Duolingo's Q1 Revenue Exceeds Estimates Amid Backlash Over AI Approach

Duolingo's decision to go "AI-first" has been met with backlash, but the company's financial metrics show positive results. Despite widespread criticism, Duolingo has seen a 40% year-over-year growth in daily active users and expects to make over $1 billion in revenue this year. CEO Luis von Ahn attributed the positive growth to the company's shift in social media strategy, which focused on positivity and context.

Duolingo's decision to prioritize artificial intelligence (AI) in its language learning platform has sparked debate, but the company's financial performance indicates a positive impact. Despite criticism, Duolingo has seen a 40% year-over-year growth in daily active users (DAUs) and expects to generate over $1 billion in revenue this year [2]. CEO Luis von Ahn attributes this growth to the company's shift in social media strategy, focusing on positivity and context [2].

The second quarter of 2025 saw Duolingo's shares surge nearly 30% before the bell, driven by a forecast increase that boosted investor confidence in the company's ability to drive user growth through AI features and social engagement [1]. The company reported adjusted profit per share of $0.91, surpassing analysts' estimates of $0.58, and posted a gross margin decline of 100 basis points, less than the 300-basis-point fall anticipated [1]. The AI-powered features, such as the Max tier, which offers AI-driven video calls, have significantly contributed to this growth [1, 2].

Duolingo's AI strategy has also led to cost reductions and usage growth, supporting gross margin expansion [2]. The company's revenue climbed 38% year-over-year to $252.3 million in the first quarter, with net income rising to $35.1 million from $27.0 million a year earlier [2]. Paid subscribers surged 40% to 10.3 million, boosting subscription bookings by 44% to $232.2 million [2].

Looking ahead, Duolingo guided Q3 revenue to a range of $257–$261 million, topping consensus estimates of $253.3 million, and raised full-year guidance, projecting FY2025 revenue between $1.011 billion and $1.019 billion [2]. This optimism is driven by the company's ability to blend rapid user growth with disciplined profitability and expanding product breadth [2].

While Duolingo's AI strategy has faced criticism, the company's financial metrics demonstrate its success. The stock trades at 85 times profit expectations, well above other internet services firms like Uber and DoorDash [1]. As Duolingo continues to expand its curriculum with music, math, and chess, and acquire strategic talent, investors appear encouraged by the company's ability to drive growth and profitability [2].

References:
[1] https://www.reuters.com/business/duolingo-surges-ai-led-growth-forecast-raise-boost-investor-confidence-2025-08-07/
[2] https://finance.yahoo.com/news/duolingo-surges-user-growth-ai-204545840.html