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ARM vs. APP: Which AI-Exposed Tech Stock is a Better Buy Right Now?
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Both AppLovin Corporation (APP - Free Report) and Arm Holdings plc (ARM - Free Report) and are tech companies riding the AI wave, AppLovin through sophisticated AI-driven advertising algorithms and app monetization engines and Arm Holdings through its advanced chip architectures that fuel AI hardware performance, making them compelling, innovation-focused plays on the accelerating demand for AI solutions across industries.
Their shared emphasis on harnessing artificial intelligence to drive efficiency, scalability, and business impact places them at the forefront of a broader technological shift, where AI is rapidly becoming central to competitive advantage and long-term growth.
The Case for APP
AppLovin is accelerating its evolution into a leading AI-powered advertising platform, shifting its core strategy toward high-growth, high-margin segments within the digital ecosystem. A key milestone in this transition was the $900 million sale of its gaming unit to Tripledot Studios, allowing the company to streamline its operations and intensify focus on its proprietary AXON 2.0 technology, an AI engine that intelligently optimizes ad delivery, targeting, and performance.
With AI now embedded at the heart of its operations, AppLovin is investing heavily in automation and advanced algorithmic tools designed to enhance advertiser efficiency and drive better outcomes across campaigns. These innovations enable the platform to serve over 10 million businesses globally, offering data-driven precision and scalability in an increasingly competitive digital advertising market.
AppLovin’s recent earnings underscore the impact of its AI-led approach to advertising. The company continues to benefit from AXON 2.0, which uses deep learning to deliver high-conversion ad placements across mobile apps. In the first quarter of 2025, revenue surged 40% year over year, driven by strong advertiser demand and improved campaign performance through intelligent optimization.
Operational efficiency has scaled with AI integration, as reflected by an 83% year-over-year jump in adjusted EBITDA, alongside a remarkable 144% increase in net income. For the full year 2024, revenue rose 43%, while adjusted EBITDA climbed 81%, validating the company’s ability to deliver profitability through advanced technology and smart resource allocation.
The Case for ARM
Arm Holdings maintains a dominant foothold in the semiconductor industry. Its low-power chip architecture has long been a critical component in smartphones and tablets. Major tech giants like Apple (AAPL - Free Report) , Qualcomm (QCOM - Free Report) , and Samsung have consistently relied on ARM’s designs.
ARM remains well-positioned to benefit from rapid advancements in AI and the Internet of Things. Its energy-efficient chips are increasingly embedded in smart devices, autonomous technologies, and cloud infrastructure. With AI workloads and IoT deployments accelerating, the need for scalable, power-efficient solutions has never been greater. Arm Holdings’ ongoing efforts to tailor its architecture for AI applications further enhance its growth prospects.
A distinctive aspect of Arm Holdings’ business model is its licensing and royalty structure. ARM licenses its chip designs to major technology companies and earns royalties on every chip sold. This model provides a steady stream of revenues without significant capital expenditure. Furthermore, partnerships with key industry players allow the company to maintain relevance, ensuring it remains a preferred choice in sectors like automotive, data centers, and smart devices.
Currently, tariff-related risks pose a potential headwind for Arm Holdings. The company revealed that approximately 10–20% of its royalty revenues stem from shipments into the U.S. market. Ongoing tariff tensions risk raising the cost of imported chips, which could dampen end-market demand in the United States. Higher prices may make imported, ARM-based devices less attractive compared to domestically produced alternatives, weakening ARM’s competitive edge. This could lead to a decline in royalty revenues and, potentially, a slowdown in its licensing business. As a result, new product development may face delays, and demand for ARM’s technology licenses could be negatively impacted.
How Do Zacks Estimates Compare for APP & ARM?
According to the Zacks Consensus Estimate, APP is poised to deliver a robust 24% year-over-year increase in sales, along with an impressive 85% surge in earnings per share (EPS) for the current fiscal year, highlighting strong operating leverage and accelerating profitability from its AI-driven advertising platform.
Image Source: Zacks Investment Research
In contrast, ARM is expected to report a more modest 17% sales growth and a relatively muted 5.5% increase in EPS, suggesting a steadier growth trajectory as it continues to scale its licensing model and invest in AI-enabled chip innovation. While both companies are benefiting from secular tech tailwinds, APP's significantly higher earnings momentum may reflect greater short-term operational efficiency and demand capture in the evolving digital advertising landscape.
Image Source: Zacks Investment Research
Valuation Favors APP's Balanced Growth and Profitability
Arm Holdings trades at a forward 12-month P/E of 70.45X, well below its median of 103.99X, signaling a relative valuation discount. However, it still carries a steep premium, reflecting lofty expectations tied to its AI and IoT potential. In contrast, AppLovin’s forward P/E of 39.05X is only slightly above its median of 38.78X, suggesting a more grounded valuation. Given APP’s stronger earnings growth outlook and operational momentum, its current valuation appears more attractive. Investors may find better near-term upside in APP, especially as its AI-driven ad tech model continues to convert growth into profitability more effectively.
APP Shines as the Smarter AI Bet
While both Arm and AppLovin are strategically positioned to benefit from the rise of AI, AppLovin stands out for its ability to translate innovation into profitability more efficiently. Its sharpened focus on AI-powered ad technology, combined with strong operational execution, positions it for sustained growth. Moreover, AppLovin’s valuation appears more grounded relative to its earnings potential, offering a favorable risk-reward profile. In contrast, Arm Holdings’ premium pricing and exposure to external risks could limit near-term upside. For investors seeking a tech-forward, AI-driven company with scalable returns and strategic clarity, AppLovin emerges as the Buy right now.
