Latest news with #DuolingoMax
Yahoo
6 days ago
- Business
- Yahoo
Is AI Duolingo's Biggest Risk or Biggest Catalyst?
Duolingo is rapidly growing its top and bottom lines, leading to market-beating stock gains. The business is booming thanks to AI but investors need to also consider how AI might be changing the space. 10 stocks we like better than Duolingo › Gamified mobile learning company Duolingo (NASDAQ: DUOL) has been a market-crushing investment. The stock closed its first day of trading in 2021 at $139 per share. As of this writing, just four years later, it's trading at over $520 per share, up 276% and trading near an all-time high. For perspective, the S&P 500 is up just 34% during this time. Duolingo is outrunning the market for at least two simple reasons. First, it's growing like a weed. Second, it's actually quite a profitable business. The end result is that skyrocketing profits are lifting the stock to higher and higher levels. The chart below shows that Duolingo's revenue is up more than its stock price. And its trailing-12-month free cash flow of $289 million is astronomically higher than when it went public. Duolingo's latest quarter was particularly impressive. In the first quarter of 2025, the company's daily active user base took a huge 49% year-over-year jump to 46.6 million. That's impressive enough. But paid subscriptions also had a huge 40% jump to over 10 million. What's driving this impressive growth for Duolingo? It's undeniable that generative artificial intelligence (AI) is a contributing factor. The company is using generative AI to create new features and products. And those efforts appear to be hugely successful. So is generative AI Duolingo's biggest catalyst for growth? Or could it actually be one of its biggest risks? These are questions investors should certainly explore. In its first-quarter letter to shareholders, Duolingo's management enthusiastically shared that it had launched "Nearly 150 new language courses for different geographies in Q1 using AI-generated content." Moreover, its bookings were higher than expected thanks to growth in its most expensive subscription tier, which is Duolingo Max -- the tier that offers special AI features. Given its catalyzed growth rate, it would appear that generative AI is a net positive for Duolingo. But I believe there are some risks to the strategy that are worth considering. For starters, Duolingo's AI content and features are built with large language models (LLMs) but these aren't proprietary to Duolingo. It's using widely available LLMs, including OpenAI's popular GPT-4. Its own machine-learning software uses these models to create the content. So there is some distinct technology at work. But the underlying LLM is available to any company that wants to use it. Some have suggested that Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) is a rising challenge to Duolingo because of AI. The company's Google Meet now offers real-time AI translation, preserving a speaker's tone and voice. Why learn another language when AI translates for you? There's reason to downplay Alphabet's translation AI as a threat to Duolingo. For starters, Alphabet's AI Ultra subscription costs nearly $150 per month versus about $30 per month for Duolingo Max -- the cost difference is real. Moreover, some people enjoy Duolingo's gamified learning experience, which is something they'd forego with Google Meet's new features. That said, I do believe Alphabet's AI translation announcement shows how quickly the space can change. Can another company replicate what Duolingo has built since launching its app in 2012? The possibility is less far-fetched today than it used to be, in my opinion. Investors also shouldn't underestimate the potential impacts AI can have on the Duolingo experience. Launching 150 new products in a single quarter could be too fast to ensure quality. If AI cheapens the Duolingo experience in any way, the company may regret leaning in so strongly. Duolingo stock is too risky for me personally. What I've just described speaks to both the competitive risk and the execution risk. The competitive risk is elevated because generative AI could be quickly changing the language-learning space. And the execution risk is higher than normal because generative AI is new and Duolingo needs to learn and deploy it correctly. Yet there's another risk as well: Duolingo's valuation risk. As of this writing, the stock trades at nearly 30 times its trailing sales. Not only is this high generally speaking but it's also high when compared to the usual valuation for Duolingo stock, as the chart below shows. If Duolingo only had the competitive risk or the execution risk, I might be inclined to give it the benefit of the doubt and invest anyway. But the added valuation risk gives me pause. If it slips at all due to the fast changes brought on by generative AI, the stock has a lot of room to come down due to its pricey valuation. This doesn't mean that Duolingo stock will be a bad investment from here -- as mentioned, the business is absolutely booming right now. If this continues, there's reason to believe shareholders will make money. But when it comes to my own investment portfolio and risk tolerance, I'll stay on the sidelines with Duolingo stock for the reasons I've shared. Before you buy stock in Duolingo, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Duolingo wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $651,049!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $828,224!* Now, it's worth noting Stock Advisor's total average return is 979% — a market-crushing outperformance compared to 171% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool recommends Duolingo. The Motley Fool has a disclosure policy. Is AI Duolingo's Biggest Risk or Biggest Catalyst? was originally published by The Motley Fool
Yahoo
6 days ago
- Business
- Yahoo
Is AI Duolingo's Biggest Risk or Biggest Catalyst?
