Duolingo's AI-Powered Features Drive Record Growth and User Engagement

Duolingo Ramps AI Investment as User Count Soars | The Motley Fool

Duolingo (DUOL -5.40%) held its fourth-quarter 2024 earnings call on February 27, 2025, reporting what CEO Luis von Ahn described as "an outstanding record quarter." The company saw daily active users (DAUs) surge 51% year over year to 40 million and delivered record quarterly bookings, revenue, and adjusted EBITDA. Here are three key insights from the call for long-term investors. Max -- Duolingo's premium AI-powered subscription tier -- is showing strong early adoption, helping drive top-line growth and representing a key area of focus for 2025. Since launching Video Call, our GenAI-powered conversation feature, user engagement has grown meaningfully. Max is now available to the majority of our DAUs and represents about 5% of total subscribers. We're still very early in driving Max monetization and believe there is a lot of room to grow. -- Luis von Ahn, co-founder and CEO According to CFO Matt Skaruppa, Max will temporarily impact gross margins by 170 basis points in 2025, with margins expected to improve in the second half of the year as the company optimize AI costs. Max presents a meaningful growth opportunity, particularly among English learners who, as von Ahn noted, use the Video Call feature at twice the rate of non-English learners. Duolingo is leveraging AI to dramatically accelerate content creation, enhance learning experiences, and extend its reach beyond languages into new subjects. AI and automation tools are also allowing us to expand content and courses faster than ever before. We believe this will help us reach more learners globally. This includes also scaling our courses for Math and Music, which are showing strong early adoption. Today, these subjects have a combined 3 million DAUs, and we see a lot of room to grow, though as I've said before, this will take time. -- Luis von Ahn, co-founder and CEO The company's content generation capacity has increased approximately tenfold over the past two years, as von Ahn stated during the call. This accelerated content creation enables more advanced lessons and faster development of new language pairs. This expansion is particularly strategic for capturing intermediate English learners, which von Ahn identified as "a huge part of the market" the business previously weren't serving effectively. Beyond its AI initiatives, Duolingo is seeing strong performance from its Family Plan offering and continued international expansion, particularly in less-penetrated Asian markets. The Family Plan is also delivering strong results. It now makes up 23% of total subscribers and continues to show higher retention and LTV than individual plans. -- Luis von Ahn, Co-Founder and CEO With Family Plan subscriptions now accounting for 23% of subscribers and delivering higher retention and lifetime value than individual plans, Duolingo is building a more durable subscription base. Growth is strong across all regions, with Latin America--their most mature market--growing at approximately 80% year-over-year. As von Ahn explained, this demonstrates Duolingo is "far from saturating any of our markets." He specifically identified Asia as the company's least penetrated region, noting opportunities in Japan, Korea, India, and China. For 2025, Duolingo management is projecting bookings growth of 25% year over year at the midpoint (27% on a constant currency basis), with subscription bookings anticipated to grow around 31%. This guidance puts the business on track to surpass $1 billion in bookings this year. The company outlined three strategic priorities for 2025: driving subscription bookings through user growth and Max promotion, leveraging generative AI to enhance the Video Call experience and scale content creation, and maintaining disciplined investments to balance growth with profitability targets. As von Ahn emphasized in the call, "The market opportunity in both language learning and other subjects remains substantial, and we're making strategic investments now in order to fuel growth for years to come."

Duolingo CEO Luis von Ahn Defends the Language App's A.I. Spend Despite Stock Plunge