Image: Bigstock
ARM vs. APP: Which AI-Exposed Tech Stock is a Better Buy Right Now?
Both AppLovin Corporation (APP - Free Report) and Arm Holdings plc (ARM - Free Report) and are tech companies riding the AI wave, AppLovin through sophisticated AI-driven advertising algorithms and app monetization engines and Arm Holdings through its advanced chip architectures that fuel AI hardware performance, making them compelling, innovation-focused plays on the accelerating demand for AI solutions across industries.
Their shared emphasis on harnessing artificial intelligence to drive efficiency, scalability, and business impact places them at the forefront of a broader technological shift, where AI is rapidly becoming central to competitive advantage and long-term growth.
The Case for APP
AppLovin is accelerating its evolution into a leading AI-powered advertising platform, shifting its core strategy toward high-growth, high-margin segments within the digital ecosystem. A key milestone in this transition was the $900 million sale of its gaming unit to Tripledot Studios, allowing the company to streamline its operations and intensify focus on its proprietary AXON 2.0 technology, an AI engine that intelligently optimizes ad delivery, targeting, and performance.
With AI now embedded at the heart of its operations, AppLovin is investing heavily in automation and advanced algorithmic tools designed to enhance advertiser efficiency and drive better outcomes across campaigns. These innovations enable the platform to serve over 10 million businesses globally, offering data-driven precision and scalability in an increasingly competitive digital advertising market.
AppLovin’s recent earnings underscore the impact of its AI-led approach to advertising. The company continues to benefit from AXON 2.0, which uses deep learning to deliver high-conversion ad placements across mobile apps. In the first quarter of 2025, revenue surged 40% year over year, driven by strong advertiser demand and improved campaign performance through intelligent optimization.
Operational efficiency has scaled with AI integration, as reflected by an 83% year-over-year jump in adjusted EBITDA, alongside a remarkable 144% increase in net income. For the full year 2024, revenue rose 43%, while adjusted EBITDA climbed 81%, validating the company’s ability to deliver profitability through advanced technology and smart resource allocation.
The Case for ARM
Arm Holdings maintains a dominant foothold in the semiconductor industry. Its low-power chip architecture has long been a critical component in smartphones and tablets. Major tech giants like Apple (AAPL - Free Report) , Qualcomm (QCOM - Free Report) , and Samsung have consistently relied on ARM’s designs.
ARM remains well-positioned to benefit from rapid advancements in AI and the Internet of Things. Its energy-efficient chips are increasingly embedded in smart devices, autonomous technologies, and cloud infrastructure. With AI workloads and IoT deployments accelerating, the need for scalable, power-efficient solutions has never been greater. Arm Holdings’ ongoing efforts to tailor its architecture for AI applications further enhance its growth prospects.
A distinctive aspect of Arm Holdings’ business model is its licensing and royalty structure. ARM licenses its chip designs to major technology companies and earns royalties on every chip sold. This model provides a steady stream of revenues without significant capital expenditure. Furthermore, partnerships with key industry players allow the company to maintain relevance, ensuring it remains a preferred choice in sectors like automotive, data centers, and smart devices.
Currently, tariff-related risks pose a potential headwind for Arm Holdings. The company revealed that approximately 10–20% of its royalty revenues stem from shipments into the U.S. market. Ongoing tariff tensions risk raising the cost of imported chips, which could dampen end-market demand in the United States. Higher prices may make imported, ARM-based devices less attractive compared to domestically produced alternatives, weakening ARM’s competitive edge. This could lead to a decline in royalty revenues and, potentially, a slowdown in its licensing business. As a result, new product development may face delays, and demand for ARM’s technology licenses could be negatively impacted.
How Do Zacks Estimates Compare for APP & ARM?
According to the Zacks Consensus Estimate, APP is poised to deliver a robust 24% year-over-year increase in sales, along with an impressive 85% surge in earnings per share (EPS) for the current fiscal year, highlighting strong operating leverage and accelerating profitability from its AI-driven advertising platform.
In contrast, ARM is expected to report a more modest 17% sales growth and a relatively muted 5.5% increase in EPS, suggesting a steadier growth trajectory as it continues to scale its licensing model and invest in AI-enabled chip innovation. While both companies are benefiting from secular tech tailwinds, APP's significantly higher earnings momentum may reflect greater short-term operational efficiency and demand capture in the evolving digital advertising landscape.
Valuation Favors APP's Balanced Growth and Profitability
Arm Holdings trades at a forward 12-month P/E of 70.45X, well below its median of 103.99X, signaling a relative valuation discount. However, it still carries a steep premium, reflecting lofty expectations tied to its AI and IoT potential. In contrast, AppLovin’s forward P/E of 39.05X is only slightly above its median of 38.78X, suggesting a more grounded valuation. Given APP’s stronger earnings growth outlook and operational momentum, its current valuation appears more attractive. Investors may find better near-term upside in APP, especially as its AI-driven ad tech model continues to convert growth into profitability more effectively.
APP Shines as the Smarter AI Bet
While both Arm and AppLovin are strategically positioned to benefit from the rise of AI, AppLovin stands out for its ability to translate innovation into profitability more efficiently. Its sharpened focus on AI-powered ad technology, combined with strong operational execution, positions it for sustained growth. Moreover, AppLovin’s valuation appears more grounded relative to its earnings potential, offering a favorable risk-reward profile. In contrast, Arm Holdings’ premium pricing and exposure to external risks could limit near-term upside. For investors seeking a tech-forward, AI-driven company with scalable returns and strategic clarity, AppLovin emerges as the Buy right now.
APP currently sports a Zacks Rank #1 (Strong Buy), while ARM carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank stocks here.