Duolingo

This earnings season, tech giants are increasing capital expenditure for AI-driven growth, but smaller players like DoorDash, Duolingo, and Roblox face investor skepticism after announcing similar spending increases. DoorDash’s investments in autonomous delivery and acquisitions, Duolingo’s focus on user growth with AI, and Roblox’s platform safety measures all raise concerns about near-term profitability. While companies argue these are essential for long-term growth, analysts question if returns will justify the investments, contrasting with the confidence afforded to larger firms like Amazon and Alphabet.

Duolingo’s shares fell 27% after releasing weaker-than-expected guidance, signaling a focus on user growth over immediate revenue. While Q1 revenue surged 41% to $272M, exceeding estimates, bookings guidance for the next quarter disappointed. Despite a rise in paid subscribers to 11.5 million, daily and monthly active user numbers missed expectations. The company is leveraging AI for new features and courses but the market reacted negatively to the profitability outlook amid increased investment in long-term user acquisition.