Duolingo Shares Surge 13% As Analyst Reaffirms Confidence Despite AI Backlash

Duolingo Inc. DUOL closed trading higher on Thursday after the company reported second-quarter earnings and revenue that beat expectations and raised its full-year 2025 outlook.

What To Know: The company posted $252.3 million in revenue and $78.7 million in adjusted EBITDA, both ahead of consensus estimates. While user growth showed signs of slowing, particularly in daily active users (DAUs), Duolingo attributed the softness to public backlash in the U.S. over its announcement that it would become an "AI-first" company. This led to a noticeable dip in engagement, prompting the company to temporarily pull back its marketing on social media.

Needham analyst Matthew Shea acknowledged the temporary pressure from social sentiment but emphasized that the company's underlying business remains on track.

Shea maintained a Buy rating and reiterated his $460 price target, writing that stronger-than-expected subscriber growth, higher average revenue per user (ARPU) and operating efficiency contributed to a 29% adjusted EBITDA beat compared to expectations.

"When combining the growing success of Max and Chess with new initiatives to improve monetization like Energy, we remain confident in the growth trajectory of the business," Shea wrote in his note.

Duolingo also announced the acquisition of NextBeat, a move aimed at expanding its music course offering and bringing in talent in monetization and user retention. This, along with improved bookings and cost optimizations, led the company to raise its fiscal-year 2025 revenue guidance to $1.011 billion to $1.019 billion.

While engagement temporarily softened, the analyst suggested this was not likely to have a lasting impact, as social media sentiment has reportedly improved and Duolingo plans to resume its broader marketing strategy.

DUOL Price Action: Duolingo shares closed Thursday up 13.75% at $390.84, according to Benzinga Pro.

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