Markets
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Matt Phillips

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.

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Hardware stocks jump thanks to server demand and record Lenovo revenue

Server stocks are rallying as Dell, Super Micro Computer, and Hewlett Packard Enterprise ride the momentum of Hong Kong-based Lenovo. The PC maker’s stock rose 19% on Friday, hitting an all-time high, on record Q4 earnings.

Powering the positive earnings report was the company’s AI-related revenue, which grew 84% in the fourth quarter and now makes up over a third of total revenue. Investors seem to think the increased demand for servers could have trickle-down effects for other companies.

“The company’s results and commentary reinforced the outlook for strong AI-infrastructure demand while indicating resilient broader traditional server and storage spending,” wrote Woo Jin Ho, a senior technology analyst at Bloomberg Intelligence. “Lenovo’s $21 billion AI-server pipeline and remarks that demand is outpacing supply support Dell’s AI-demand momentum and point to robust orders.”

AI’s insatiable computing demand is reshaping the hardware industry and driving up server demand.

Dell will report first-quarter earnings on Thursday, May 28.

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Ross Stores surges as Q1 results beat expectations, full-year guidance raised

Ross shares are rising after the company delivered strong Q1 results, with sales topping Wall Street’s projections.

The stock soared 6.3% just after the open.

Key numbers:

  • Earnings per share of $2.02 vs. $1.47 year over year (estimate: $1.72).

  • Sales of $6.01 billion, up 21% year over year (estimate: $5.61 billion).

  • Comparable sales growth of 17% (estimate: 8.58%).

CEO Jim Conroy attributed the results to better traffic in stores. “Customer traffic was the primary driver of the strong sales trend as compelling merchandise assortments, higher customer acquisition and engagement from our ongoing marketing initiatives, and an improved in‑store experience are resonating with shoppers.”

The company also noted that transaction volume grew across all key demographics, including “income levels, ethnicities, and age groups, including younger customers.” Sales were also likely buoyed by standard seasonal tailwinds, including consumer spending from tax refunds.

Backed by the strong quarter, the company lifted its full-year targets. Ross now projects same-store sales growth of 6% to 7%, up from the prior forecast of 3% to 4%, topping Wall Street’s estimate of 4.64%. It boosted its annual EPS guidance to a range of $7.50 to $7.74, versus the prior outlook of $7.02 to $7.36.

Ross Stores has been one of the retail sector’s standout performers this year, rising around 20% year to date as of Thursday’s close.

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