Duolingo is rapidly growing its top and bottom lines, leading to market-beating stock gains. The business is booming thanks to AI but investors need to also consider how AI might be changing the space. 10 stocks we like better than Duolingo › Gamified mobile learning company Duolingo (NASDAQ: DUOL) has been a market-crushing investment. The stock closed its first day of trading in 2021 at $139 per share. As of this writing, just four years later, it's trading at over $520 per share, up 276% and trading near an all-time high. For perspective, the S&P 500 is up just 34% during this time. Duolingo is outrunning the market for at least two simple reasons. First, it's growing like a weed. Second, it's actually quite a profitable business. The end result is that skyrocketing profits are lifting the stock to higher and higher levels. The chart below shows that Duolingo's revenue is up more than its stock price. And its trailing-12-month free cash flow of $289 million is astronomically higher than when it went public. Duolingo's latest quarter was particularly impressive. In the first quarter of 2025, the company's daily active user base took a huge 49% year-over-year jump to 46.6 million. That's impressive enough. But paid subscriptions also had a huge 40% jump to over 10 million. What's driving this impressive growth for Duolingo? It's undeniable that generative artificial intelligence (AI) is a contributing factor. The company is using generative AI to create new features and products. And those efforts appear to be hugely successful. So is generative AI Duolingo's biggest catalyst for growth? Or could it actually be one of its biggest risks? These are questions investors should certainly explore. In its first-quarter letter to shareholders, Duolingo's management enthusiastically shared that it had launched "Nearly 150 new language courses for different geographies in Q1 using AI-generated content." Moreover, its bookings were higher than expected thanks to growth in its most expensive subscription tier, which is Duolingo Max -- the tier that offers special AI features. Given its catalyzed growth rate, it would appear that generative AI is a net positive for Duolingo. But I believe there are some risks to the strategy that are worth considering. For starters, Duolingo's AI content and features are built with large language models (LLMs) but these aren't proprietary to Duolingo. It's using widely available LLMs, including OpenAI's popular GPT-4. Its own machine-learning software uses these models to create the content. So there is some distinct technology at work. But the underlying LLM is available to any company that wants to use it. Some have suggested that Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) is a rising challenge to Duolingo because of AI. The company's Google Meet now offers real-time AI translation, preserving a speaker's tone and voice. Why learn another language when AI translates for you? There's reason to downplay Alphabet's translation AI as a threat to Duolingo. For starters, Alphabet's AI Ultra subscription costs nearly $150 per month versus about $30 per month for Duolingo Max -- the cost difference is real. Moreover, some people enjoy Duolingo's gamified learning experience, which is something they'd forego with Google Meet's new features. That said, I do believe Alphabet's AI translation announcement shows how quickly the space can change. Can another company replicate what Duolingo has built since launching its app in 2012? The possibility is less far-fetched today than it used to be, in my opinion. Investors also shouldn't underestimate the potential impacts AI can have on the Duolingo experience. Launching 150 new products in a single quarter could be too fast to ensure quality. If AI cheapens the Duolingo experience in any way, the company may regret leaning in so strongly. Duolingo stock is too risky for me personally. What I've just described speaks to both the competitive risk and the execution risk. The competitive risk is elevated because generative AI could be quickly changing the language-learning space. And the execution risk is higher than normal because generative AI is new and Duolingo needs to learn and deploy it correctly. Yet there's another risk as well: Duolingo's valuation risk. As of this writing, the stock trades at nearly 30 times its trailing sales. Not only is this high generally speaking but it's also high when compared to the usual valuation for Duolingo stock, as the chart below shows. If Duolingo only had the competitive risk or the execution risk, I might be inclined to give it the benefit of the doubt and invest anyway. But the added valuation risk gives me pause. If it slips at all due to the fast changes brought on by generative AI, the stock has a lot of room to come down due to its pricey valuation. This doesn't mean that Duolingo stock will be a bad investment from here -- as mentioned, the business is absolutely booming right now. If this continues, there's reason to believe shareholders will make money. But when it comes to my own investment portfolio and risk tolerance, I'll stay on the sidelines with Duolingo stock for the reasons I've shared. Before you buy stock in Duolingo, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Duolingo wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $651,049!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $828,224!* Now, it's worth noting Stock Advisor's total average return is 979% — a market-crushing outperformance compared to 171% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool recommends Duolingo. The Motley Fool has a disclosure policy. Is AI Duolingo's Biggest Risk or Biggest Catalyst? was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
