Duolingo Inc., the cloud-based language learning app creator, delivered fourth-quarter financial results today that beat expectations, sending its stock higher in extended trading.

The company reported a net loss of $13.9 million, down from a loss of $17.5 million a year ago. It delivered a loss before certain costs such as stock compensation of 35 cents per share on revenue of $103.8 million, up 47% from the same period one year earlier. Wall Street had also been targeting a loss of 35 cents per share, but analysts had forecast lower revenue of $99.9 million.

For the full year fiscal 2023, the company delivered revenue of $369.5 million, up 47%.

Duolingo is the creator of a gamified language learning tool that can be used by students and teachers to provide a more engaging learning experience. Students create a cartoon avatar character and then navigate through a series of learning games, earning rewards for doing so and learning as they progress. Because everything is gamified, Duolingo becomes fun and encourages students to keep learning, even outside of the classroom.

The company’s application is free to use and works on most kinds of devices and focuses on four types of language skills — reading, writing, speaking and listening. There are currently 36 different languages available to learn in the app, with basic lessons for beginners and more advanced instruction for those who already have some knowledge of the target language.

Duolingo co-founder and Chief Executive Luis von Ahn (pictured) said the company’s full year results were “extraordinary,” even when compared with the lofty expectations it had set itself. “We enter 2023 in a great position to continue our momentum,” he added. “The infrastructure we’ve built has driven our innovation and operating efficiency, and is poised to help us deliver higher incremental profits this year and beyond.”

During the quarter, Duolingo expanded its platform with the launch of Duolingo Max, a higher-tier subscription that throws in some extra artificial intelligence-based features for users. “Duolingo Max will give our subscribers an even more engaging way to learn by chatting with Duolingo characters and receiving personalized explanations of their mistakes,” Von Ahn said.

The company reported some explosive growth, with its total number of paid subscribers rising to 4.2 million at the end of the quarter, up 67% from a year earlier. Monthly active users increased by 43%, to 60.7 million, while daily active users rose 62%, to 16.3 million.

Holger Mueller, an analyst with Constellation Research Inc., said Americans especially are keen to learn languages in the new, self-driven way that Duolingo offers, as is shown by its impressive growth. “With revenue up almost 50% and expenses increasing by just 30%, good things happen to the bottom line, and in Duolingo’s case that meant a similar net loss for the full year, albeit on a much larger revenue base,” he explained. “The challenge for Duolingo now will be to maintain its DAU and MAU levels in 2023 and keep delivering. If it has another year like this, it may be able to deliver a profit to shareholders at last.”

The company seems to think such an outlook is realistic. Looking to the first quarter, Duolingo said it expects to see yet more growth. As a result, it’s anticipating revenue of between $111 million and $114 million, well ahead of Wall Street’s target of $106 million.

Investors liked what they saw, and Duolingo’s stock rose more than 8% in the after-hours trading session, adding to a 2% gain earlier in the day.

Photo: Duolingo