In Q3 2024, boosted by performance exceeding expectations and AI-enabled expectations, the US-listed company AppLovin saw its stock price surge by 72% to $290 in the last two trading days last week, with a market cap briefly surpassing the $100 billion mark. The stock's cumulative increase this year has reached 627%, far exceeding Nvidia's 206% increase during the same period.

On November 7, 2024, AppLovin's third-quarter report showed quarterly revenue of $1.198 billion, a 39% year-on-year increase, exceeding market expectations by 5.9%; net income of $0.434 billion, a 300% year-on-year increase, with a net margin of 36%; adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $0.722 billion, surpassing market expectations by 12.4%, with an adjusted EBITDA margin increasing by 11.7 percentage points to 60% year-on-year.

Its software platform revenue increased to $0.835 billion, a 66% year-on-year increase, with an adjusted net margin of 78% for this software platform. AppLovin attributes its success to the use of AXON 2.0 AI-driven technology on its AppDiscovery platform, improving performance and increasing advertising spending for advertisers.

The company's fourth-quarter guidance remains strong, with revenue guidance of $1.24 billion-1.26 billion, corresponding to a year-on-year growth of 30%-32%; adjusted EBITDA guidance of $0.74 billion-0.76 billion, with an adjusted EBITDA margin of 60%.

In the earnings call, Foroughi stated that AppLovin aims to achieve a high annual growth rate of up to 30%, partly due to its AI-driven AXON 2.0 ad engine.

AI tools have helped improve its advertising monetization rate, becoming the biggest highlight of AppLovin's software platform business today.

It is understood that AppLovin is an application software company dedicated to advertising, and its series of advanced technologies help businesses of all sizes connect with their ideal customers. The company's end-to-end software and artificial intelligence solutions help businesses reach global audiences and achieve monetization and growth.

Currently, leveraging AI tools, AppLovin is actively expanding beyond the gaming field, with e-commerce as the company's current key breakthrough area.

Open Source Securities believes that this may be due to the improvement in advertising matching efficiency brought by AppLovin's AI advertising engine model Axon2.0, and the commercialization potential of AI advertising is worth attention.

AI-related scenarios in Hong Kong stocks:

Mobvista (01860): The company plans to release third-quarter results on November 15, with its advertising platform Mintegral performing well in the latest report, especially achieving new breakthroughs in the dual-end game list and the Android end. Open Source Securities is bullish on its platform scale growth and midterm strategic goals of expanding into multiple verticals.

Yidu Tech (02158): Yidu Tech's self-developed large model is a professional large language model for multi-scenario medical vertical fields, which is fully compatible with Ascend AI in the medical field; its performance in multiple medical clear task scenarios such as auxiliary diagnosis, basic medicine, general medicine, clinical internal medicine, clinical surgery, and practice qualification examinations has surpassed GPT3.5. The accuracy and recall rates in data structure tasks are far higher than those of models with similar parameters. The company positions the large model as a new generation of 'medical super brain,' and its applications have been implemented in both the consumer (C-end) and business (B-end) sectors. For C-end, Yidu Tech's large model can provide professional medical-level personalized services and has already been piloted in the 'Huinian Insurance' field; the 'Jiangsu Medical Huibao No. 1' at the provincial level in Jiangsu took the lead in integrating Yidu Tech's large model and will provide 24/7 health management services.

Fourth Paradigm (06682): Fourth Paradigm achieved revenue of 1.867 billion yuan in the first half of 2024, a year-on-year increase of 27% compared to 1.468 billion yuan in the same period last year; the loss narrowed from 0.48 billion yuan in the same period last year to 0.17 billion yuan; gross profit was 0.79 billion yuan, a year-on-year increase of 12.1%. In the first half of the year, the core business of Fourth Paradigm, the 'Fourth Paradigm Prophet AI Platform,' generated revenue of 1.251 billion yuan, a year-on-year increase of 65.4%. The Prophet AI Platform is the core of all Fourth Paradigm's businesses, evolving from version 1.0 to 5.0 over 10 years, with this business revenue accounting for 67% of the company's overall revenue.