AppLovin Corp (APP) is trying to prove that its best growth days aren't behind it, even after a bruising year for shareholders. The company's next-generation AI advertising models are opening up fresh room for expansion, while a smaller consumer business could become a meaningful second growth engine. J.P. Morgan sees a path to further gains.

AppLovin's AI Models Could Unlock More Advertising Growth

AppLovin's advertising technology is already delivering results. Revenue climbed 55% year over year to $2.18 billion in the third quarter, while net income surged 72% to $1.44 billion. Gaming revenue grew approximately 50% year over year, helped by the partial rollout of next-generation Axon models.

J.P. Morgan analysts led by Bryan Smilek believe the new models could provide greater room to improve advertising performance than the existing architecture. Better results for advertisers could encourage existing customers to increase spending while attracting new ones.

Importantly, the rollout is not complete. The analysts believe AppLovin began partially deploying the models around late August or September. Management sees further optimization opportunities and is working to bring its architecture closer to that of large language models. However, the timing of a full rollout remains uncertain.

Consumer Advertising Could Become a Second Growth Engine

Beyond gaming, AppLovin is building its consumer advertising business, which could become a more meaningful contributor to revenue. J.P. Morgan estimates the segment grew approximately 7% sequentially in the third quarter and could accelerate to 35% in the fourth quarter, helped by holiday demand.

Smilek projects Consumer revenue of $771 million in 2026, representing 62% annual growth, before reaching $1.3 billion in 2027, up 67%. That would increase its contribution to total revenue from approximately 9% this year to 12% next year.

AppLovin is looking to deepen customer spending, onboard new advertisers and expand its consumer data through organic growth and selective acquisitions. The company also authorized another $3.2 billion in share repurchases, taking its available buyback authorization to approximately $3.6 billion.

Why JPMorgan Still Sees AppLovin Stock Climbing

Management continues to target annualized revenue growth of more than 30%, although achieving that ambition will require sustained execution across gaming and consumer advertising.

J.P. Morgan reiterated its Neutral rating but maintained a December 2027 price target of $400, implying approximately 47% upside from its Nov. 4 reference price of $271.75. The valuation is based on 16.5 times its 2028 estimated GAAP earnings per share of $24.06.

For investors, the next test is whether AppLovin can turn its partially deployed AI improvements into sustained growth while scaling consumer advertising without sacrificing margins. The $400 target offers a reason to revisit the stock after a difficult year, but JPMorgan's Neutral rating makes clear that execution still has to do the convincing.