By Emily Dattilo and Janet H. Cho

Duolingo demonstrated strong growth in its latest quarter but that wasn't enough to boost shares of the language-learning app.

The stock fell 15% to $320.09, putting it on track for its largest daily percentage decrease since last May, according to Dow Jones Market Data. Shares had gained 93% over the past 122 months through Thursday's close of trading.

Raymond James analysts led by Alexander Sklar rate Duolingo at Market Perform. They offered a possible reason for the decline.

"While the run into the print likely meant the Street was looking for more in the 2025 outlook, we believe trends around paid subscribers including ramping Max adoption (now 5% of paid subscribers) set the stage for potential upside into FY25," the analysts wrote in a research report. Duolingo Max is the company's highest subscription tier.

After markets closed Thursday, the language-learning app reported fourth-quarter net income of $13.9 million, higher than the $12.1 million recorded a yea ago. Revenue of $209.6 million beat the consensus estimate for $205.5 million among analysts tracked by FactSet.

Gross margin was 71.9%, lower than the 73.1% a year prior.

Seaport Research analyst Aaron Kessler, who rates shares at Neutral, weighed in on that metric. "In 4Q, GM decreased 120 bp y/y due to higher GenAI costs from Duolingo Max adoption as well as lower advertising revenues per DAU," he wrote. "Additionally, DUOL expects a 170 bp GM impact for the year with most of that in 1H25."

Bookings in the fourth quarter were $271.6 million, up 42% from the year-ago quarter. Daily active users were 40.5 million, an increase of 51%, while monthly active users rose 32% to 116.7 million.

Its paid subscriber count increased 43% to 9.5 million in the fourth quarter, from 6.6 million at the end of 2023.

For full-year 2024, Duolingo reported revenue of $748 million, up 41% from 2023. Net income increased to $88.6 million, and total bookings jumped 40% to $870.6 million.

Fourth-quarter net income was $13.9 million, compared with $12.1 million in the year-ago quarter.

"We closed out 2024 with a record-breaking quarter," said CEO Luis von Ahn in a letter to shareholders. "We surpassed 40 million DAUs; added our largest-ever number of net paid subscribers; achieved our highest-ever quarterly bookings, revenue and Adjusted EBITDA; and delivered 42% free cash flow margin."

For its first quarter, Duolingo expects revenue between $220.5 million and $223.5 million, while analysts had penciled in $220.8 million.

For the current fiscal year, the company anticipates revenue between $962.5 million and $978.5 million, while analysts had forecast $965.5 million.

Write to Emily Dattilo at emily.dattilo@dowjones.com

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February 28, 2025 10:51 ET (15:51 GMT)

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