Duolingo stock plummeted Friday after the language-learning software maker badly missed expectations for earnings in the fourth quarter.
The Pittsburgh, Pa.-based company earned 28 cents a share on sales of $209.6 million in the December quarter. Analysts polled by FactSet expected earnings of 48 cents a share on sales of $205.5 million. In the year-earlier period, Duolingo earned 26 cents a share on sales of $151 million.
However, Duolingo beat estimates for subscribers and total users in the fourth quarter. It ended the year with 9.5 million paying subscribers, up 43% from 2023. It also reported 40.5 million daily active users and 116.7 million monthly active users, up 51% and 32%, respectively.
On the stock market today, Duolingo stock dropped 17% to 312.07. Shares hit an all-time high of 441.77 on Feb. 18.
Most Wall Street analysts chose to focus on the company's better-than-expected sales guidance for the current quarter and full year. At least seven analysts raised their price targets on Duolingo stock after the Q4 report.
Based on the midpoint of its guidance, Duolingo expects first-quarter revenue to rise 32.5% year over year to $222 million. The company sees full-year sales increasing 30% to $970.5 million.
Meanwhile, Jefferies analyst John Colantuoni cut his price target on Duolingo stock to 360 from 370 and kept his hold rating.
"Impressive top-line momentum was countered by a weaker-than-expected margin outlook, driven by first-half investments in AI and marketing," Colantuoni said in a client note. "We were encouraged to see early indication that Video Call is driving accelerated Max adoption, but remain Hold on premium valuation and low visibility on near-term margin trajectory."
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