Spotify vs. AppLovin: Which Ad-Powered Tech Stock is the Better Buy?

Both Spotify Technology S.A. SPOT and AppLovin Corporation APP are leveraging AI within their respective ecosystems, offering compelling ad-tech strategies.Spotify's AI features are consumer-facing and engagement-oriented. They are deeply tied to the company’s advertising business, enhancing user retention, collecting valuable data, and enabling more efficient, personalized ad delivery.Meanwhile, AppLovin employs AI to optimize in-app advertising across a vast network of mobile applications. Its algorithms analyze real-time user data to determine the most effective ad placements, formats, and timing, thereby maximizing click-through and conversion rates.While Spotify focuses on audio-driven personalization, AppLovin excels in visual and performance-based mobile ads. Together, they exemplify how AI can unlock scalable, high-margin digital advertising models.APP: Axon 2 and Wurl Propel AI-Driven ExpansionAPP is accelerating its transformation from a mobile-first ad platform into a diversified, AI-powered advertising leader. At the heart of this evolution is its strategic push into web advertising, e-commerce, and connected TV (CTV), driven by the acquisition of Wurl, a streaming-focused content distribution and monetization platform. Wurl enables AppLovin to extend its AI-driven monetization capabilities beyond mobile, unlocking high-growth opportunities in smart TVs and digital commerce.The CTV market is witnessing rapid growth as viewers migrate from linear to streaming platforms. Wurl’s infrastructure synergizes with AppLovin’s advanced AXON AI engine, allowing the company to deliver hyper-targeted, performance-driven ad campaigns across CTV devices. This move enhances both ad efficiency and measurable outcomes for advertisers.On the mobile front, AppLovin’s next-generation AI engine, Axon 2, launched in the second quarter of 2023, has dramatically improved ad performance. Since its rollout, Axon 2 has helped quadruple ad spend on the company’s platform, powering an estimated $10 billion annual run rate from gaming clients and securing AppLovin’s place among the top global ad tech firms by valuation.Axon 2’s impact extends beyond optimization. In a post-Identifier for Advertisers world, where traditional user acquisition strategies were upended, Axon 2 emerged as a recovery engine. While Western mobile gaming experienced stagnation in 2022, Axon 2 has reignited ad-driven growth. Meanwhile, the company’s MAX publisher base continues to expand rapidly, far outpacing modest in-app purchase growth, highlighting the strategic edge of AppLovin’s AI-first approach.SPOT: AI-Powered Personalization Deepens EngagementSPOT is harnessing the power of AI to redefine user experience and deepen engagement on its platform. Personalized AI features like Spotify Wrapped have become annual cultural phenomena, leveraging machine learning to analyze vast amounts of user listening data. This feature not only entertains but also strengthens brand loyalty by offering users a unique snapshot of their musical journey.SPOT’s AI DJ is a dynamic tool that utilizes advanced algorithms to curate personalized playlists in real-time. By incorporating voice-command functionality, the AI DJ offers an interactive, radio-like experience that mimics human curation while adapting to individual tastes. This innovation fosters greater user retention and time spent on the platform, directly enhancing monetization potential.These AI-driven tools are not just boosting engagement; they're also expanding margins by reducing reliance on manual curation and enabling more targeted advertising. Furthermore, the massive troves of proprietary user data that power Spotify’s AI form a defensible, data-driven moat that’s difficult for competitors to replicate. As AI continues to evolve, Spotify’s strategic integration of intelligent features positions it as a leading innovator in digital audio, setting the stage for long-term growth and sustainable competitive advantage.How Do Zacks Estimates Compare for APP & SPOT?The Zacks Consensus Estimate for APP’s 2025 sales and EPS indicates year-over-year growth of 17% and 89%, respectively. EPS estimates have been trending upward over the past 60 days. Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for SPOT’s 2025 sales suggests 818% year-over-year growth, while EPS is expected to grow 57%. EPS estimates have been trending downward over the past 60 days. Image Source: Zacks Investment ResearchSPOT’s Valuation More Attractive Than APPSPOT is trading at a forward sales multiple of 7.03X, below its 12-month median of 5.05X. APP’s forward sales multiple stands at 18.82X, below its median of 16.48X.AppLovin: The Better Buy NowWhile both Spotify and AppLovin are leveraging AI to drive ad-powered growth, AppLovin appears better positioned in the near term. Its Axon 2 engine is delivering massive gains in ad efficiency and spend, while Wurl expands its AI reach into fast-growing CTV and digital commerce markets. APP's stronger EPS growth estimates and AI-driven recovery in a post-IDFA world further support its momentum. Although Spotify offers deeper user engagement and a more attractive valuation, its downward-trending EPS estimates raise concerns. For investors seeking AI-led scalability and ad-tech upside, AppLovin currently stands out as the more compelling buy.While APP carries a Zacks Rank #1 (Strong Buy), SPOT carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AppLovin Corporation (APP): Free Stock Analysis Report Spotify Technology (SPOT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks