ARM vs. APP: Which AI-Focused Technology Stock Should You Choose at This Moment?

AppLovin and Arm Holdings: Leaders in the AI Transformation

AppLovin Corporation (APP) and Arm Holdings (ARM) are both at the forefront of technological innovation, leveraging artificial intelligence to drive their businesses forward. AppLovin utilizes sophisticated AI-driven advertising solutions and app monetization platforms, while Arm Holdings provides the advanced chip designs that enable high-performance AI hardware. Their focus on innovation positions them as key players in the rapidly expanding AI landscape.

Both companies are committed to using AI to boost operational efficiency, scalability, and measurable business results. This shared vision places them at the cutting edge of a new era, where artificial intelligence is becoming a central force for competitive advantage and sustainable growth.

Why AppLovin Stands Out

For AppLovin, artificial intelligence is fundamental to its business strategy. The company’s proprietary AXON optimization engine constantly evaluates campaign data, refining targeting and improving performance. This continuous feedback loop not only enhances advertiser returns but also strengthens the platform’s appeal and retention.

Another crucial component is the MAX mediation platform, which links publishers to a broad range of advertising demand sources. As the network grows, performance improves for all participants, creating a virtuous cycle: better results attract more advertisers and developers, which in turn amplifies AppLovin’s data advantage.

This competitive edge is built not just on technology, but on a robust ecosystem and deep data insights—assets that are difficult for even well-funded competitors to replicate.

AppLovin’s recent financials highlight its operational strength: in the fourth quarter of 2025, revenue surged to $1.7 billion, a 66% increase from the previous year, while adjusted EBITDA climbed 82% to $1.4 billion, resulting in an 84% margin.

These results indicate that AppLovin is not only growing rapidly but also becoming more efficient. When revenue growth translates directly into stronger operations, it points to lasting advantages rather than short-lived trends. This kind of disciplined execution is especially valued in the ad-tech sector, where competition and platform dependencies often pressure margins.

Arm Holdings: Powering the Future of AI

Arm Holdings has evolved from a traditional chip designer into a central force in energy-efficient AI computing. Its RISC-based architecture delivers outstanding performance per watt, a vital benefit as AI adoption accelerates and energy efficiency becomes increasingly important. The Neoverse V-Series CPUs are shaping the future of AI infrastructure by enabling faster and more efficient machine learning without the high energy costs of older technologies.

One of Arm’s key strengths is its consistent architecture, which allows developers to deploy AI applications seamlessly across mobile devices, cloud platforms, and edge environments. Strategic partnerships, such as with Meta, highlight Arm’s growing role in data center efficiency, while new leadership from Amazon signals a deeper commitment to advanced chip innovation. The planned launch of an AI chip division marks a shift toward becoming a strategic infrastructure provider, potentially strengthening Arm’s influence over AI economics and reinforcing its competitive position.

In the fourth quarter of 2025, Arm’s revenue surpassed $1 billion once again, demonstrating that the company’s growth is now driven by scale and sustained demand, rather than being cyclical or experimental. This expansion was fueled by ongoing interest from advertisers and developers seeking improved monetization, supported by Arm’s efficient ad delivery platform. Notably, this growth came from a much larger base than in previous years, showing that Arm is maintaining momentum as it scales.

While revenue growth remained strong, earnings growth reflected disciplined cost management and improved monetization. Arm continues to prove it can expand its platform without sacrificing profitability, an important signal for investors seeking quality growth.

Comparing Zacks Estimates: APP vs. ARM

According to Zacks Consensus Estimates, AppLovin is expected to achieve a 38% year-over-year increase in sales and a 55% jump in earnings per share for the current fiscal year, reflecting robust operations and accelerating profitability from its AI-powered ad platform.

By comparison, Arm Holdings is projected to deliver 22% sales growth and a 7% rise in EPS, indicating a more gradual growth path as it continues to expand its licensing model and invest in AI chip innovation. While both companies benefit from strong technology trends, AppLovin’s higher earnings momentum suggests greater short-term efficiency and demand capture in the digital advertising space.

Valuation: APP’s Growth and Profitability Shine

Arm Holdings is currently valued at a forward 12-month P/E of 62, which is below its median of 144.44, indicating a relative discount but still reflecting high expectations for its AI and IoT prospects. In contrast, AppLovin’s forward P/E of 24 is also below its median of 39, suggesting a more reasonable valuation. Given AppLovin’s stronger earnings outlook and operational momentum, its current valuation appears more attractive, offering investors better near-term potential as its AI-driven ad tech continues to convert growth into profitability.

APP: The More Compelling AI Investment Right Now

When comparing both companies, AppLovin emerges as the more attractive short-term opportunity. Its deep integration of AI into its business model enables scalable innovation and improved profitability. The company’s ecosystem, data strengths, and operational discipline position it to maintain momentum and effectively manage competition. While Arm remains a crucial player in AI infrastructure, its growth is steadier and more sensitive to valuation. Based on current fundamentals and analyst rankings, AppLovin stands out as the more balanced and actionable choice for investors seeking AI exposure today.

Currently, AppLovin holds a Zacks Rank #3 (Hold), while Arm Holdings is rated Zacks Rank #4 (Sell).