Investing.com -- AppLovin (NASDAQ: APP ) stock declined 16% amid cautious commentary from Edgewater Research, which adjusted its estimates for the company. Edgewater’s analysis pointed to a slow deceleration in the mobile gaming sector, alongside increasing competition from tech giants Meta Platforms Inc (NASDAQ: META ). and Alphabet (NASDAQ: GOOGL ) Inc.

The research firm noted that while AppLovin’s user acquisition performance and back-end impression share remain stable and industry-leading, the overall expansion in the market is not as rapid. This observation contributed to the bearish sentiment on AppLovin’s shares, which saw a significant drop in premarket trading.

Edgewater’s report also included a broader industry perspective, stating, "Mobile gaming macro seems to be decelerating slowly" and highlighted the rising competition AppLovin faces from both Meta and Alphabet. The firm’s decision to lower its estimates for AppLovin reflects these challenges, as well as a general sense of a subtle deceleration in both gaming and AppLovin’s e-commerce metrics.

The analyst’s comment provided further insight, "Trimming Estimates with Subtle Decel Apparent in Both Gaming & APP Ecom; META/GOOGL Competition Rising; Still No Sign of U Vector Improving UA." This suggests that despite AppLovin’s strong position, there are no clear signs of improvement in the user acquisition vector, which is crucial for sustained growth in the highly competitive mobile gaming industry.

Investors reacted to these insights by pulling back from AppLovin’s stock, leading to the observed decline. The premarket performance also saw Unity Software Inc (NYSE: U ). shares fall by 6%, indicating a broader concern for companies in the mobile gaming space as they navigate a potentially slowing market and increased competitive pressures.