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ARM vs. APP: Which AI-Exposed Tech Stock is a Better Buy Right Now?
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Key Takeaways
AppLovin's Q2 2025 revenues rose 77% as EBITDA surged 99% and net income jumped 156%.
ARM faces risk in China from RISC-V adoption, challenging its AI and IoT chip momentum.
APP's forward P/E of 39.36X looks more attractive versus ARM's 73.32X premium valuation.
Both AppLovin Corporation (APP - Free Report) and Arm Holdings plc (ARM - Free Report) 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 has solidified its leadership in mobile advertising, powered by its next-gen AI engine, Axon 2, which launched in the second quarter of 2023. Since its debut, Axon 2 has radically enhanced AppLovin’s ad performance, helping to quadruple advertising spend on its platform. This explosive growth has led to an estimated $10 billion annual run rate in ad spend from gaming clients, pushing APP into the upper echelon of global ad tech firms by valuation.
Axon 2’s importance goes far beyond mere optimization. In a post-Identifier for Advertisers environment that disrupted mobile user acquisition strategies, Axon 2 served as a critical catalyst for recovery. While Western mobile gaming experienced stagnation in 2022, Axon 2 reignited ad-driven momentum. Though in-app purchases are seeing modest, mid-single-digit growth, AppLovin’s MAX publisher base is expanding at a significantly faster rate, underscoring Axon 2’s strategic advantage.
Google, Microsoft (MSFT - Free Report) and Salesforce (CRM - Free Report) are rapidly advancing generative AI. Microsoft integrates AI in Office via Copilot and expands Azure’s AI. Google embeds AI in Workspace and enhances Vertex AI. Salesforce incorporates AI across its CRM, especially through Einstein Copilot and Data Cloud. Microsoft is also focusing on AI governance, while Google is strengthening AI security. Salesforce further refines dynamic customer experiences. While these giants focus on enterprise productivity and CRM, Applovintakes a different route, using AI to drive direct monetization in mobile advertising.
AppLovin’s financial performance has matched its technological breakthroughs. In the second quarter of 2025, revenues increased 77% year over year, reflecting strong market demand. Adjusted EBITDA jumped 99% year over year, showcasing improved operational efficiency. Net income skyrocketed 156% from the prior year, demonstrating APP’s ability to translate revenue growth into significant profitability. For the full-year 2024, revenues climbed 43% year over year, while adjusted EBITDA surged 81%, underscoring AppLovin’s ability to seize market opportunities while maintaining efficiency.
The Case for ARM
ARM is rapidly emerging as a foundational player in the age of AI and the Internet of Things. As major tech giants like Apple, Qualcomm and Samsung pursue AI-driven innovation, they are increasingly relying on ARM’s flexible and energy-efficient architecture. AI models are being embedded into everything from wearables to cloud data centers, and ARM’s chips are built to meet these growing demands.
Apple continues to scale its AI integration on ARM-based silicon, Qualcomm expands its AI capabilities in mobile and automotive, and Samsung explores next-gen IoT through Exynos chips powered by ARM. With machine learning and edge computing at the forefront, ARM is becoming an indispensable infrastructure for the next wave of tech advancement.
Currently, ARM faces notable risks due to its significant exposure to China, its second-largest market. Growth in the region has been sluggish, and one potential reason is the rising adoption of RISC-V, an open-source chip architecture increasingly favored by Chinese firms. This trend may soon accelerate, as the Chinese government prepares to issue formal guidelines aimed at promoting the development and widespread use of RISC-V technology. Such state-backed support could further weaken ARM’s position in the Chinese semiconductor ecosystem over the coming years.
Given China's strategic focus on reducing dependence on foreign chip architectures, the company’s reliance on this market presents a long-term concern. If RISC-V adoption continues to gain traction, Arm Holdings’ growth prospects in China could remain muted, affecting its broader global momentum. These evolving competitive dynamic highlights a key vulnerability in ARM’s business model that investors should closely monitor.
How Do Zacks Estimates Compare for APP & ARM?
According to the Zacks Consensus Estimate, APP is poised to deliver a 17% year-over-year increase in sales, along with an impressive 98% surge in earnings for the current year, highlighting strong operating leverage and accelerating profitability from its AI-driven advertising platform.
