Piper Sandler analyst James Callahan has expressed caution regarding AppLovin after the company reported mixed results for the second quarter and provided third-quarter profit guidance that fell short of expectations. As a result, Callahan downgraded the stock to neutral from overweight and cut the price target from $665 to $385, indicating a potential downside of 7.9% from the previous close.
The analyst noted that management attributed the earnings miss to the timing of model improvements, which they expect to reverse in the third quarter. However, Callahan raised concerns that future model improvements may need to be more significant to meet market expectations. He also highlighted increased compute costs in the second quarter and ongoing investments in new model architectures.
Despite the downgrade, AppLovin remains a favorite among analysts, with 29 out of 32 covering it rating it a buy or strong buy. The company's stock has experienced volatility, having surged 713% in 2024 and 108% in 2025, but has since declined by 38% in 2026 amid broader software sector challenges