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Duolingo ( DUOL ) raises annual revenue forecast above estimates

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AI-powered tiers attract more paying subscribers, boosting

revenue

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Partnership with Luckin Coffee boosts brand visibility in

China

By Akash Sriram

Nov 5 (Reuters) - Duolingo Inc ( DUOL ) beat Wall Street

estimates for third-quarter revenue and raised its annual

revenue forecast on Wednesday, as the language-learning app

attracted more paying subscribers for its AI-powered tier.

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 ( DUOL )-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 ( DUOL ) 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)