Image Source: Zacks Investment Research
ARM is expected to report 18% sales growth and a relatively muted 3% 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 73.32X, well below its median of 125.27X, 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 39.36X is only slightly above its median of 37.71X, 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?
Key Takeaways
Both AppLovin Corporation (APP - Free Report) and Arm Holdings plc (ARM - Free Report) 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 has solidified its leadership in mobile advertising, powered by its next-gen AI engine, Axon 2, which launched in the second quarter of 2023. Since its debut, Axon 2 has radically enhanced AppLovin’s ad performance, helping to quadruple advertising spend on its platform. This explosive growth has led to an estimated $10 billion annual run rate in ad spend from gaming clients, pushing APP into the upper echelon of global ad tech firms by valuation.
Axon 2’s importance goes far beyond mere optimization. In a post-Identifier for Advertisers environment that disrupted mobile user acquisition strategies, Axon 2 served as a critical catalyst for recovery. While Western mobile gaming experienced stagnation in 2022, Axon 2 reignited ad-driven momentum. Though in-app purchases are seeing modest, mid-single-digit growth, AppLovin’s MAX publisher base is expanding at a significantly faster rate, underscoring Axon 2’s strategic advantage.
Google, Microsoft (MSFT - Free Report) and Salesforce (CRM - Free Report) are rapidly advancing generative AI. Microsoft integrates AI in Office via Copilot and expands Azure’s AI. Google embeds AI in Workspace and enhances Vertex AI. Salesforce incorporates AI across its CRM, especially through Einstein Copilot and Data Cloud. Microsoft is also focusing on AI governance, while Google is strengthening AI security. Salesforce further refines dynamic customer experiences. While these giants focus on enterprise productivity and CRM, Applovintakes a different route, using AI to drive direct monetization in mobile advertising.
AppLovin’s financial performance has matched its technological breakthroughs. In the second quarter of 2025, revenues increased 77% year over year, reflecting strong market demand. Adjusted EBITDA jumped 99% year over year, showcasing improved operational efficiency. Net income skyrocketed 156% from the prior year, demonstrating APP’s ability to translate revenue growth into significant profitability. For the full-year 2024, revenues climbed 43% year over year, while adjusted EBITDA surged 81%, underscoring AppLovin’s ability to seize market opportunities while maintaining efficiency.
The Case for ARM
ARM is rapidly emerging as a foundational player in the age of AI and the Internet of Things. As major tech giants like Apple, Qualcomm and Samsung pursue AI-driven innovation, they are increasingly relying on ARM’s flexible and energy-efficient architecture. AI models are being embedded into everything from wearables to cloud data centers, and ARM’s chips are built to meet these growing demands.
Apple continues to scale its AI integration on ARM-based silicon, Qualcomm expands its AI capabilities in mobile and automotive, and Samsung explores next-gen IoT through Exynos chips powered by ARM. With machine learning and edge computing at the forefront, ARM is becoming an indispensable infrastructure for the next wave of tech advancement.
Currently, ARM faces notable risks due to its significant exposure to China, its second-largest market. Growth in the region has been sluggish, and one potential reason is the rising adoption of RISC-V, an open-source chip architecture increasingly favored by Chinese firms. This trend may soon accelerate, as the Chinese government prepares to issue formal guidelines aimed at promoting the development and widespread use of RISC-V technology. Such state-backed support could further weaken ARM’s position in the Chinese semiconductor ecosystem over the coming years.
Given China's strategic focus on reducing dependence on foreign chip architectures, the company’s reliance on this market presents a long-term concern. If RISC-V adoption continues to gain traction, Arm Holdings’ growth prospects in China could remain muted, affecting its broader global momentum. These evolving competitive dynamic highlights a key vulnerability in ARM’s business model that investors should closely monitor.
How Do Zacks Estimates Compare for APP & ARM?
According to the Zacks Consensus Estimate, APP is poised to deliver a 17% year-over-year increase in sales, along with an impressive 98% surge in earnings for the current year, highlighting strong operating leverage and accelerating profitability from its AI-driven advertising platform.
Image Source: Zacks Investment Research
ARM is expected to report 18% sales growth and a relatively muted 3% 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 73.32X, well below its median of 125.27X, 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 39.36X is only slightly above its median of 37.71X, 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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.