A new OpenAI-powered video calling feature has been a hit for the language learning app. While an A.I. pivot has spurred unprecedented user growth at Duolingo, the popular language learning app's costly new strategy has received a frostier embrace from investors. The company exceeded Wall Street's expectations yesterday (Feb. 27) with a record quarterly revenue of $209.6 million between October and December, up 39 percent increase year-over-year. However, Duolingo shares plummeted 17 percent today, its biggest drop in 10 months, after earnings per share came in lower than expected and gross margin narrowed for the quarter. Sign Up For Our Daily Newsletter Sign Up Thank you for signing up! By clicking submit, you agree to our <a href="http://observermedia.com/terms">terms of service</a> and acknowledge we may use your information to send you emails, product samples, and promotions on this website and other properties. You can opt out anytime. See all of our newsletters Most of Duolingo's A.I. costs are tied to an OpenAI-powered video call feature introduced last year, CEO Luis von Ahn told analysts yesterday. Offered to subscribers of Duolingo Max, the company's most expensive subscription offering, it allows users to practice their language skills in virtual conversations with a fictional character known as Lily. The tool has been a "key driver" of Duolingo's success with its premium tier, which now accounts for 5 percent of all paying users, the CEO said. The company's paid subscriber base, which includes Duolingo Max and a more affordable option, has shot up by 43 percent year-over-year to 9.5 million. Von Ahn, who co-founded the language-focused company in 2011, currently has an estimated net worth of $1.2 billion. He broke into Silicon Valley by creating the CAPTCHCA verification system that determines whether computer users are human and which was sold to Google in 2009. Duolingo, meanwhile, went public in 2021 and has since soared in popularity, counting more than 40.5 million daily active users at the end of 2024. Subscriptions soar with A.I. Duolingo's adoption of A.I. was a major driver of user growth in recent months, according to von Ahn, who defended his company's tech spending during Duolingo's earnings call. "We know that these costs can be optimized in a lot of ways," he said. But for the time being, Duolingo is "trying to go as fast as possible in generating the best possible features," given the "unique opportunity" presented by the emerging technology, he added. Elevating Duolingo's video call feature remains a key priority for the 2025. "At the moment, Lily is not necessarily your best friend yet," said von Ahn, who hopes to eventually offer a more personalized chatbot that will remember past conversations and "ask you about your problems." The app's video call feature is now available across most of its international customer bases -- with the notable exception of China, which blocks access to OpenAI's technology. It has been especially successful amongst users looking to learn English, noted von Ahn. "This is the only feature we have ever put in the app that gets used twice as much by English learners vs. non-English learners," he said. 'Unhinged' marketing stunts A.I. alone isn't solely responsible for Duolingo's growth. The app has made a name for itself with its "unhinged and viral marketing campaigns," noted the company in its recent earnings report. Promotional strategies like a fake ice-skating musical and a partnership with Netflix (NFLX) that riffed on the popular Squid Games series have boosted the company's user and brand growth, according to Duolingo. The company's recent quarter was also marked by a media marketing ploy surrounding its beloved owl mascot Duo. Duolingo's social media posts declared the character faked his own death earlier this month -- although he remained alive for users in Japan since "joking about death is not as kosher" there, according to von Ahn. After users completed daily lessons to revive Duo, the mascot was brought back to life two weeks later. "He's back to doing what he does best: pestering everyone to keep up their lessons," said von Ahn.

Duolingo forecasts annual revenue above estimates on strong adoption of AI features

