-GAAP adjusted EBITDA was approximately $1.399 billion, an 82% increase year-over-year.

For the full fiscal year 2025, Applovin reported total revenue of about $5.481 billion, a 70% increase from FY2024; net profit was approximately $3.334 billion, up 111%; and adjusted EBITDA was around $4.512 billion, an 87% increase.

Market focus on outlook: Applovin’s management expects Q1 2026 total revenue to be between $1.745 billion and $1.775 billion, indicating sequential growth and significantly exceeding the Wall Street average estimate of about $1.7 billion. Adjusted EBITDA is forecasted between $1.465 billion and $1.495 billion, also above market expectations.

AppLovin has successfully embedded generative AI and deep machine learning into its core advertising technology. Using the AXON 2.0 engine plus MAX/AppDiscovery, it creates a closed loop from user acquisition to monetization, driving revenue and profit growth. In the “AI + digital advertising” space, AppLovin has formed data network effects and economies of scale, boosting eCPM and ROI while rapidly expanding EBITDA exponentially. AXON, operating at microsecond speeds and leveraging billions of user and contextual signals, matches each ad impression with the highest ROI bid. Initially focused on mobile game user acquisition, AXON now covers high-growth verticals such as e-commerce, fintech, and CTV.

As software stocks are heavily sold off, the narrative of “AI reshaping software profitability” is quietly spreading

Last week, the global stock markets were swept by the “Software-mageddon” wave, with widespread sell-offs in SaaS subscription and broader software sectors triggered by Anthropic’s launch of a series of AI tools and proxy AI agent collaboration platforms, dubbed a major rival to OpenAI. This heightened fears that AI could drastically disrupt traditional SaaS business models. As a result, the S&P 500 Software & Services index declined about 13% since late January, erasing nearly $1 trillion in market value last week alone. However, the market is gradually pricing in an AI growth narrative: as AI significantly enhances efficiency and reduces marginal decision costs, platform-based software companies may experience positive feedback loops of throughput and unit economics, rather than being entirely displaced.

Anthropic’s new AI tools are primarily based on its “Claude Cowork” proxy AI agents designed to handle complex, specialized workflows often sold as core products by software and data providers. These tools target functions such as legal and technical research, customer relationship management, financial market analysis, and financial reporting. This has intensified concerns that AI could substantially weaken traditional SaaS vendors’ business models.

Earlier this January, Anthropic launched “Claude Cowork,” a proxy AI programming tool aimed at transforming AI agent functions from coding terminals to general office scenarios like file management and software interaction—further fueling fears of AI completely disrupting the SaaS industry.

Since last Tuesday, the global software sector has collapsed, driven by two major factors: Anthropic’s new AI tools—one capable of handling multiple document tasks, including compliance tracking and legal review, and the recently launched Claude Opus 4.6, which surpasses GPT-5.2 in AI programming, financial analysis, legal document deep analysis, and Office collaboration. These capabilities—reviewing legal documents, financial analysis, and proprietary data services—are long-standing moats for many SaaS companies. Following the announcement last Thursday, FactSet plunged 10% intraday, while Thomson Reuters, S&P Global, Moody’s, and Nasdaq continued to fall, causing all three major U.S. indices to drop sharply.

However, Applovin demonstrates that those managing critical enterprise workloads on platform software will benefit from AI in the long run, rather than being replaced. Those who control enterprise execution—security, IT/business process orchestration, data pipelines and observability, transaction and billing, compliance and risk management—are more likely to become the “default targets” for AI agents. Conversely, products with “light features + pure subscription models + workflows easily completed by AI agents” are more susceptible to re-pricing.

From the perspective of software engineering and AI agent workflows, agents do not replace entire enterprise software but shift value from “human UI interaction time” to “machine API throughput.” A stable enterprise agent requires not just text generation but also verified identity and permissions (RBAC/ABAC), policies and approval chains, audit logs, idempotency and rollback semantics, error budgets and observability (SLO/Tracing), and strict rules for business object and state machine updates. The plug-in mechanism of Claude Cowork essentially codifies these processes into reusable execution templates, embedding agents more deeply into enterprise toolchains rather than bypassing them.

Applovin’s strong earnings and outlook reinforce the long-term growth logic that platform software managing critical enterprise workloads will benefit from AI. It illustrates a typical potential growth path: AI not only avoids marginalizing platforms but enhances their unit economics and scale efficiency. The combination of “high margins + better-than-expected guidance” often indicates AI is reducing decision costs through improved prediction, matching, and optimization, thereby increasing throughput and cash generation.

High-quality, AI-embracing platform software giants are now presented with a good entry point on dips

Recently, many Wall Street analysts have indicated that high-quality, AI-positive software companies are poised for a strong rebound. They agree with Jensen Huang’s optimistic view on software stocks—that the market has overly punished those software giants with strong fundamentals focused on “AI + core operational workflows.”

Thus, for platform software companies like AppLovin, which have proven they can radically transform product delivery and pricing using AI and dominate key enterprise execution points, dips often offer better risk-reward opportunities. Conversely, for subscription software mainly driven by UI and manual processes, declines could be traps.

Jensen Huang emphasized that “software will not be replaced by AI,” underscoring that AI is more likely to augment existing large software platforms rather than replace them entirely. The global popularity of ChatGPT signals the arrival of the AI era, which also means that the “human-driven SaaS workbench” is transitioning toward an “AI-native task execution layer.” During this transition, lightweight applications and simple workflows (“vibe coding” style rapid assembly) are most vulnerable to replacement, which is why some analysts argue that deeply integrated, process-heavy enterprise platforms like SAP and Microsoft are more likely to become the foundational “bases” and “cornerstones” of the AI agent era.

“AI-driven workflows are likely to gradually encroach on the SaaS sector, which will undoubtedly impact valuation multiples,” said Rolf Bulk, a tech stock analyst at Futurum Group. However, Bulk believes that some software providers—especially those managing critical enterprise workloads, such as Microsoft, Oracle, and ServiceNow—will retain their “right to earn” due to their deep data assets and entrenched roles in customer workflows. He added that these companies are more likely to coexist with AI long-term and benefit from it rather than be entirely displaced.

Rick Sherlund, one of Wall Street’s most renowned tech analysts and founder of the AI software investment bank Sherlund Partners, who experienced the 2000 dot-com bubble burst, issued a strong statement last Thursday supporting fundamentally strong software stocks. Sherlund emphasized that the software industry undergoes major transformations every 10 to 15 years, and investors should not overreact to AI threats to mature, solidly grounded companies—especially those with complex enterprise workflows. He pointed out that while “vibe coding” may make simple applications more replaceable, companies like German software giant SAP, with their extensive integrated platforms and supply chains, have a larger moat to protect their business, and AI could be a “profit machine” for them.