AppLovin (APP) is expected to deliver Q2 results above its guidance, supported by continued strength in its gaming business and steady progress in its consumer platform, although investors should remain patient as the company's self-serve advertising business scales, Wedbush Securities said in a Wednesday note.

The brokerage expects AppLovin to report Q2 revenue of about $1.97 billion and adjusted EBITDA of about $1.66 billion, exceeding the company's guidance and to forecast 4% to 6% sequential revenue growth for Q3.

According to the note, concerns about the pace of new advertiser signups on AppLovin's self-serve platform are overstated, with higher spending by existing advertisers expected to remain the primary driver of revenue growth as onboarding continues over the coming weeks before moderating.

Looking beyond the quarter, Wedbush said advertiser spending and retention are more important than signup growth, adding that competitive concerns related to Unity appear overstated and that a strong Q3 outlook or broader consumer platform adoption could improve investor sentiment.

Wedbush maintained its outperform rating on the stock and raised its price target to $640.

Shares of AppLovin declined more than 2% in Wednesday trading.

Price: 406.30, Change: -11.92, Percent Change: -2.85