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Duolingo Shares Jump 32% on Strong AI-Driven Growth and Upgraded Forecast

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Duolingo shares surged about 32% on Thursday after the language-learning platform raised its annual forecast, boosting investor confidence in its ability to accelerate user growth through AI-powered features, social engagement tools, and improved monetization strategies.

The company has been experimenting with app features and subscription models to enhance retention and attract new users. Duolingo runs targeted experiments to decide which subscription options are shown to which users and when, aiming to maximize long-term value rather than pushing any single plan.

In the second quarter, average revenue per user rose 6%, largely due to more users switching to the higher-priced Max tier, which includes AI-powered video calls for conversational practice, and the $12.99-per-month Super plan. Analysts at Raymond James noted potential upside in monetization, pricing, paid conversion rates, and margins, despite a cautious stance on near-term user growth.

Gross margin fell 100 basis points in the quarter, a smaller decline than the 300 basis points Duolingo had anticipated, thanks to lower AI costs and stronger ad performance. “AI costs that power Max were lower than expected, as the cost of calling AI tools has dropped significantly,” CFO Matt Skarupa told Reuters.

The company posted adjusted earnings per share of 91 cents, beating analyst expectations of 58 cents, prompting an upward revision in earnings forecasts. If current levels hold, Duolingo’s market valuation could increase by roughly $5 billion from its prior $15.62 billion.

Even after the rally, Duolingo trades at a forward price-to-earnings multiple of 85.21 — higher than peers such as Uber (26.54) and DoorDash (79.38).

Duolingo Raises 2025 Revenue Forecast as AI Features Boost User Growth

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Duolingo (DUOL.O) raised its annual revenue forecast and surpassed second-quarter revenue estimates on Wednesday, driven by increased adoption of its AI-enhanced subscription services. The language-learning app’s shares climbed about 20% in after-hours trading.

Operating on a freemium model, Duolingo offers free basic lessons with premium tiers that provide advanced features through monthly or annual subscriptions. The company now expects 2025 revenue between $1.01 billion and $1.02 billion, surpassing analysts’ consensus of $996.6 million. Previously, the forecast ranged from $987 million to $996 million.

For the April-June quarter, revenue reached $252.3 million, beating analysts’ estimates of $240.7 million.

Duolingo’s two subscription tiers, Super and Max, include AI-powered tools like video-call conversation practice with chatbots, personalized error analysis, and improved feedback. Since launching its AI video-call feature on Android in January, the company has expanded it to more languages to enhance natural conversation practice and drive subscription growth.

The company’s gross margin exceeded expectations this quarter due to lower-than-anticipated AI costs and stronger ad performance, which, while a smaller part of the business, contributed positively to margins, CFO Matt Skaruppa said.

Duolingo uses generative AI to craft and personalize lessons across more than 100 languages. CEO Luis von Ahn noted that after 12 years to develop its first 100 courses, AI tools helped launch 148 new courses in about one year.

Looking ahead, Duolingo expects third-quarter revenue between $257 million and $261 million, exceeding analyst forecasts of $253 million, and projects adjusted core profit for 2025 in the range of $288.1 million to $295.5 million.