AppLovin stock faces Unity competition concerns ahead of earnings

Investing.com - AppLovin Corporation (NASDAQ: APP) and Unity Software Inc. (NYSE: U) are set to report third-quarter earnings this week, with AppLovin reporting Wednesday after market close on November 4 and Unity reporting Thursday morning on November 5.

BTIG maintains Buy ratings on both companies, with a $396 price target on AppLovin and $53 on Unity. The firm reports that investor sentiment for AppLovin has declined to levels last seen in 2022 and 2023, with concerns mounting about competitive headwinds, market share loss, and take-rate compression. BTIG's checks suggest AppLovin's gaming market share remained steady, but its take rate has been affected by Unity reinvesting take-rate gains into gross spend and share of voice.

For Unity, BTIG notes that investor and industry conversations throughout the quarter have been consistent, with expectations for a strong quarterly print driven by positive channel checks and the increasing impact of D28 campaigns. The firm reports concerns remain around fourth-quarter guidance due to difficult quarter-over-quarter comparisons and uncertainty around model upgrades and D28 adoption, which Unity previously disclosed stood at only 25% of developers as of the second-quarter earnings call.

BTIG reports that feedback on AppLovin's Commerce operation has been mixed but appears to be moving in a more positive direction, with onboarding trends improving relative to the second quarter. The firm notes AppLovin announced a partnership with Trybe, a user-generated content creative platform, in early October, adding TikTok as a new partner.

For Unity's Create business, BTIG notes the Commerce initiative recently went live and could begin contributing to growth and revenue in the second half of 2026 through 2027. Unity leadership stated on public podcasts that the Unity 7 release cycle, with beta testing in the fourth quarter and broad release in the first quarter of 2027, should feature AI-driven improvements in backward compatibility.

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