Duolingo's lower-than-expected revenue forecast overshadows quarterly beat

The company also pointed to lower AI costs, which helped lift gross margins. Munson said Duolingo is increasingly using open-source AI models for some features that do not require its most advanced systems, helping drive costs down.

Even so, Duolingo chose not to raise its revenue forecast, signaling caution on the pace at which stronger user engagement converts into bookings and subscription revenue.

Second-quarter revenue rose 18% to $298.5 million, beating analysts' average estimate of $295.6 million, according to data compiled by LSEG. Its adjusted core profit also topped expectations.

The company said product improvements, broader rollout of AI-powered features such as Video Call, and more disciplined performance marketing boosted engagement during the quarter.

It also cited a one-time "Streak Revival" campaign that brought millions of inactive users back to the platform, though management said sustained growth would be driven primarily by improvements in retention and learning outcomes rather than temporary promotions.

Duolingo forecast third-quarter revenue below Wall Street expectations on Wednesday, tempering optimism from its robust second quarter as the language-learning company bets stronger user engagement will fuel long-term growth.

The company projected third-quarter revenue of about $302 million, below analysts' estimate of about $304 million. It reaffirmed its full-year revenue forecast.