AppLovin (APP) is rapidly evolving from a mobile gaming advertising network into a broader AI-driven performance marketing platform, with expansion into e-commerce and generative AI advertising tools expected to drive its next growth phase, Wedbush Securities said in a Friday note.

Following discussions with management, the firm said AppLovin's Axon 2.0 ad technology has already established a strong foundation, with the next phase focused on scaling AppLovin's e-commerce self-serve platform and rolling out new generative AI advertising products.

The investment firm said upcoming tools such as 30- to 60-second AI video ads, dynamic product catalogs and interactive advertising formats could accelerate retailer adoption and expand AppLovin's addressable market. The brokerage said e-commerce revenue could potentially surpass mobile gaming revenue within three to five years.

The company's core mobile gaming advertising business is expected to continue delivering about 20% to 30% baseline growth, providing strong cash generation as the e-commerce business scales. Wedbush said AppLovin maintains a competitive advantage in probabilistic bidding environments particularly in mobile gaming.

Wedbush reiterated its outperform rating on the stock, with a $640 price target.

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