What happened
Duolingo (DUOL -1.88%) stock is gaining ground following the company's first-quarter earnings release. The online language-education specialist's share price was up 10.6% in Wednesday's daily session as of 12:30 p.m. ET, according to data from S&P Global Market Intelligence.
Duolingo released its Q1 report after market close on May 9 and posted results that beat expectations. The company recorded a per-share loss of $0.06 on revenue of $116 million in the period, surpassing the average Wall Street analyst's target for a per-share loss of $0.24 and sales of $113 million. In addition to the better-than-expected sales and earnings results, the company's stock is likely also benefiting from recent data suggesting that inflation is moderating.
So what
Duolingo's Q1 results came in strong across key metrics. Revenue was up 42% year over year, and bookings in the period were up 37% to reach $140.1 million. The company's monthly active user count rose 47% compared to the prior-year period to reach 72.6 million, and its paid subscriber count climbed 63% to 4.8 million. The business's net loss for the period came in at $2.6 million, narrowing from $12.2 million in last year's quarter.
All in all, it was a good quarter and a welcome development for shareholders on the heels of some bearish sentiment that has circled the stock lately. Duolingo's valuation had been under pressure recently as investors weighed the potentially disruptive impacts that OpenAI's ChatGPT and other generative artificial-intelligence technologies could have on its business.
The reported results show that Duolingo's business is doing fine despite the ChatGPT challenge.
Adding another welcome bullish catalyst, the most recent Consumer Price Index data brought some encouraging news on the inflation front. While the index still rose 0.4% on a monthly basis and 5% year-over-year, the inflation data was better than some analysts and economists had feared.
Now what
Duolingo is guiding for sales to come in between $122 million and $125 million in the second quarter. For the full year, the education specialist is guiding for revenue between $500 million and $509 million. The guidance suggests the business is still on track for strong growth this year, and the stock could enjoy a more favorable backdrop if inflation continues to moderate.
High levels of inflation and rising interest rates have created tough conditions for growth stocks over the last year. The recent inflation data suggests that the Federal Reserve may now be able to hold off on subsequent rate hikes, which would be a positive development for growth stocks including Duolingo.
