Do you still remember how your school life was? Prior to the integration of AI into educational systems, education was predominantly characterized by traditional, teacher-centered methods. Classrooms typically featured instructors delivering standardized lessons to entire groups, with students expected to learn at a uniform pace. Educational materials were primarily textbooks, and homework was graded manually, which could be time-consuming and subject to human error or inconsistency. While some basic educational technology was in use by the early 2000s, such as computers for word processing and rudimentary educational software, these tools lacked the adaptive, intelligent capabilities that AI now offers. Personalized learning paths, intelligent tutoring systems, and automated grading were not yet common, limiting the ability to cater to individual student needs. Communication between teachers and parents often relied on physical notes, phone calls, or periodic parent-teacher meetings, and libraries remained the primary source for additional research, with no AI-driven support for student queries or learning assistance.

1. How does AI improve the learning experiences of students?

In the US, AI is widely used to improve learning experience and enhance the engagement of students. It can be used to enhance students’ interests in learning by turning text into image or gamification, provide personalized learning paths with customized feedback for each student, and perform data analytics to track students’ progress.

1.1. Improve comprehension by AI and students’ creativity: an example of Stride Inc.

Stride Inc. (NYSE: LRN), formerly known as K12 Inc., is a for-profit education company providing online and blended learning programs, primarily for K-12 students, as well as career and adult learning services. The company has evolved over 25 years to become a leader in lifelong learning, serving learners in all 50 states and over 100 countries. Stride Inc. has actively incorporated AI into its educational offerings to enhance engagement, reduce costs, and improve revenue, aligning with its mission to provide inspired teaching and personalized learning. One specific example of Stride Inc.'s AI integration is the Legend Library, an app that allows students to master reading comprehension in a game setting, utilizing generative AI powered by Stability AI in Amazon Bedrock. This tool allows students to create their own imagery for stories using text-to-image models, personalizing the learning experience and making it more engaging by fostering creativity. This initiative has already improved reading comprehension of thousands of students in the U.S. It does not only enhance student participation but also potentially reduces the need for additional creative resources, thereby lowering costs of parents and schools. Stride is currently trying to expand Legend Library to a wider audience, such as middle school students.

1.2. Application of AI by Duolingo: personalize learning experience of students

Duolingo (Nasdaq: DUOL) is a language learning platform that uses gamification to teach over 40 languages through quick, bite-sized lessons, focusing on speaking, reading, listening, and writing. Duolingo for Schools, launched in 2016, is a free platform designed specifically for educators, providing tools to monitor progress, assign tasks, and create engaging learning experiences. Duolingo's AI algorithms analyze students' performance and adjust the difficulty and content of lessons accordingly. This ensures that students are always challenged at an appropriate level, allowing them to learn at their own speed, which is particularly beneficial for those who need more time or want to accelerate. Duolingo Max offers AI-driven Roleplay, where students can practice conversations with an AI partner, simulating real-life scenarios. For instance, a student practicing German can roleplay ordering food at a restaurant, receiving feedback from the AI, which deepens conversational skills and engagement. This is crucial for students who may be hesitant to speak in class due to fear of making mistakes. Moreover, Duolingo for Schools uses AI to provide teachers with real-time data on student progress, such as lesson completions, streaks, and XP earned, enabling teachers to identify areas where students need additional support and tailor instruction accordingly.

2. How does AI help teachers handle different tasks and increase efficiency?

The presence of AI also reduces the workload of teachers by completing administrative and repetitive tasks, enabling educators to spend more time to cater to the needs of each student.

2.1. Save time and reduce burnout of teachers using AI: an instance of MagicSchool AI

MagicSchool AI is a platform designed to support educators by leveraging artificial intelligence to streamline various teaching tasks. It aims to save teachers time and reduce burnout, allowing them to focus more on student interaction. It offers over 80 AI tools, including generating quick and detailed lesson plans, creating assessments and quizzes for tailored evaluations, producing contents for academic texts and math problems, grading student work efficiently with feedback, and providing communication assistants for drafting professional emails and newsletters. It also has a chatbot called Raina that can answer questions teachers may have about instructional approaches, behavior management strategies, and more. Educators joining MagicSchool AI have reported that it can save them 7-10 hours each week, addressing burnout, a significant issue among teachers since 44% of K-12 teachers reported a frequent burnout. In fact, MagicSchool AI is used by more than 2,500 school and district partners.

