Duolingo shares soared 34% after the report. Are they still worth buying?

Shares of language learning platform Duolingo soared more than 30% after the company released a quarterly report that beat analysts' expectations. The company's revenue grew nearly 42% year-over-year and the number of daily active users increased 40%. AI-enabled subscriptions, new courses and ambitions to make a "super app" are fueling investor interest.

Shares of Duolingo soared 34% to $460.5 in early trading in New York, hitting their highest level since mid-June. Investors reacted positively to the company's second-quarter report. Duolingo recorded earnings of $0.91 per share on revenue of $252.3 million, while analysts polled by FactSet expected $0.59 per share and $240.6 million in revenue, wroteThe Barron's. 

The company said revenue was supported by a 40% increase in daily viewership to 47.7 million users and a 24% increase in monthly active users to 128.3 million. Against this backdrop, net income jumped 84% to $44.8 million, driven by favorable currency exchange rates, advertising revenue growth and the success of Super's paid subscriptions.

"In the second quarter, we surpassed even our own ambitious benchmarks for bookings and revenue - and did so by increasing profitability," commented Duolingo co-founder and CEO Luis von Ahn.

The company improved its outlook for the third quarter, expecting revenue in the range of $257-261 million, above the Wall Street consensus forecast. The annual outlook was also revised upward, with revenue for 2025 expected to be in the range of $1.01-1.019 billion.

Duolingo's stock is up more than 100% over the past year. When considering investments in the company, it is important to take into account the current revaluation: the growth of the stock reflects investors' expectations, but further dynamics will depend on the effectiveness of strategy implementation, stresses analysts of ValueTheMarkets. With a competent approach one can expect further growth of the value, but one should also take into account general market trends and competitors' actions, they specify;

Analysts at Needham reiterated a "buy" recommendation on Duolingo shares after the report and maintained a $460 target price, writes Investing.com. Needham remains confident in Duolingo's growth prospects, pointing to the successful development of its Max subscription, chess course, and new monetization tools.

Meanwhile, analysts at Zacks Investment Research assigned a "sell" rating  to Duolingo's stock, indicating expectations of weakness relative to the broad market in the short term.

According to Duolingo co-founder and CEO Luis von Ana, the key growth driver was the company's active transition to the use of generative AI, which allowed it to expand the range and topics of educational courses. The contribution of Super and Max subscriptions is particularly notable. Duolingo has two subscription levels: Super for active learners and Max for advanced users. Both plans include AI-powered features: practice video conversations with chatbots, personalized error analysis and improved feedback tools.

While Duolingo's main focus is foreign languages, the company is aiming to become a "super app" in education, adding courses in math, music and other subjects. In the last quarter, it expanded its offerings by launching its first chess course, wrote SiliconAngle. 

In addition, Duolingo has announced the acquisition of NextBeat, a London-based music game development startup, reminds The Wall Street Journal. The amount of the deal was not disclosed, but the 23-person team will join Duolingo to expand its music courses, which are currently limited to piano instruction.

This article was AI-translated and verified by a human editor