Duolingo beats revenue forecast as AI features turn profitable and paid users surge

Language-learning app Duolingo Inc has exceeded Wall Street’s third-quarter revenue estimates and raised its annual forecast, crediting the success of its AI-driven premium tier and rapid growth in paid subscriptions. The company’s shares rose 7% in after-hours trading following the announcement.

The Pittsburgh-based firm, which operates on a freemium model, has been expanding its paid offerings with products such as Super Duolingo, which provides an ad-free experience, and Duolingo Max, which integrates generative AI features, as reported by Reuters.

Chief Executive Luis von Ahn told Reuters that Duolingo’s use of AI is not just a technological advantage but a profitable one.

Von Ahn said that they are one of the few companies that has found a way to make profit off of AI, and that it is actually profitable.

Despite the additional costs associated with AI integration, Duolingo reported an operating margin of 72.5% for the quarter — above analyst expectations of 71.4%, according to data from LSEG.

The company’s user base continued to expand robustly, driving higher conversions from free users to paying subscribers. Paid users rose 34% year-on-year to 11.5 million in the third quarter.

A major driver of growth came from China, where Duolingo partnered with Luckin Coffee in July for a cross-promotional campaign that proved highly successful.

Von Ahn said, that that activation was a home run. The company did not have to pay any money for it. Twenty-six thousand Luckin stores sold more than 10 million Duolingo-branded drinks, which directly led to user growth — mostly in China.

Duolingo’s long-standing reliance on viral marketing and social media engagement continues to underpin its cost-efficient user acquisition model, strengthening its position in the global mobile learning market.

For the quarter, revenue rose to $271.7 million, surpassing estimates of $260.3 million. The company has now beaten revenue expectations every quarter since going public in 2021.

Looking ahead, Duolingo raised its annual revenue forecast to between $1.028 billion and $1.032 billion, up from a previous range of $1.01 billion to $1.02 billion. Analysts had expected around $1.02 billion, according to LSEG.

With continued momentum in AI integration and international expansion, Duolingo appears set to maintain its strong growth trajectory into 2025.