Duolingo (DUOL +0.88%) stock fell 14.6% through 10:55 a.m. ET Friday despite having beaten analyst forecasts for Q4 sales the night before. TheFly.com notes that Duolingo's $209.6 million in Q4 sales exceeded the $205.5 million in sales Wall Street expected. Because of the nonstandard way in which Duolingo reports its numbers, however, it's hard to determine whether the company's earnings on those profits were good or bad.
Let's see if we can help with that.
NASDAQ: DUOL
Key Data Points
Duolingo Q4 earnings
To find Duolingo's earnings results, you need to start on the SEC's website and locate the Q4 "shareholder letter." Current quarterly and yearly results are presented right up front, but to determine whether Duolingo improved year over year, you have to scroll down a bit.
Doing this, we see that Q4 sales grew 39% year over year, but that earnings improved less than half that amount, rising only 15% to $13.9 million. On 49.5 million diluted shares outstanding, that works out to $0.28 per share, which is significantly less than the $1.09 per share that Yahoo! Finance says Wall Street was expecting.
That's the bad news. The good news is that full-year earnings at Duolingo were $88.6 million, a 450% increase year over year and equivalent to $1.79 per share. It's also significantly better earnings growth than the 41% (to $748 million) revenue growth in 2024.
Turning next to free cash flow, Duolingo calculates that it generated $274.9 million in positive FCF in 2024. Versus $144.3 million generated in 2023, that works out to a FCF growth rate of more than 90%.
Is Duolingo stock a sell?
So while the quarter seems to have been a disappointment, Duolingo still did quite well in 2024, and 2025 should look pretty terrific as well.
Management forecasts about $970 million in 2025 revenue, which works out to a growth rate of just under 30%. Still, at a valuation of roughly 51.5 times trailing free cash flow, 30% growth is a bargain only if earnings grow much faster than sales. Luckily, so far, Duolingo's managing to do just that.
