Duolingo Stock Surges After Earnings. Why the Market Is Going Bonkers Over the Numbers.

The maker of the free language-learning app saw a 42% surge in revenue. (Gabby Jones/Bloomberg)

Duolingo stock was soaring after the company beat expectations for second-quarter earnings as revenue jumped nearly 42% from a year ago. Duolingo also raised its outlook for the third quarter and the full year.

Shares of Duolingo have jumped 29% to $442.66 on the news, on pace for its largest percentage gain since May 2022.

Duolingo reported earnings of 91 cents a share and revenue of $252.3 million, and daily active users jumped 40% from a year ago, to 47.7 million.

Analysts tracked by FactSet expected earnings of 59 cents a share and revenue of $240.6 million.

Duolingo said it sees third-quarter revenue in a range of $257 million to $261 million, above Wall Street expectations. For the full year, it sees revenue of $1.01 billion to $1.019 billion, also higher than Street expectations.

“We exceeded our own high expectations for bookings and revenue this quarter, and did it while expanding profitability,” said CEO and co-founder Luis von Ahn, in a press release. “We’ve seen encouraging early signals from new product initiatives like our energy mechanic and Chess course.”

Evercore analyst Mark Mahaney liked what he saw, citing three points specifically:

1. We see a LOT of dry powder—with plenty of opportunity to flex pricing on both Super and Max, and we expect DUOL to soon re-engage with its highly successful viral marketing campaigns; 2) Newer programs and features are gaining real traction—Chess surpassed 1MM DAUs at quarter end, marking the fastest launch in the company’s history, and Energy (the company’s very new pacing system) is increasing DAUs, median time spent, and subscriber conversion; and 3) Profitability continues to ramp—with Gross Margin up 130 bps Q/Q, due to lower than expected AI costs and strength in their ads business.

So did the stock market.

Write to Liz Moyer at liz.moyer@barrons.com