In 2024, ad-tech company AppLovin experienced a 300% increase in revenue, leading to high expectations for future earnings.

• According to FactSet data, AppLovin is the top-performing U.S. tech company with a market cap of at least $5 billion, achieving a 310% gain this year.
• The company will be under pressure to deliver impressive earnings results this week.
• AppLovin's digital ad technology is getting a big boost from artificial intelligence.

Despite the impressive growth in the technology sector, the AI chip manufacturer's market presence has been overshadowed this year by a digital advertising company that specializes in gaming.

In 2024, Nvidia, which has led the artificial intelligence boom and become the world's second-most valuable public company, has soared 310%, beating every U.S. tech company with a market cap of at least $5 billion, according to FactSet data.

In 2021, AppLovin, founded 12 years ago, went public, experiencing growth in online games due to the Covid-19 pandemic. However, the company's games unit now generates slow growth, while its online ad business is thriving thanks to advancements in AI that enhance ad targeting.

As investors anticipate, AppLovin's earnings report on Wednesday will determine whether the recent surge in returns is justified. The company's third-quarter report is expected to show revenue growth of 31% to $1.13 billion, following two consecutive quarters of growth above 40%, according to LSEG.

According to FactSet, analysts predict that EPS will more than triple to 92 cents, and operating income will more than double to $424.2 million, based on LSEG's consensus. Despite revenue growth, AppLovin has shown a massive increase in profit.

The growth of AppLovin can be attributed to its AI advertising engine, AXON 2.0, which targets ads on mobile gaming apps owned by the company and is also used by other studios that license the software.

AppLovin's ongoing self-learning and dedicated development efforts have led to robust business performance this quarter, resulting in a 75% increase in revenue in the software business, which accounts for about two-thirds of total sales.

Analysts have gotten increasingly bullish.

Wells Fargo upgraded AppLovin to a buy rating on Oct. 29, predicting the company to be a share gainer. BTIG analysts increased their price target to $202 last week, the highest among firms tracked by FactSet. Additionally, Oppenheimer, Stifel Nicolaus, and Jefferies also raised their targets in October.

Over the next decade, the ad opportunity in the mobile gaming industry is predicted to increase from $10 billion to $50 billion, according to analysts at Wedbush.

Wedbush analysts wrote in a note on Oct. 11 that investors have driven APP shares to all-time highs due to their belief in the company's potential to capitalize on the growing trend of brand advertising in mobile gaming from traditional channels such as social media and legacy broadcasting.

Due to its standing in the realm of digital advertising, AppLovin may encounter competition from some of the world's largest corporations. In its recent financial report, AppLovin cited , and as rivals. The company's success is largely dependent on a limited number of mobile platforms, primarily from Apple and Google, for distribution.

AppLovin didn't respond to a request for comment.

The founder and CEO of AppLovin, Adam Foroughi, has seen his stake value increase to approximately $5 billion as a result of the company's historic rally.

Things could've turned out very differently.

In September 2016, Foroughi agreed to sell a majority stake in AppLovin to Chinese investment firm Orient Hontai Capital for $1.4 billion. However, the deal did not go through as the agreement was made at a time when the U.S. government was tightening its regulations on Chinese investment in the domestic tech sector.

In 2022, AppLovin abandoned its $20 billion bid to acquire gaming software developer Unity after shareholders rejected the offer.

Since then, Unity has struggled greatly, losing more than half its value, while AppLovin's market cap has increased by almost six times.

WATCH: AppLovin is 'killing Unity' says LightShed's Brandon Ross