Soaring Duolingo Stock Gets Halted by OpenAI's GPT-5 Reveal

Duolingo (DUOL) experienced a rollercoaster day in the market, with its stock initially climbing significantly after a strong Q2 earnings report before giving up a large portion of its gains following a demo of OpenAI's new GPT-5 model. After an initial surge of more than 30%, shares ultimately closed with a daily gain of over 10%.

The language-learning company's impressive Q2 results showed robust growth across several key metrics. Daily active users increased by 40% year-over-year to 47.7 million, while monthly active users saw a 24% rise to 128.3 million. The number of paid subscribers grew by 37% over the same period. Duolingo's revenue jumped by 41% year-over-year to $252.3 million, with total bookings also increasing by an identical percentage to $268 million. Earnings per share more than doubled, climbing from $0.51 a year ago to $0.91.

In light of these strong results, Duolingo's CEO and co-founder, Luis von Ahn, noted in a press release that the company had "exceeded our own high expectations." He also attributed some of the company’s growth to "lower-than-expected AI costs and strength in our ads business." The company also raised its full-year revenue outlook to a range of $1.01 billion to $1.019 billion, exceeding prior estimates. Following the report, UBS analysts raised their price target for the stock to $500.

The positive momentum was significantly disrupted during a presentation by OpenAI, where the company showcased its new GPT-5 model. In a demonstration, GPT-5 was shown building a custom web application that taught French to a user in just three minutes. This direct competition with Duolingo’s primary function as a language-learning tool led to a sell-off, erasing much of the stock's gains. The company is actively working to expand its product offerings beyond language and has already implemented new courses in areas like chess, math, and music, as well as acquiring the music gaming startup NextBeat. Duolingo is also integrating AI into its platform, including a new conversational AI feature for its highest-tier subscribers.