Duolingo Shares Drop by 25% Following Lowered Projections
Shares of Duolingo, the popular language-learning app, saw a significant decline on Thursday, plummeting over 25% after the company revealed a disappointing outlook for its revenue forecasts. Investors reacted negatively to the company’s recent push towards artificial intelligence, questioning its effectiveness.
In its third quarter report, Duolingo announced sales of $271.1 million, surpassing analysts’ expectations of $260.3 million. However, various factors contributed to the drop in stock value.
The company has revised its booking expectations for the fourth quarter, projecting between $329.5 million and $335.5 million. This new estimate falls short of analysts’ expectations of $343.6 million. Additionally, Duolingo experienced slower user growth, reporting 50.5 million daily active users, which is below the expected 51.1 million.
Despite the challenges, Duolingo highlighted that its revenue and user base have both increased by over 40% since the beginning of the year in a letter to investors.
After an impressive performance earlier this year, Duolingo’s shares have now fallen more than 40%. The company’s attempts to leverage AI have not resonated well with investors thus far.
CEO Luis von Ahn expressed confidence in the company’s approach to AI, stating, “We are one of the few companies that has found a way to make profit off of AI. This is actually profitable for us.” In the investor letter, he also mentioned a focus on improving educational methods to sustain user growth, emphasizing the transformative potential of AI in learning.
Duolingo has faced increased scrutiny, especially after a presentation by OpenAI showcased its generative AI capabilities, building a language-learning tool in just minutes. This has put pressure on the company to prove its effectiveness in integrating AI into its platform.
