AppLovin (APP) Offers Attractive Cash Flow Multiple?
In its second quarter 2026 investor letter, Greenhaven Road Capital detailed its investment in AppLovin Corporation (NASDAQ:APP). The mobile technology company, which develops software for advertisers, closed at $315.44 per share on August 14, 2026, with a market capitalization of $105.97 billion. The investment management firm revealed that AppLovin has a 1% position in their small AI basket.
Notably, AppLovin has experienced impressive growth, with revenue increasing by approximately 70% year-over-year to $5.48 billion in 2025, and an adjusted EBITDA margin of 82%. The company generated $3.95 billion in free cash flow (FCF) that year, representing an 88% conversion rate of EBITDA to FCF. In 2026, AppLovin is expected to generate more than $6 million in EBITDA per employee, while reducing headcount as they continue to achieve high growth rates.
The shares currently trade at a valuation of less than 20 times forward 2027 FCF. Despite AppLovin being held by 91 hedge funds at the end of Q1 2026, Greenhaven Road Capital believes there are other AI stocks with greater upside potential and lower risk.
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