Duolingo beats Q2 estimates as AI features drive $1B revenue forecast

Duolingo raised its 2025 revenue forecast and beat second-quarter estimates, driven by growing adoption of its AI-enhanced subscription tiers that offer features like video-call conversation practice with chatbots. The language-learning company now expects annual revenue between $1.01-$1.02 billion, up from its previous projection of $987-$996 million, as AI tools boost user engagement and lower operational costs than anticipated.

Key financial results: Duolingo’s second-quarter revenue reached $252.3 million, surpassing analyst estimates of $240.7 million.

• The company’s stock jumped about 20% in after-hours trading following the earnings announcement.
• For the third quarter, Duolingo projects revenue between $257-$261 million, compared to analyst estimates of $253 million.
• The firm also forecast an adjusted core profit of $288.1-$295.5 million for 2025.

AI-powered subscription growth: Duolingo operates two premium tiers—Super for frequent learners and Max for advanced users—both featuring AI-driven capabilities that are driving subscriber adoption.

• The Max tier includes video-call conversation practice with chatbots, personalized error analysis, and enhanced feedback tools.
• Since launching an AI-powered video-call tool for Android in January, the company has expanded the feature to additional languages to boost subscription growth.
• These AI features enable users to practice natural conversations across a broader linguistic range.

Cost efficiency gains: AI implementation delivered unexpected financial benefits through lower operational costs and improved margins.

• Duolingo’s gross margin benefited from lower-than-expected AI costs, as the margin decline from expanding Max and AI features was much smaller than originally projected.
• “The cost of calling AI tools has come down a lot. Ads also did better; ads are not a big part of our business, but it turned out that it helped margin a little bit as well,” CFO Matt Skaruppa told Reuters.

Accelerated course development: Generative AI has dramatically increased Duolingo’s ability to create new language courses and personalize learning content.

• The company leverages AI to create and personalize bite-sized lessons across more than 100 language courses.
• After taking 12 years to develop the first 100 courses, Duolingo’s AI tools helped it introduce 148 new courses in roughly one year, according to CEO Luis von Ahn.