Duolingo Shares Surge 32% on Raised Guidance, AI-Driven Growth Strategy

Duolingo's stock soared after lifting its annual revenue forecast to $1.01-$1.02 billion, up from $987-$996 million, as investors rewarded its AI-powered expansion. Bookings projections climbed to $1.15-$1.16 billion, signaling confidence in the language app's monetization of artificial intelligence for content creation and premium features.

The company's ARPU grew 6% year-over-year, driven by uptake of higher-priced subscription tiers like the AI-enhanced Max plan. Duolingo's targeted pricing experiments and dynamic offer system demonstrate a sophisticated approach to maximizing customer lifetime value.

Despite anticipating a 300-basis-point gross margin contraction, the company limited the decline to just 100 points. This outperformance suggests operational efficiency in scaling AI infrastructure, even amid workforce reductions.