20-05-2025
- Business
- Yahoo
Duolingo: The Owl Expands Its Wings Beyond Language
In my previous article about Duolingo (NASDAQ:DUOL), I argued that despite a post-earnings stock drop of over 16% after Q4 2024, caused by an EPS miss and temporary margin dip tied to heavy AI investments, Duolingo's fundamentals were very much alive and thriving. I treated that pullback as an opportunity and raised my price target to $343 per share. Since then, the shares not only hit that level but jumped over 60% from the time of the article. In this update, I'll dig into the latest numbers to determine whether this rally was earned and whether the shares still offer long?term upside. Fast forward to Duolingo's Q1 2025 earnings, and the latest results show the company extending its growth streak while starting to benefit from the earlier investments. Duolingo reported $230.7 million in Q1 revenue, up 38% year-over-year (YoY), and about 10% higher than Q4's $209.6 million. That performance handily beat consensus and remains near 40% top-line growth even as it scales. To put that in perspective, the company now generates nearly ten times the top-line it generated in Q1 2020. Source: Gurufocus On the user front, Duolingo added 6 million daily active users (DAU) in Q1, ending the quarter with 46.6 million, a 49% increase from 31.4 million a year ago. This sequential jump from 40.5 million in Q4 2024 was the largest quarterly gain in Duolingo's history. It likely reflects seasonal New Year engagement (as users set new learning resolutions) and the continued viral popularity of the app. Monthly active users (MAU) climbed over 130 million, and the engagement ratio (DAU/MAU) also improved to 36%, showing that a growing share of visitors engage with the app each day, a sign of strong habit formation. Paid subscribers also crossed the ten-million mark for the first time, increasing 40% YoY to 10.3 million and reinforcing Duolingo's strategy to convert free users into Super and Max plan customers. Paid penetration has climbed to 8.9% of MAUs and subscription and other bookings grew strongly as well. Duolingo doesnt break out per-user economics, but a quick back-of-the-envelope calculation from the Q1 2025 tells a story. Subscription revenue of $191 million spread over an average of 9.9 million paid subscribers puts quarterly subscription ARPU at roughly $19. Advertising contributed $17.9 million, or just $0.16 per free monthly active user in the quarter. In other words, this explains why management is intentionally dialing down third-party ads and using that ad time to promote Duolingo Max to free learners. A Max upgrade is far more accretive than squeezing a few extra cents of ad revenue out of non-paying users. Sales-and-marketing spend was just $27 million, roughly 12% of revenue, underscoring how little Duolingo relies on paid acquisition. In my view, Duolingo remains one of the best experts of high?impact marketing. This quarter's Duo Owl fakes his own death' social campaign generated an estimated 1.7 billion impressions worldwide without meaningful media spend, driving strong user acquisition and brand engagement. Source: Duolingo Shareholder Letter On margins, the expansion of Duolingo Max continues to apply modest pressure. Gross margin dropped about 190 basis points (bps) to roughly 71.1% as GenAI costs in Max outpaced the mix shift toward higher-margin subscriptions. Yet because Max subscribers pay more, total gross profit dollars rose strongly, highlighting that a lower margin percentage does not necessarily mean less cash generation. Management expects this trend to continue in Q2 and accelerate in Q3 and Q4. Indeed, operating margin improved 40 bps to 10.2%, and GAAP net income reached $35 million, or $0.72 per share, comfortably ahead of estimates. Free cash flow (FCF) of $104 million in the quarter works out to about $0.80 per MAU, or 45% of revenue. When combined with 38% top-line growth, delivers a Rule of 40 score in the low-80s, a rare showing for a fast-growing consumer tech company. The balance sheet is stellar, with $1?billion in cash and marketable securities and no debt. Stock-based compensation was $31 million, or about 13% of revenue, leading to only a 2% increase in share count year-over-year. That equity spend has been carefully managed even as Duolingo scales up its AI and product teams. Finally, even amid geopolitical turbulence, demand for language study keeps rising. Management lifted full?year 2025 revenue guidance to a midpoint of $991 million, and a modest beat would push Duolingo past the $1 billion mark. Generative AI has prompted questions about whether AI tutors will render Duolingo obsolete. In my view, the opposite is true. AI is the fuel that powers Duolingo's next phase of growth to become an even better, more efficient company. Duolingo has invested heavily in AI to generate and personalize content. CEO Luis von Ahn has made it clear that every member of the organization now works alongside AI tools to streamline routine tasks and focus human effort on higher-value work. Behind the scenes, Duolingo's