Shares of Duolingo (DUOL 25.74%) fell on Thursday after the mobile learning platform announced a shift in its growth strategy.
As of 2:25 p.m. ET, Duolingo's stock price was down more than 25%.
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People are flocking to Duolingo's platform for their learning needs
Duolingo's revenue jumped 41% year over year to $271.7 million. Popular new courses, such as chess, are helping to attract new learners at an impressive clip.
Monthly and daily active users rose by 20% and 36%, respectively, to 135.3 million and 50.5 million. And more of those users are paying for premium features. Paid subscribers increased by 34% to 11.5 million.
NASDAQ: DUOL
Key Data Points
These subscriber gains also helped to drive Duolingo's profits higher. The company's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) surged by 68% to $80 million.
Artificial intelligence could reshape the education market
Investors, however, appeared to focus more on management's comments regarding a shift to projects with longer-term payoffs. "We're investing proportionally more in teaching better, and we're prioritizing user growth over monetization," CEO Luis von Ahn said in a letter to shareholders.
Yet, although impatient traders are selling Duolingo's stock today, Von Ahn believes the long-term payoffs to both users and shareholders will more than outweigh the near-term costs.
"We're doing this now because we want to keep growing users for a long time, and because of our increasing conviction that AI can fundamentally change what's possible in how we teach," Von Ahn said. "If we develop an app that is more engaging than, and teaches as well as, a personal tutor across multiple subjects, we think we'll become a much bigger business in the long term."
