Shares of app-based education company Duolingo (DUOL 3.64%) soared on Thursday, following the release of its financial results for the third quarter of 2023. Results surpassed Wall Street's expectations as more people than ever are switching from its free tier to a paid subscription. And that's why Duolingo stock was up 14% as of 9:50 a.m ET and hitting a fresh 52-week high.
Duolingo pleasantly surprises the market again
Duolingo's app provides a gamified language-learning experience, but the app now also offers lessons for music and math. Users can access the free tier, which has advertisements. Or they can pay for an ad-free experience with extra features. And people are increasingly signing up for both.
In Q3, Duolingo had 83.1 million monthly active users (MAUs) and 24.2 daily active users (DAUs), up 47% and 63% year over year, respectively. This was also a big jump from 74.1 million MAUs and 21.4 million DAUs in the second quarter.
More importantly for Duolingo's revenue, paid subscribers hit 5.8 million in Q3, which was a 60% year-over-year jump. This paid-subscriber growth was a key component to the company's revenue growth of 43%, which pushed the top line to $137.6 million. This was ahead of management's guidance of $129.5 million to $132.5 million and it's why the market was so impressed today.
Can Duolingo keep surprising?
Duolingo had guided for full-year 2023 revenue of $510 million to $516 million. But in light of its strong Q3, management now expects revenue of $525 million to $528 million, which would be a 42% to 43% jump from 2022.
Almost every quarter, Duolingo's management revises its outlook higher as more and more users switch from the ad-supported free tier to a paid subscription. This growth stock seems to have a superb grasp on what it takes to build something people are willing to pay for. And for this reason, I wouldn't bet against Duolingo beating expectations yet again when it reports its numbers next time.