Birdbrain engine analyzes billions of data points from daily lessons to refine and personalize content in real time. At the content-creation level, AI dramatically slashes both the time and cost required to build new courses. Duolingo uses AI to run millions of A/B tests, draft example sentences, generate conversational prompts, and even craft detailed explanations for answers. These capabilities underpin premium features like Duolingo Max's Explain My Answer and Roleplay chat, which not only enrich the learning experience but also justify a higher subscription price. For example, Duolingo is working heavily on making Video Call with Lily a more immersive experience and bolstering retention. It's adding new improvements that let users review past conversations, receive and replay voice messages from Lily, and explore a fully 3D environment with interactive objects for users to engage with. Once the core app framework is in place, plugging in an entirely new subject or language requires only incremental effort. In April, Duolingo added 148 new language pairings, enabling, for example, a Portuguese speaker to learn Korean directly rather than routing through English. AI automates the bulk of translation, example generation, and localization, meaning Duolingo can expand its catalog faster than any traditional publisher. This rapid, low-cost rollout of high-quality content is, in my view, Duolingo's greatest moat. Smaller rivals simply cannot match the speed or scale at which Duolingo, backed by AI and continuous A/B testing, brings new learning experiences to millions of users around the world. Duolingo has demonstrated optionality through its expansion beyond languages into new learning verticals. After rolling out math and music, the company is now preparing to launch chess in 2025 for English-speaking iOS users. The origin story of this course underscores Duolingo's AI advantage as CEO Luis von Ahn described, two team members with neither programming nor chess experience who used generative AI to prototype the entire curriculum. Once they had a solid draft, a dedicated team refined and polished it for public beta, demonstrating how AI can slash development time and cost. I should mention something amazing about the chess is that it really started with a team of two people, neither of whom knew how to program, so they were not programmers and they basically made prototypes and did the whole curriculum of chess by just using AI. Also neither of them knew how to play chess -- and we started that for several months. And eventually, when they had a really good prototype, we had a whole team to professionalize it and put it in the app. So we're very happy with it. This is, at the moment, mainly going to be to increase users who we think there's a huge demand for chess. There's hundreds of millions of people who want to play chess. The course uses interactive chess puzzles and mini-games to teach concepts. For example, a lesson might ask you to move a knight to the correct spot to practice the L-shaped move, or solve a checkmate puzzle with a king trapped in a corner. Users can even play mini-matches or full chess games against a Duolingo AI coach named Oscar as they progress. In my opinion, Duolingo is applying the same formula it uses for language lessons, short sessions, fun exercises, immediate feedback, and leveling up, to the game of chess. While the gamified approach is similar, the content domain is entirely new. Instead of vocabulary and grammar, the chess course teaches moves, tactics, and strategies. That differs from language learning, where direct application (conversation) often happens outside the app. Chess also allows Duolingo to introduce new kinds of interactive content (like an AI opponent) that weren't part of language lessons. Moving into subjects like chess could attract users who aren't currently using Duolingo. For instance, someone not interested in learning a new language might still be interested in improving their chess skills through a fun app. By entering the chess arena, Duolingo can attract users who may never have been drawn to language learning. with over 211 million members, currently dominates the market by offering lessons, computer opponents, and online play. advantage, beyond its massive member list, is that users can play against human opponents, a feature Duolingo could add to create an interactive, competitive experience on its own platform, in my opinion. For those who doubted Duolingo's optionality beyond languages, this multi-subject strategy offers clear proof of concept. Each new vertical, whether math, music, or chess, not only broadens the addressable market but also deepens engagement and cross-sell opportunities. Imagine a family plan where one member practices Spanish, another tackles algebra, and a child learns chess, all within the same app. While these non-language cohorts are still small, they are expanding faster than the core language business. While Duolingo lacks a direct public competitor, many apps compete with Duolingo, even so, it remains the top pick. A public competitor in the educational space is Chegg (NYSE:CHGG). Chegg is an education company that originally focused on textbook rentals and now on subscription homework help (Chegg Study). Product-wise, Chegg is about answering specific academic questions (think problem solutions, tutoring, writing help), primarily for high