Digital Turbine APPS and AXT, Inc. AXTI are two small-cap technology stocks with exposure to long-term digital infrastructure trends. Digital Turbine helps mobile operators, device makers and advertisers acquire and monetize users, while AXT manufactures compound semiconductor substrates used in AI, data centers, fiber-optic networks and 5G applications.
Although their businesses differ, both companies offer exposure to long-term technology trends fueled by rising digital connectivity and AI adoption. As small-cap stocks with significant growth potential, they offer investors distinct ways to capitalize on the expanding digital economy.
But which company offers stronger growth prospects and the better investment opportunity today? Let's compare their fundamentals, competitive positioning, valuation, growth outlook and key risks to determine which small-cap tech stock deserves a place in your portfolio.
The Case for APPS Stock
Digital Turbine is benefiting from the expanding digital economy through its mobile growth platform, which connects advertisers, app developers, wireless carriers and OEMs. Its business spans On Device Solutions (ODS) and the App Growth Platform (AGP), enabling app discovery, mobile advertising, user acquisition and monetization across billions of connected devices. Proprietary technologies such as SingleTap, DT DSP and AI-powered targeting reinforce its competitive position within long-term digital infrastructure and mobile connectivity trends.
The company's long-term growth is supported by increasing smartphone usage, rising app engagement, expanding international carrier partnerships, alternative app distribution and AI-powered mobile advertising. With a platform reaching nearly 3 billion devices and more than 80,000 applications, Digital Turbine possesses a valuable first-party data advantage that enhances AI-driven recommendations, targeting and personalization.
Operational momentum improved significantly in fiscal 2026. Revenues increased 15% to $565.3 million, while adjusted EBITDA surged 69% to $122.5 million. APPS highlighted that DTiQ, Ignite Graph, AI-driven optimization and machine learning models are improving targeting, advertiser returns and pricing while supporting margin expansion. Reflecting confidence in these growth initiatives, the company expects fiscal 2027 revenues of $630-$650 million, alongside continued double-digit adjusted EBITDA growth.
Recent strategic developments further strengthen Digital Turbine's accelerating AI adoption and the long-term expansion of the digital economy. During the past month, the company introduced Launchpad, a unified platform for modern app distribution designed to improve app discovery across its mobile ecosystem. It also expanded its AI capabilities through a deeper Google Cloud partnership, integrating Gemini Enterprise Agent technologies to enhance targeting, recommendations and real-time optimization. In addition, the Databricks collaboration also strengthens AI-powered data intelligence across its global mobile footprint.
The Case for AXTI Stock
AXT is well positioned to capitalize on the expanding AI infrastructure and digital connectivity markets through its indium phosphide (InP) substrates, a critical material for high-speed optical transceivers, silicon photonics and photodetectors used in AI data centers. As hyperscalers accelerate AI investments and digital connectivity upgrades, demand for InP-based optical components is rising rapidly, positioning the company as an indirect beneficiary of the expanding digital economy. Management believes optical component demand could drive a 4x-6x expansion in the substrate market over the next three to five years, with additional upside from the emerging co-packaged optics (CPO) market beginning in late 2027.
AXT's competitive advantage lies in its vertically integrated supply chain, proprietary crystal-growth technology, in-house furnace manufacturing and partial ownership of raw-material suppliers, which provide greater manufacturing control and support scalable capacity expansion. The company recently completed a $632.5 million capital raise to expand Tongmei's InP production capacity, accelerate 6-inch InP development and fund R&D. AXT is already ahead of schedule to double InP capacity in 2026 and plans another doubling in 2027, supported by record customer forecasts and an InP backlog exceeding $100 million. At the same time, the company is qualifying additional Tier-1 optical customers while benefiting from rising AI infrastructure investments in both the United States and China.
Further strengthening its long-term growth outlook, AXT's subsidiary entered into a three-year Master Development and Supply Agreement with Coherent for 6-inch InP substrates. The agreement includes a $22.3 million prepayment from Coherent and supports AXT's manufacturing expansion through 2028, improving long-term revenue visibility while reinforcing its position in AI-driven optical networking.
However, investors should monitor several execution risks. China's export-license requirements for InP shipments, geopolitical tensions and the successful execution of the company's aggressive capacity expansion plans remain key challenges. Export permits continue to be the largest near-term constraint despite robust customer demand.
How Do Estimates Compare for APPS & AXTI?
While both companies are expected to deliver improved earnings, analyst estimates favor Digital Turbine in terms of near-term growth momentum.
The Zacks Consensus Estimate projects APPS' fiscal 2027 EPS to grow more than 50% year over year to 84 cents. The estimate has remained unchanged over the past 30 days after being revised upward over the past 60 days.
Image Source: Zacks Investment Research
In contrast, the Zacks Consensus Estimate for AXTI's 2026 EPS stands at 27 cents, down by 1 cent over the past 30 and 60 days. However, the estimate still reflects a significant turnaround from the year-ago loss of 41 cents per share.
Image Source: Zacks Investment Research
Price Performance and Valuation of APPS & AXTI
In the past three months, APPS shares have rallied 124.8%, while AXTI shares have plunged 43.9%. In comparison, the sector has returned 4.1%.
3-Month Price Performance Chart
Image Source: Zacks Investment Research
From a valuation standpoint, APPS appears significantly more attractive than AXTI based on the trailing 12-month price-to-sales (P/S) ratio. APPS carries a Value Score of B, reflecting a relatively cheaper valuation, whereas AXTI has a Value Score of F, indicating the stock is overvalued. APPS’ shares currently trade at 1.77X trailing 12-month sales, well below AXTI's 27.15X.
P/S- TTM Valuation Chart
Image Source: Zacks Investment Research
Conclusion
Both stocks offer compelling long-term growth opportunities tied to digital connectivity and AI. However, Digital Turbine's accelerating financial performance, expanding AI-powered platform, improving earnings outlook and attractive valuation provide a superior risk-reward profile. While AXT has promising long-term potential, its premium valuation, export-related uncertainties and execution risks limit its near-term appeal. Overall, APPS appears to be the better investment choice now.
Digital Turbine sports a Zacks Rank #1 (Strong Buy) at present, while AXT has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).