Duolingo says generative AI is paying off as its stock price nears record highs

Duolingo’s stock surged more than 20% Thursday after the company reported 44% year-over-year revenue growth in 2023, totaling $531.1 million, during its earnings call Wednesday.

The language learning platform’s shares closed at $195.51 Wednesday and soared to $240.77 Thursday morning, nearing its one-year high of $245.87. The company’s shares dipped slightly during trading throughout the day, settling around $230 at the time of this writing.

Duolingo “achieved record-high user engagement and a record number of subscribers” in its fourth quarter, CEO Luis von Ahn said in a press release. Its paid subscribers reached 6.6 million at the end of the quarter, a 57% year-over-year increase, and resulted in $157.8 million in revenues.

“Our performance resulted from our pursuit of product excellence and innovation, the progress we’ve made building an iconic brand, and disciplined execution,” von Ahn said.

Much of that innovation involves Duolingo’s focus on generative AI. The company launched Duolingo Max last March, which includes every feature from its traditional subscription tier, Super Duolingo, with an additional two AI-powered tools: Explain My Answer and RolePlay. The first lets users converse with a chatbot that explains why an answer is right or wrong, while the second allows users to chat with the app’s characters to build conversation skills in simulated real-world situations. Both are powered by OpenAI’s GPT-4.

Duolingo’s success comes as the company laid off 10% of its contract workers at the end of 2023, saying it no longer needs as many workers after changing its content-creation operations. Duolingo has previously said it uses AI in course content creation.

Von Ahn told shareholders that Duolingo will continue its focus on growing subscribers in 2024 through new lesson types, gamification, and social features, and improving its English-course offerings. “We’ll continue to build upon our long-term effort of integrating AI into our products to make them more personalized and engaging,” he added.

The company forecasts between $717.5 and $729.5 million in revenue in 2024, and expects its subscription-based revenue will continue growing to between $790 and $802 million, compared to $622.2 million in 2023.

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