school and college students. It's less of a learning platform and more of a study aid. The rise of free AI tools like OpenAI's ChatGPT directly threatened Chegg's value proposition in 2023, causing a sharp drop in its growth. Engagement for Chegg is need-based, not habit-based, meaning that a student might subscribe for a semester to get through a tough course, then cancel. By contrast, Duolingo has users who stick around for years, continuously learning. Another example is Babbel, a language?learning app similar to Duolingo that planned an IPO in 2021, but canceled late that year as the business model failed to woo investors. These examples underscore how difficult it is to sustain daily engagement in educational software, and they show why I believe Duolingo's mix of network effects (more users -> more data -> better AI -> better product -> more users), AI-driven personalization, and gamification creates a durable moat. That said, Duolingo continues to trade at a premium. The stock is currently priced at a P/S multiple of 27x, with a forward P/S of about 21x and a price-to-FCF ratio of 75x. Despite the company's robust growth, these metrics are now sitting above the company's historical range and are getting difficult to justify. The PEG ratio, on the other hand, remains under 2 at 1.65x, suggesting investors are still paying a reasonable premium for high-teens growth. Source: Gurufocus In my updated model, I incorporate the raised 2025 revenue guidance, then assume that growth gradually slows down. I build in near?term margin pressures while anticipating that continued innovation, including enhancements to Lily and expansion into new verticals, will help restore and even improve margins over time. Under these assumptions, I raised my price target to $360 per share, but, after the recent run, it implies roughly 25% downside. Source: Author From a Guru's perspective, billionaire investor Ron Baron (Trades, Portfolio) opened a position in Q3 2024. Ray Dalio (Trades, Portfolio) added to his stake in Q4 2024, both signaling confidence in Duolingo's unique combination of engagement and monetization. On the other end, Baillie Gifford (Trades, Portfolio) trimmed its stake by 14% but still owns over 6% of shares outstanding, evidence that many gurus remain committed to Duolingo's growth story even as they rebalance portfolios. I can't overlook the challenges Duolingo faces as it stretches beyond its language roots. First, execution risk is real. Chess, math and music must prove they can match the habit-forming engagement and learning outcomes that made language courses so sticky. If retention in these new verticals disappoints, the cross-sell and engagement benefits will fall short of expectations. Second, each subject brings entrenched competition. already has over 211 million members, math learners have a wealth of options from Khan Academy to STEM-focused apps, and music education platforms vie for the same users. Duolingo's gamification edge must be strong enough to lure consumers away from these specialist incumbents. Finally, Duolingo's valuation already reflects lofty assumptions about future growth and margin expansion. With premiums built on continued outperformance, any shortfall in execution, user engagement or profitability could trigger a sharp share-price correction. Duolingo's expansion into chess, math and music underscores just how much optionality lives in its platform. What began as a simple language app is fast evolving into a gamified learning platform that spans multiple disciplines. Overall, Q1's results showed that Duolingo's engine is firing on all cylinders. Revenue continues to grow near 40%, paid subscriptions just crossed 10 million, and free cash flow remains extraordinarily strong. These metrics confirm that Duolingo has truly cracked the code on habit-forming education. If new verticals like chess, math and music gain traction, they'll open the door to fresh user segments and new revenue streams without a proportionate rise in costs. That optionality comes with execution and valuation risks, which I've outlined above, but I continue to view today's share price as reflecting not just the strength of the core language business but the promise of a multi-subject learning platform. I remain confident that Duolingo is ahead of its peers, however, in my view, the stock overshot after a great quarter. I intend to remain a shareholder, considering a modest trim to lock in some gains after this strong rally, because I believe Duolingo's blend of AI, engagement, and network effects offers long-term upside that few public companies can match. This article first appeared on GuruFocus. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
13-05-2025
- Business
- Yahoo
Duolingo, Inc. (DUOL): A Bull Case Theory
