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Shares of the Pittsburgh-based company rose 7% in trading after the bell. Sign up here. The company operates on a "freemium" model and has sought to convert free users to paid subscriptions, such as "Super Duolingo" for an ad-free experience, and "Duolingo Max," which incorporates generative AI features. "We are one of the few companies that has found a way to make profit off of AI. This is actually profitable for us," CEO Luis von Ahn told Reuters. While the AI additions resulted in a lower profit margin in the third quarter of 72.5%, it was still higher than estimates of 71.4%, according to data compiled by LSEG. A growing user base continued to drive conversions from free users to paid subscribers. Paid users jumped 34% to 11.5 million in the third quarter. Growth was bolstered by outsized performance in China. A partnership with Luckin Coffee in July helped boost visibility in the region. "That activation was a home run. We did not have to pay any money for it. Twenty-six thousand Luckin stores sold more than 10 million Duolingo-branded drinks, which directly led to user growth — mostly in China," von Ahn said. The company has historically relied on its viral marketing campaigns and strong social media presence to acquire users at a low cost, a strategy that has helped it gain a dominant position in the mobile learning market. In the third quarter, revenue of $271.7 million beat estimates of $260.3 million. Duolingo has topped revenue estimates every quarter since the company went public in 2021. The company raised its annual revenue forecast to between $1.028 billion and $1.032 billion, from $1.01 billion to $1.02 billion. Analysts on average were expecting $1.02 billion, according to LSEG data. Reporting by Akash Sriram in Bengaluru; Editing by Sriraj Kalluvila Our Standards: The Thomson Reuters Trust Principles., opens new tab Akash reports on technology companies in the United States, electric vehicle companies, and the space industry. His reporting usually appears in the Autos & Transportation and Technology sections. He has a postgraduate degree in Conflict, Development, and Security from the University of Leeds. Akash's interests include music, football (soccer), and Formula 1.
