What happened

Shares of mobile-app education company Duolingo (DUOL -1.18%) jumped higher on Wednesday after the company reported financial results for the fourth quarter of 2022. The company is still growing at an impressive rate, delighting investors. And that's why Duolingo stock was up almost 17% as of 10:20 a.m. ET.

So what

Duolingo primarily generates revenue from its app for language learning, with 74% of full-year 2022 revenue coming from paying subscribers. And impressively, the company ended the year with 4.2 million paying subscribers, a 67% increase from 2021. For perspective, this is an acceleration from the 56% growth in paying subscribers it enjoyed in 2021.

With its rapidly growing user base, Duolingo grew full-year 2022 revenue by 47% to $370 million. And the company's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) swung from a $1.1 million loss in 2021 to a $15.5 million gain in 2022.

Importantly, Duolingo's adjusted EBITDA margin came in at 4.2% -- a meaningful improvement and a big step toward management's long-term adjusted EBITDA margin target of 30% to 35%. And this is a big reason Duolingo stock was up today.

Now what

For 2023, Duolingo expects to generate revenue of $486 million to $498 million, a 32% to 35% jump from revenue in 2022 and far ahead of Wall Street's revenue expectations of around $465 million. Several analysts are consequently increasing their price targets for Duolingo stock today.

Indeed, Duolingo is one of the few companies maintaining business momentum after a big initial surge in the early days of the pandemic. That's been surprising to many who follow the company -- myself included -- and suggests that this management team is doing something right. 

With plans to expand far beyond its core competency in language learning and to introduce new features at higher subscription price points in 2023, Duolingo certainly warrants following at this point, given its successes since going public.