We came across a bullish thesis on Duolingo, Inc. (DUOL) on Substack by Lorenzo Bastianelli. In this article, we will summarize the bulls' thesis on DUOL. Duolingo, Inc. (DUOL)'s share was trading at $503.57 as of May 8th. DUOL's trailing and forward P/E were 248.06 and 178.57 respectively according to Yahoo Finance. romantitov/ Duolingo's Q1 2025 results are a testament to the company's ability to leverage its unique brand and marketing strategies, with the 'Dead Duo' campaign becoming a viral sensation that significantly boosted its performance. Revenue for the quarter reached $230.7 million, marking a 38% year-over-year increase and exceeding analyst expectations. This surge is reflective of Duolingo's business model, which continues to benefit from a well-oiled flywheel of user growth, engagement, and paid subscriber conversion. The company's Monthly Active Users (MAUs) surged to 130.2 million in Q1 2025, a 33% increase compared to the same period last year. This growth was propelled not only by Duolingo's freemium model and the network effects of its global reach but also by the marketing success of its 'Dead Duo' campaign, which generated 1.7 billion organic impressions. This viral event attracted new users and re-engaged lapsed ones, further fueling Duolingo's MAU growth. Beyond language learning, Duolingo's expansion into new verticals, such as math, music, and chess, provides additional growth opportunities and broadens its user base. CEO Luis von Ahn emphasized the potential of these new subjects, noting the massive demand for skills like chess and the platform's ability to scale content quickly, especially with the help of AI. Duolingo's engagement metrics are also impressive, with Daily Active Users (DAUs) reaching 46.6 million, up 49% year-over-year. The DAU/MAU ratio's surge highlights how users are increasingly engaged, with features like Friend Streaks, streak freezes, and AI-driven enhancements keeping users committed. The 'Dead Duo' campaign's interactive component also played a key role in driving daily participation. The integration of generative AI into content creation has significantly boosted Duolingo's ability to scale and personalize its offerings. AI has enabled faster and more cost-effective content production, contributing to both user retention and feature innovation. For instance, the new 'Video Call with Lily' feature has made practicing conversation with a computer more feasible, and AI has streamlined the development of Duolingo's chess course. Paid subscriber penetration continues to rise, with 10.3 million premium subscribers in Q1 2025, a 40% year-over-year increase. This growth is closely linked to Duolingo's product enhancements, particularly Duolingo Max, which has shown strong retention rates. The company's AI-driven features and new courses, such as 148 newly added language courses, have made the platform more appealing to a global audience. These developments are accelerating user conversions from free to paid subscriptions, which now contribute significantly to Duolingo's revenue, which reached $191 million for the quarter, up 45% from the previous year. Overall, Duolingo's Q1 2025 performance reaffirms the long-term investment thesis that the company's strategic use of AI, coupled with a powerful user growth engine and engaging brand, positions it for sustained success. As Duolingo continues to expand its content and refine its product offerings, it is moving beyond a language-learning app to become a platform for lifelong learning. With AI enabling faster content creation and scaling, Duolingo is well-positioned to capitalize on its growth opportunities, including expanding into new educational verticals. The company's strong performance in Q1 2025 sets the stage for continued outperformance as it executes on its ambitious vision. Duolingo, Inc. (DUOL) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 52 hedge fund portfolios held DUOL at the end of the fourth quarter which was 31 in the previous quarter. While we acknowledge the risk and potential of DUOL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DUOL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock. Disclosure: None. This article was originally published at Insider Monkey. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
02-05-2025
- Business
- Yahoo
Why Duolingo (DUOL) Stock Is Trading Up Today
Shares of language-learning app Duolingo (NASDAQ:DUOL) jumped 18.6% in the afternoon session after the company reported strong first-quarter 2025 results, which significantly beat analysts' sales, earnings, and EBITDA expectations. Revenue rose 38% from the same period last year, led by a 45% increase in subscription revenue as more learners opted into premium plans like Duolingo Max. The real story was the record surge in user engagement, with daily active users jumping 49% and paid subscribers rising 40% year-over-year, showing that Duolingo continued to expand its footprint while keeping users coming back. Zooming out, we think this was a solid print. Is now the time to buy Duolingo? Access our full analysis report here, it's free. Duolingo's shares are extremely volatile and have had 35 moves greater than 5% over the last year. But moves this big are rare even for Duolingo and indicate this news significantly impacted the market's perception of the business. The previous big move we wrote about was 9 days ago when the stock gained 10.4% on the news that Morgan Stanley initiated coverage of the stock with a Buy rating, calling the company a "best-in-class consumer internet asset." The firm also assigned a price target of $435, implying a potential 30% upside. Duolingo is up 45.8% since the beginning of the year, and at $476.50 per share, has set a new 52-week high. Investors who bought $1,000 worth of Duolingo's shares at the IPO in July 2021 would now be looking at an investment worth $3,417. Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we've identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link. Sign in to access your portfolio
