The lawsuit, filed in the United States District Court for the Northern District of California, centers on two specific trading sessions where APP shares suffered steep declines. On July 13, 2026, the stock dropped $64.13—a 12.65% decline—following a Bank of America Securities report that suggested weaker-than-anticipated e-commerce ad growth. The pressure intensified on August 6, 2026, when shares plummeted an additional $82.13, or 19.66%, after the company reported second-quarter revenue of $1.92 billion, missing the $1.94 billion consensus estimate.

Management cited a "lighter than normal" pace of AI model improvement during that quarter and admitted the generative AI video tool remained a work in progress. These disclosures contradicted earlier company statements that touted continuous, unhindered advancements in their AI technology. In the wake of the August report, multiple financial institutions, including RBC Capital Markets and Piper Sandler, slashed their price targets for the firm. Joseph E. Levi of Levi & Korsinsky, LLP, the firm representing the class, stated that the rapid market reassessment illustrates the significant gap between the company's public assurances and the reality of its development challenges.