Duolingo stock plunges 27% on light guidance as company prioritizes user growth

Duolingo's stock took a significant hit, plunging 27% following guidance that was below market expectations. The language learning platform is now focusing on user acquisition over immediate monetization strategies. CEO and co-founder Luis von Ahn shared insights with CNBC, emphasizing a strategic shift in investment priorities towards long-term growth opportunities. For the upcoming quarter, Duolingo anticipates bookings between $329.5 million and $335.5 million, which falls short of the $344.3 million projected by FactSet. Additionally, the company forecasts adjusted EBITDA in the range of $75.4 million to $78.8 million, again missing the $80.5 million expectation. Despite these setbacks, Duolingo reported a rise in paid subscribers, reaching 11.5 million, slightly exceeding the 11.38 million predicted by StreetAccount. However, daily and monthly active user numbers were less favorable, coming in at 50.5 million and 135.3 million, respectively, against forecasts of 51.2 million and 137.4 million. In a bid to enhance user engagement, Duolingo has introduced various artificial intelligence features, including an interactive video call option aimed at attracting more paying customers. The company has also accelerated the launch of new language courses, leveraging AI technology. Von Ahn noted the ongoing balancing act between monetization and user growth, stating that recent efforts have increasingly prioritized expanding the user base. Despite the challenges, Duolingo's revenues surged by 41% this quarter, reaching $272 million, surpassing the analysts' estimate of $260 million. Total bookings rose 33% year-over-year to approximately $282 million, also beating expectations. Net income saw a dramatic increase to $292.2 million, equating to $5.95 per share, a significant jump from $23.4 million, or 49 cents per share, during the same period last year. This impressive growth was partly attributed to a one-time tax income benefit of $222.7 million. Moreover, Duolingo raised its annual revenue guidance to a range of $1.0275 billion to $1.0315 billion, up from the previous forecast of $1.01 billion to $1.02 billion.