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2.2. Stride Inc.: Training teachers in adopting AI in classrooms

Stride Inc. also offers professional development courses for educators on implementing AI in the classroom. These courses, available as part of a comprehensive subscription plan, train educators on using AI as a resource to help students learn and grow, ensuring that teachers are equipped to leverage these technologies effectively. This focus on educator training can reduce the cost of onboarding and improve teaching efficiency, potentially increasing revenue by attracting more school districts and learners to their programs.

3. Turning AI education into profit: revenue generating and cost cutting

After AI being widely used by listed companies, investors expect it to reduce costs and generate more income. AI automates routine and repetitive tasks, reducing the need for human labor and thus lowering labor costs. On the revenue generation side, AI analyzes vast amounts of data to provide insights for better decision-making, such as predicting customer behavior. It also drives innovation by enabling the development of new products and services, opening new revenue streams.

3.1. Stride Inc.: improving revenue by more enrolment

After the launch of Legend Library in August 2023, revenue of Stride Inc. rises from $1.8 billion in 2023 to $2.0 billion in 2024. General Education revenues increased 13.9% YoY in 2024, primarily due to personalized learning and engaging experiences, leading to 8.3% increase in enrolments. Furthermore, AI allows Stride to serve more students with the same infrastructure, enabling higher revenue. With over 230.6 thousand student enrolments in Stride programs as of 24Q2, AI's role in content generation and user retention is crucial.

From the aspect of expense, the increase in cost of revenue from $1.2 billion in 2023 to $1.3 billion in 2024, and operating expenses from $482 million to $514 million, may reflect investments in AI development, such as integrating generative AI and building new features, necessary for long-term growth but increasing short-term costs. However, the net income still rises from $127 million in 2023 to $204 million in 2024.

3.2. Duolingo: increasing revenue by higher subscription

Revenue of Duolingo continues surging after the adoption of AI, from $369 million in 2022, $531 million in 2023, to $748 million in 2024. The 40.8% YoY revenue growth in 2024 is mainly driven by enhanced user experience. As of 24Q4, daily and monthly active users of Duolingo reach 40.5 million and 116.7 million respectively, with a YoY growth of 51% and 32%. AI-powered personalization, such as adaptive learning paths and immediate feedback, likely increased user satisfaction, leading to higher subscription rates. The gamified approach, optimized by AI, keeps users engaged, increasing ad revenue and subscription fees. In 24Q4 earning report of Duolingo, the management emphasizes how AI can change the platform’s customer products and internal productivity gains, which may attract more customers and generate higher income.

From the cost-cutting perspective, AI does not help much with Duolingo. Its cost of revenue increased from $99 million in 2022, $142 million in 2023, to $203 million in 2024. Research and development expense is also surging, from $150 million in 2022, $194 million in 2023, to $235 million in 2024. This reflects investments in AI development, such as integrating GPT-4 and building new features, which are necessary for long-term growth but increasing short-term costs. Nonetheless, AI helps minimize expense through automation, reducing the need for human labor, particularly in content creation. The layoffs of 10% of contractors at the end of 2023, affecting teams working on language programs, suggest cost savings in labor expenses. AI also automates customer support and lesson generation, reducing operational costs.

4. Conclusion: Education, a new trend of AI applications

While AI has been a standard in industries like finance, healthcare, and e-commerce, its application in education is a relatively new and rapidly growing trend. Previously overshadowed by U.S. tech giants, China's AI sector has now showcased its potential, driven by innovative companies like DeepSeek. This newfound prominence has opened doors in the education AI industry, with universities launching DeepSeek-centered courses and companies like Stride Inc. integrating AI tools such as Legend Library to enhance learning. These developments signal growing opportunities for AI-driven educational advancements in China. Investors could consistently monitor the AI education industry due to its rapid growth and transformative potential.

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