Language-learning software maker Duolingo pleased investors with its first-quarter report, which surpassed Wall Street's estimates. Duolingo stock broke out on the news.
The Pittsburgh-based company late Thursday said it earned 72 cents a share on sales of $230.7 million in the first quarter. Analysts polled by FactSet had expected earnings of 51 cents a share on sales of $223.2 million. On a year-over-year basis, Duolingo earnings jumped 26% while sales increased 38%.
Duolingo also beat estimates for subscribers and total users in the first quarter. It reported 10.3 million paying subscribers, up 800,000 from the end of 2024. Plus, it reported 46.6 million daily active users and 130.2 million monthly active users, up 49% and 33% year over year, respectively.
For the current quarter, Duolingo guided to revenue of $240 million, based on the midpoint of its outlook. Wall Street was modeling for $233.8 million in sales.
For the full year, the company forecast revenue of $987 million to $996 million. The midpoint of $991.5 million easily topped the consensus estimate of $976.4 million. In 2024, Duolingo generated $748 million in sales.
On the stock market today, Duolingo rocketed 21.6% to close at 486.42. With the gap up, Duolingo stock broke out of a cup base at a buy point of 441.76, according to IBD MarketSurge charts. It hit an all-time high of 487 in intraday trading Friday.
Duolingo Stock Snags Price-Target Hikes
At least nine investment firms raised their price targets on Duolingo stock after the report.
Morgan Stanley analyst Nathan Feather reiterated his overweight, or buy, rating on Duolingo stock and upped his price target to 515 from 435.
"Duolingo's unique, gamified approach to learning allows it to combine the mobile gaming and language learning markets for a $220 billion total addressable market," he said. "With sub-1% share, it is heavily underpenetrated."
Duolingo is using generative artificial intelligence technology to improve its education offerings and better monetize its service, Feather said.
On Wednesday, Duolingo announced the launch of 148 new language courses, more than doubling its current offerings. The launch makes Duolingo's seven most popular non-English languages — Spanish, French, German, Italian, Japanese, Korean and Mandarin — available to all 28 supported user interface languages.
"Developing our first 100 courses took about 12 years, and now, in about a year, we're able to create and launch nearly 150 new courses. This is a great example of how generative AI can directly benefit our learners," Chief Executive Luis von Ahn said in a news release. "This launch reflects the incredible impact of our AI and automation investments, which have allowed us to scale at unprecedented speed and quality."
Duolingo Adds Chess Course
Duolingo also offers education courses in math and music. On Thursday, the company said it will add instruction in chess in the coming weeks.
In a shareholder letter, von Ahn said the chess course fits with the company's goal of making education fun.
"We chose Chess as our next subject because it trains strategic thinking, problem-solving, and mental agility — skills that are valuable far beyond the game itself," he said.
Evercore ISI analyst Mark Mahaney kept his outperform rating on Duolingo stock and hiked his price target to 480 from 400.
Duolingo's fundamentals remain "super impressive," he said in a client note.
"These results reflect outstanding product innovation, a compelling value proposition, a still very modest penetration of a large total addressable market, and a very impressive management team," Mahaney said.
Duolingo stock is on two IBD stock lists: IBD 50 and Tech Leaders.
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