Feb 27 (Reuters) - Language learning app Duolingo (DUOL.O), opens new tab forecast annual revenue above Wall Street expectations on Thursday, anticipating a stronger adoption of its subscription tier featuring artificial intelligence capabilities. The Pittsburgh, Pennsylvania-based company's shares were up about 4% in extended trading. The company operates a "freemium" model, providing a basic set of features for all users at no cost with additional capabilities available through monthly or annual paid subscriptions. Duolingo runs two subscription tiers -- Super for avid users, and Max, which includes a generative AI-driven feature that simulates natural conversations through video calls. Over the past few months, Duolingo has expanded the feature to a slew of languages to rake in more subscribers and grow revenue, but the video call feature on its Max subscription added to costs. It expects revenue for 2025 to be in the range of $962.5 million to $978.5 million, compared to analysts' estimate of $965.9 million, according to data compiled by LSEG. Duolingo forecast revenue for the first quarter ranging from $220.5 million to $223.5 million. Analysts, on average, were expecting $221.1 million. "There's a marginal cost to Max, and that marginal cost is we call generative AI models to power what is the most important part of Max, which is the video call, and that did have about a 100-basis-point impact to gross margin," Chief Financial Officer Matt Skaruppa told Reuters. "The first priority is innovating as quickly as possible, experimenting as quickly as possible to drive more engagement, and then the costs will come down over time." The firm also forecast adjusted core profit between $259.9 million and $274 million this year, below estimates of $272.1 million, largely due to costs related to its AI video call features. The company said chatter around the TikTok ban in January and a marketing campaign in which the app's mascot, Duo, faked his death and returned led to a jump in users in February. Reporting by Akash Sriram in Bengaluru; Editing by Alan Barona Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Artificial Intelligence Akash Sriram Thomson Reuters Akash reports on technology companies in the United States, electric vehicle companies, and the space industry. His reporting usually appears in the Autos & Transportation and Technology sections. He has a postgraduate degree in Conflict, Development, and Security from the University of Leeds. Akash's interests include music, football (soccer), and Formula 1.

Nothing lost in translation as Duolingo sees robust growth in 2024

Duolingo has continued to make significant investments in improving user engagement through new artificial intelligence features in 2024, while also having more courses lined up for 2025. Global language learning company Duolingo reported a revenue of $748m (€719.7m) for the financial year 2024, which was a surge of 41% on an annual basis. This was mainly because of the company innovating rapidly by launching artificial intelligence (AI) features in some subscription plans like Duolingo Max, which focus on natural conversation practice. Duolingo's share price plunged 8.4% in pre-market futures on the NASDAQ index. Total bookings came up to $870.6m (€837.6m) for last year, which was a boost of 40% year-on-year, whereas net income was $88.6m (€85.3m) in 2024. Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA), came up to $191.9m (€184.6m) in 2024. For the fourth quarter 2024, revenue was $209.6m (€201.7m), with net income coming up to $13.9m (€13.4m) and adjusted EBITDA being $52.3m (€50.3m). In the fourth quarter, daily active users surged 51% on an annual basis, whereas monthly active users jumped 32% compared to the same quarter in the previous year. Paid subscribers also soared 43% year-on-year. Luis von Ahn, co-founder and CEO of Duolingo, said in the Q4 earnings press release: "We closed out 2024 with a truly exceptional fourth quarter, achieving our highest ever quarterly bookings, revenue, DAUs, and net new subscribers. Our results highlight the continued strength of our product-led strategy and focus on engagement. "We see exciting opportunities ahead in 2025. We intend to continue to invest in our product in order to drive engagement and user growth, as well as in features like Video Call to drive adoption of Duolingo Max. These investments will help us teach better, continue to expand our market, and enable sustained, long-term growth." Euronews has contacted Duolingo for comment. In 2024, Duolingo saw significant success with marketing campaigns such as Duolingo on Ice, its 5-second Super Bowl ad and its "Owl Game" tie-up with Netflix. These went a long way in helping to strengthen the brand as well as boosting user growth. More than 10 millions users now have streaks of one year or longer. The company also uses a number of marketing channels, such as Instagram Reels and YouTube Shorts, which experienced rocketing numbers of views in 2024 as well. In 2025, Duolingo plans to continue focusing on A/B testing, as well as speeding up experimentation, so as to make their user experience more engaging and interesting. New courses such as German for Japanese speakers and Chinese for Korean speakers will also be introduced, along with improvements in current features such as Video Call for English learners.

Duolingo's English Learners Eager for AI Helped Drive Sales Beat

Duolingo Inc.'s English-language learners were more eager users of its artificial intelligence-powered features than learners of other languages, helping drive the mobile learning platform's sales beat for the fourth quarter. English learners used Duolingo's new video-call feature -- launched in the third quarter last year -- at a rate "a lot higher than folks learning other languages," its chief financial officer Matt Skaruppa told Bloomberg News in an interview Thursday.