Key Takeaways
- Q4 2025 results exceeded expectations with EPS of $0.84 (vs. $0.83 estimate) and revenue of $282.9M (vs. $275.7M estimate)
- Shares plummeted more than 23% in after-hours trading following disappointing bookings projections
- Management announced strategic pivot prioritizing user acquisition over near-term monetization
- Full-year 2026 bookings guidance of $1.27B–$1.30B significantly missed the $1.39B consensus estimate
- Company authorized new $400 million stock repurchase program
The language-learning platform delivered a solid Q4 performance, yet shares tumbled as management’s forward-looking projections disappointed investors across multiple metrics.
The company reported earnings per share of $0.84, narrowly surpassing the analyst consensus of $0.83. Quarterly revenue hit $282.9 million, exceeding projections of $275.7 million. For the full fiscal year 2025, adjusted EBITDA surpassed the $300 million threshold, while total bookings exceeded $1 billion for the first time in company history.
The platform’s daily active user count also reached a milestone of 50 million — representing more than a five-fold increase since the company went public in 2021.
Despite these achievements, investor sentiment soured when management unveiled its outlook.
For Q1 2026, Duolingo projected bookings of approximately $301.5 million, falling significantly short of the $329.7 million analyst consensus. The full-year bookings forecast of $1.27–$1.30 billion similarly disappointed compared to Wall Street’s $1.39 billion expectation.
The company’s revenue guidance of $1.20–$1.22 billion for 2026 also came in below the $1.26 billion analyst projection.
Shares declined over 23% in extended trading immediately following the announcement, though they later recovered to close up 5.19% at $113.24 after the official earnings release.
The conservative guidance reflects a strategic recalibration. Management is deliberately shifting focus from monetization efficiency toward accelerating user base expansion.
CEO Luis von Ahn articulated the approach directly: “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.”
AI Capabilities Expanding to Broader Audience
Central to this strategic shift is democratizing access to artificial intelligence-powered learning tools. The popular “Video Call with Lily” feature, which was exclusively available to Max tier subscribers, will now be accessible to users on the standard Super Duolingo subscription plan.
Additionally, the company intends to make more AI-enhanced speaking exercises available to free-tier users. Management highlighted that the cost of operating the AI video call functionality has decreased by over ten times since its initial launch, making wider distribution financially sustainable.
The company anticipates its adjusted EBITDA margin will compress to approximately 25% during 2026 as it increases investments in artificial intelligence capabilities and expands marketing expenditures.
User Acquisition Momentum Moderating
Daily active user growth experienced deceleration throughout 2025, with projections indicating expansion at roughly half the rate observed in previous years.
Bookings growth for 2026 is anticipated to reach approximately 11%. Management acknowledged that maintaining its previous strategic approach could have yielded around 20% bookings growth — a deliberate tradeoff the company has chosen to accept.
In recent years, the platform emphasized converting users to paid subscriptions through advertising and promotional offers. While this approach improved per-user bookings, it simultaneously constrained overall growth rates, ultimately triggering the strategic pivot.
The board of directors has also authorized a share repurchase program worth up to $400 million.
At present trading levels, the stock remains substantially below its 52-week peak of $544.93, with a market capitalization hovering around $5.44 billion and a price-to-earnings ratio of 14.67.
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