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Why Did Duolingo's Stock Drop 17.6% in July?

Reasons for the Decline

1. Lower-than-Expected Earnings

Duolingo's earnings per share (EPS) for the second quarter of 2022 were $0.03, below the analyst consensus estimate of $0.05.

2. Disappointing Subscriber Growth

The company reported a net increase of 1.2 million subscribers in Q2 2022, falling short of analysts' expectations of 1.4 million.

3. Increased Marketing Expenses

Duolingo increased its marketing expenses by 45% year-over-year to drive user acquisition. This higher spending contributed to the company's lower profitability.

4. Competition from Similar Platforms

The language-learning market has become increasingly competitive, with many other app-based services offering similar features to Duolingo.

Impact on Stock Price

The combination of these factors led to a 17.6% decline in Duolingo's stock price during July 2022.

Analysts' Outlook

Analysts remain cautiously optimistic about Duolingo, citing its strong brand recognition and potential for future growth. However, they caution that the company needs to address its subscriber growth and profitability challenges to sustain long-term success.