Duolingo tumbles 6% after analyst shows deceleration in active users

Jefferies analysts published an update on Duolingo Wednesday that showed a marked deceleration in the growth of daily active users, helping the push the stock to its worst day in over two months. The analysts wrote:

“[Daily active user] growth on the mobile app decelerated to +37% y/y in June, a slowdown from +53%/+41%/+40% in Mar/Apr/May. Visits growth on the mobile app also decelerated below the 1Q trajectory, with +30%/+35% growth in April/May (June not yet available) vs. +37% in 1Q.”

The Wednesday slump put a divot in the chart of the online language learning app, which until recently had been up by more than 100% over the last 12 months. (The Nasdaq Composite was up 13% over that period.)

Jefferies analysts suggest that the slowdown in DAU growth could have been tied to CEO Luis von Ahn’s statement earlier this month that Duolingo intended to become an “AI-first” company and would gradually stop using contractors for work that AI could do. The statement was met with online backlash, and von Ahn subsequently tried to clarify his comments, writing:

“I do not see AI as replacing what our employees do (we are in fact continuing to hire at the same speed as before). I see it as a tool to accelerate what we do, at the same or better level of quality.”

That’s essentially what von Ahn told Sherwood News last September when he sat down for one of our Final Boss interviews, just as the shares were really beginning to lift off.