Duolingo profits beat forecasts | The Motley Fool

Duolingo (DUOL 5.23%)known for its popular language learning app, announced impressive results for the third quarter of 2024 on November 6. The company’s results exceeded forecasts, with adjusted EBITDA reaching $47.5 million, above the expected range of $40.1 million to $42.7 million. Revenue also beat expectations at $192.6 million, versus expectations of $186.7 million to $189.7 million. Total bookings were $211.5 million, well above estimates of $194.5 million to $197.5 million. The quarter was particularly strong, with a 47% increase in paid subscribers, now totaling 8.6 million. The company is experiencing significant growth amid changing market needs.

Source: Expectations based on management guidance set forth in the 2024-08-07 earnings release.

Business overview

Duolingo is known for its user-friendly gaming platform that makes language learning easier for millions of people around the world. The company’s Freemium model ensures broad accessibility by offering free basic services while encouraging users to upgrade to Super Duolingo’s premium offering. This approach was instrumental in driving subscription adoption, brand development, and user engagement. Increasing subscriber numbers, expanding artificial intelligence capabilities, and expanding product offerings such as family plans have played a critical role in its success.

Duolingo has recently focused on increasing user engagement through strategies such as gamification, which incorporate game-like elements such as leaderboards and streaks to improve the user experience. The company focuses on data-driven learning, using artificial intelligence to tailor and improve the user experience. Duolingo’s strength also lies in its strong brand presence, which drives organic growth through word of mouth, especially in new global markets.

Quarterly indicators

Duolingo delivered outstanding financial performance in its most recent quarter. Key performance indicators such as adjusted EBITDA grew by more than 100%, with margin improving to 24.7% from 16.3%. The significant growth was driven by a 49% increase in subscription revenue to $157.6 million. Total revenue also increased 40% year over year to $192.6 million. Net income was $23.4 million, down from $2.8 million in the prior year.

Duolingo’s user base expanded impressively, with daily active users (DAU) up 54% to 37.2 million and monthly active users (MAU) up 36% to 113.1 million. These numbers reflect the effectiveness of the engagement strategy. Additionally, total orders reached $211.5 million, up 38% year-over-year, highlighting the company’s growth trajectory. The integration of artificial intelligence features such as the video calling feature in Duolingo Max has played a crucial role in increasing user interest.

Despite these achievements, Duolingo continues to face competitive pressure. It remains critical for Duolingo to maintain growth amid the evolving edtech landscape.

Looking to the future

Duolingo’s full-year 2024 forecast has been revised upward, indicating confidence that the growth trend will continue. The updated forecast for total orders now stands at $843.5 million to $846.5 million, up from the previous $820.5 million to $827.5 million. Revenue guidance was also increased from $731.0 million to $744.0 million from $731.3 to $738. 3 million, which indicates the optimism of the company.

Investors should keep an eye on Duolingo’s strategies to maintain user engagement, especially as it expands its reach into new education platforms such as math and literacy. The company’s future plans include leveraging its existing user base and brand strength to diversify beyond learning languages. This initiative promises to open up new revenue streams. Additionally, developments in AI and machine learning applications within the app will be key to maintaining its competitiveness.