In This Article:
Release Date: May 01, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Duolingo Inc (NASDAQ:DUOL) reported strong growth in daily active users (DAUs), with a 49% year-over-year increase, indicating robust user engagement.
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The company successfully launched 148 new language courses using AI, significantly speeding up content creation compared to previous years.
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Duolingo Inc (NASDAQ:DUOL) is expanding its offerings with new subjects like chess, math, and music, which are already being monetized similarly to language learning.
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AI is playing a transformative role in Duolingo Inc (NASDAQ:DUOL)'s operations, enhancing content creation, feature development, and overall efficiency.
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The company is seeing positive trends in its Duolingo Max subscription, which now accounts for 7% of subscribers, contributing to strong financial performance.
Negative Points
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Despite the growth in new subjects, they remain significantly smaller in scale compared to language learning, limiting their immediate impact on revenue.
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Duolingo Inc (NASDAQ:DUOL) faces challenges in converting users in low GDP per capita regions, affecting overall monetization potential.
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The company anticipates a 150 basis point decline in gross margin year-over-year, with some sequential declines expected in the second quarter.
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Pricing for Duolingo Max remains high in certain markets like India, potentially limiting adoption until costs can be reduced.
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The company acknowledges that it will take time, potentially years, for word of mouth to significantly boost the adoption of its intermediate and advanced English content.
Q & A Highlights
Q: Could you discuss the cadence of gross margin for the year and expectations for the second quarter? A: Matthew Skaruppa, CFO: We expect a 150 basis point decline year-over-year in gross margin. Q1 performed better than expected with a 200 basis point decline instead of the anticipated 300. For Q2, we foresee a 50 basis point sequential decline compared to Q1, with improvements expected in Q3 and Q4, bringing us back to the levels at the end of last year.
Q: What are your expectations for the new language modules like chess, music, and math in terms of engagement and monetization? A: Luis Von Ahn, CEO: We're excited about these modules, especially chess, which will soon be live. Initially, these are aimed at increasing user engagement, as there's significant demand. We are monetizing these subjects similarly to language learning, through subscriptions that remove ads. While they are smaller compared to language learning, they are growing well.