Duolingo’s third quarter results were met with a significant negative market reaction, despite the company exceeding Wall Street’s expectations on both revenue and earnings. Management attributed this divergence to a deliberate shift in strategic priorities, emphasizing long-term user growth over short-term monetization. CEO Luis von Ahn explained that recent changes to product and marketing—such as a renewed focus on engaging social media content in Asia and product improvements for retention—drove daily active user growth, while a conscious decision to limit monetization experiments impacted near-term bookings. Management acknowledged that the company is placing more emphasis on teaching quality and user expansion, stating that, “We are investing in the long term, aiming to build an app that teaches better than ever before.”
Is now the time to buy DUOL? Find out in our full research report (it’s free for active Edge members).
Duolingo (DUOL) Q3 CY2025 Highlights:
- Revenue: $271.7 million vs analyst estimates of $260.6 million (41.1% year-on-year growth, 4.3% beat)
- Adjusted EPS: $6.80 vs analyst estimates of $1.59 (significant beat)
- Adjusted EBITDA: $80.05 million vs analyst estimates of $72.27 million (29.5% margin, 10.8% beat)
- Revenue Guidance for Q4 CY2025 is $275 million at the midpoint, roughly in line with what analysts were expecting
- EBITDA guidance for the full year is $298.6 million at the midpoint, above analyst estimates of $294 million
- Operating Margin: 12.9%, up from 7% in the same quarter last year
- Monthly Active Users: 135.3 million, up 22.2 million year on year
- Market Capitalization: $9.01 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Duolingo’s Q3 Earnings Call
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Bryan Smilek (JPMorgan) asked how social media strategy and marketing changes are impacting user growth. CEO Luis von Ahn explained that more viral content and product improvements have helped DAU growth recover, especially in Asia.
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Nathaniel Feather (Morgan Stanley) inquired about the duration and impact of the strategic pivot toward user growth. CFO Matt Skaruppa clarified that this shift will persist for several years and is expected to have only a modest effect on near-term bookings.
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Wyatt Swanson (D.A. Davidson & Company) sought details on chess course engagement and retention. Von Ahn said chess user retention has been “slightly higher than language learning” and confirmed full rollout of player-versus-player functionality is imminent.
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Mark Stephen Mahaney (Evercore ISI) pressed for clarity on whether slower bookings growth was due to weaker paid conversion or retention. Von Ahn replied that deceleration is primarily from the shift to user growth priorities and not from increased churn among paid subscribers.
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Shweta Khajuria (Wolfe) asked about Duolingo Max adoption in China and renewal rates. Von Ahn noted Max is being tested in China, while Skaruppa reported Max renewals are slightly better than the company’s Super tier so far, though still early.
Catalysts in Upcoming Quarters
In the coming quarters, our team will closely track (1) the rollout and user adoption of new AI-powered features like guided video calls and expanded math and music content; (2) the pace of international user growth, particularly in Asia and China, and the impact of localized marketing strategies; and (3) the evolution of premium subscription offerings and any material changes in pricing or feature allocation. Execution on product innovation and international expansion will be key indicators of Duolingo’s ability to balance growth and profitability.
Duolingo currently trades at $194.60, down from $261.41 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).
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