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Duolingo Shares Tumble on Earnings Growth Fears
27 Feb
Summary
- Duolingo's stock dropped significantly due to slower earnings growth projections.
- The company will increase AI investment, potentially impacting immediate revenue.
- Duolingo aims to double daily users to 100 million by 2028.
Duolingo Inc. experienced a significant share price drop of up to 22% in after-hours trading. The decline followed the company's disclosure that its strategic focus on subscriber acquisition would temporarily slow earnings growth and reduce profit margins.
Company leadership indicated a commitment to stepping up investments in artificial intelligence. This strategic direction involves a deliberate sacrifice of some monetization in favor of accelerating user growth and engagement, with an ambitious target of 100 million daily active users by 2028.
CEO Luis von Ahn informed shareholders that 2026 would see reduced bookings growth, projected around 11%, compared to nearly 20% achievable through previous operational methods. Furthermore, an anticipated increase in AI feature deployment and marketing expenses is expected to lower the adjusted EBITDA margin to approximately 25% in 2026.
In the fourth quarter, Duolingo reported an adjusted EBITDA of $84.3 million, surpassing consensus estimates. However, daily active user growth in that quarter, while up 30% year-on-year, marked the slowest increase in four years. The company also projected first-quarter adjusted EBITDA of $73.6 million, falling short of analyst expectations.
