Key Takeaways
- Q4 2025 earnings per share of $0.84 surpassed analyst expectations of $0.83, while revenue of $282.9M topped forecasts of $275.7M
- Shares plunged over 23% in extended trading following disappointing Q1 and full-year bookings projections
- Management announcing strategic pivot prioritizing user expansion over immediate monetization, impacting bookings and profit margins
- Full-year 2026 bookings guidance of $1.27B–$1.30B significantly missed Street consensus of $1.39B
- Company’s board authorized new $400 million stock repurchase program
The language-learning platform delivered solid fourth-quarter results but sent investors running for the exits with disappointing forward-looking projections that significantly undershot Wall Street’s targets.
The company posted adjusted earnings of $0.84 per share, narrowly exceeding the consensus estimate of $0.83. Revenue climbed to $282.9 million, surpassing analyst projections of $275.7 million. For the complete 2025 fiscal year, adjusted EBITDA exceeded $300 million, while total bookings surpassed the $1 billion milestone for the first time in company history.
The platform’s daily active user base also reached a significant milestone, crossing 50 million users — representing more than a five-fold increase compared to its 2021 initial public offering.
The positive momentum, however, quickly evaporated when management unveiled their outlook.
For the first quarter of 2026, Duolingo projected bookings of approximately $301.5 million. Wall Street had been anticipating $329.7 million. Looking at the full year ahead, management guided toward $1.27–$1.30 billion in bookings, well below the $1.39 billion consensus estimate.
The revenue outlook of $1.20–$1.22 billion similarly fell short of analyst projections calling for $1.26 billion.
Shares tumbled more than 23% during after-hours trading, though they partially recovered to end up 5.19% at $113.24 following the earnings announcement.
The conservative guidance stems from a fundamental shift in corporate strategy. Management is deliberately moving away from maximizing monetization in favor of accelerating user base expansion.
Chief Executive 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.”
Expanding AI Capabilities to Broader User Base
Central to this strategic reorientation is democratizing access to artificial intelligence-powered functionality. The “Video Call with Lily” feature, which was previously exclusive to the premium Max subscription tier, will now become available to Super Duolingo subscribers.
Additionally, the company intends to extend more AI-enhanced speaking capabilities to users on the free tier. Management highlighted that the cost of operating the AI video call feature has decreased by more than tenfold since its initial launch, making widespread distribution financially sustainable.
The company anticipates adjusted EBITDA margin will compress to approximately 25% during 2026 as it accelerates investment in artificial intelligence features and boosts marketing expenditures.
User Growth Momentum Decelerating
Daily active user expansion decelerated throughout 2025 and is anticipated to slow to approximately half the rate achieved in previous years.
Bookings growth is now projected at roughly 11% for 2026. Management acknowledged that maintaining their previous strategic approach could have generated approximately 20% bookings growth — a trade-off they’re intentionally accepting.
In recent years, the company had focused on converting users to paid subscriptions through advertising and upgrade prompts. While this approach increased bookings per user, it constrained overall growth rates, precipitating the strategic recalibration.
The board of directors has also greenlit a share repurchase authorization of up to $400 million.
At present trading levels, shares remain significantly below the 52-week peak of $544.93, with the company carrying a market capitalization of approximately $5.44 billion and trading at a price-to-earnings ratio of 14.67.
