Duolingo raises 2025 revenue forecast as AI tools boost user engagement
The company's shares rose about 20% in trading after the bell.
Duolingo operates on a freemium model, offering basic language-learning features for free while providing premium capabilities through monthly or annual paid subscriptions.
The company now expects revenue for 2025 to be in the range of $1.01 billion to $1.02 billion, compared to analysts' estimates of $996.6 million. It had earlier projected revenue between $987 million and $996 million for the year.
Revenue in the April-June period was $252.3 million, compared with analysts' estimates of $240.7 million.
Duolingo's two subscription tiers — Super, designed for frequent learners, and Max, tailored for advanced users — include AI-driven features such as video-call conversation practice with chatbots, personalized error analysis and enhanced feedback tools.
Since launching an AI-powered video-call tool for Android in January, Duolingo has expanded the feature to additional languages, aiming to boost subscription growth by enabling users to practice natural conversations across a broader linguistic range.
Duolingo's gross margin benefited this quarter from lower-than-expected AI costs, as the decline in margin from expanding Max and AI features was much smaller than the company had originally expected.
"The cost of calling AI tools has come down a lot. Ads also did better; ads are not a big part of our business, but it turned out that it helped margin a little bit as well," CFO Matt Skaruppa told Reuters.
Duolingo leverages generative AI to create and personalize bite-sized lessons across more than 100 language courses.
In April, CEO Luis von Ahn said that after taking 12 years to develop the first 100 courses, the company's AI tools helped it introduce 148 new courses in roughly one year.
Duolingo expects revenue for the third quarter to be in the range of $257 million to $261 million, compared to analysts' estimates of $253 million, according to data compiled by LSEG.
The firm also forecast an adjusted core profit of $288.1 million to $295.5 million for 2025.
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