Key Takeaways
- Fourth quarter earnings of $0.84 per share topped analyst expectations of $0.83, with revenue reaching $282.9M versus forecasted $275.7M
- Stock dropped more than 23% during after-hours session due to weak bookings forecast for Q1 and 2026
- Management disclosed major strategy shift emphasizing user base expansion rather than immediate revenue optimization
- 2026 bookings guidance of $1.27B–$1.30B falls well below analyst projections of $1.39B
- Board approved $400 million share buyback authorization
The digital language education company posted impressive fourth-quarter performance that beat analyst estimates, but investor enthusiasm evaporated when leadership presented underwhelming forward guidance.
Quarterly earnings came in at $0.84 per share, marginally surpassing the $0.83 consensus projection. Revenue for the quarter hit $282.9 million, topping analyst expectations of $275.7 million. Across the entire 2025 fiscal year, adjusted EBITDA climbed above $300 million, with total bookings crossing the $1 billion threshold for the first time since inception.
The app’s daily active user count also achieved a significant milestone of 50 million — marking a fivefold expansion since its public market debut in 2021.
However, optimism quickly faded when executives revealed their outlook for upcoming periods.
For Q1 2026, Duolingo projects bookings around $301.5 million. Analysts had anticipated $329.7 million. The full-year bookings estimate of $1.27–$1.30 billion missed Wall Street’s $1.39 billion expectation by a wide margin.
Revenue guidance of $1.20–$1.22 billion also fell short of the Street’s $1.26 billion consensus.
The stock plunged over 23% during after-hours trading immediately following the disclosure, though shares ultimately closed up 5.19% at $113.24 during regular trading hours after the official earnings release.
Executives attributed the cautious outlook to a deliberate strategic transformation. The organization is shifting away from aggressive short-term monetization efforts toward rapidly expanding its total user ecosystem.
CEO Luis von Ahn articulated the rationale plainly: “If we’re seeing faster user growth than we’re expecting, and what we are expecting is about 20%, then that means the strategy is working.”
Expanding AI Capabilities to Broader User Base
A cornerstone of this strategic transformation involves broadening access to the platform’s artificial intelligence-driven features. The “Video Call with Lily” feature, previously limited to the premium Max subscription level, will now be extended to Super Duolingo members.
Furthermore, the platform plans to provide more AI-enhanced conversational exercises to free-tier users. Leadership noted that operational expenses for the AI video calling functionality have decreased by over tenfold since launch, enabling economically viable mass distribution.
The organization anticipates its adjusted EBITDA margin will contract to around 25% in 2026 as it ramps up artificial intelligence infrastructure investment and marketing spending.
User Acquisition Momentum Decelerating
The pace of daily active user growth decelerated during 2025 and is expected to slow to approximately half the rate witnessed in prior periods.
Bookings expansion is now projected at roughly 11% for 2026. Leadership conceded that continuing the previous strategic direction could have generated bookings growth approaching 20% — a tradeoff executives are deliberately making.
In recent periods, the company had deployed various mechanisms encouraging users toward premium subscription options through advertisements and conversion prompts. While this methodology boosted average bookings per user, it limited overall platform expansion, prompting the strategic realignment.
The board has additionally authorized a share repurchase program valued at up to $400 million.
At current price levels, the stock trades substantially below its 52-week high of $544.93, with the company maintaining a market capitalization around $5.44 billion and a price-to-earnings multiple of 14.67.
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