Key Takeaways
- Duolingo shares plummeted approximately 14% in extended trading following Q1 results
- First-quarter revenue reached $292M, exceeding forecasts with 27% annual growth
- Both paying subscribers and daily active users increased by 21%
- Annual bookings growth projection of roughly 10.5% indicates deceleration
- Company executives indicate investment payoffs delayed until 2027 or beyond
Shares of Duolingo (DUOL) tumbled approximately 14% during after-hours trading on Monday following the language-learning platform’s release of first-quarter earnings that surpassed expectations but included forward-looking guidance that concerned Wall Street.
First-quarter revenue totaled $292 million, representing a 27% increase compared to the same period last year and surpassing analyst projections of $288.5 million. Total bookings climbed 14% to reach $308.5 million, likewise exceeding Wall Street’s expectations.
The platform’s daily active users reached 56.5 million, marking a 21% year-over-year increase. Meanwhile, paid subscribers similarly grew 21% to 12.5 million, demonstrating continued effectiveness of the company’s freemium business model in converting free users to paying customers.
Adjusted earnings per share exceeded analyst predictions. The company’s adjusted EBITDA margin expanded by 140 basis points year-over-year, reaching 28.6%.
Despite these positive metrics, investors focused on the company’s future outlook.
Projected Deceleration in Bookings Growth
CFO Gillian Munson indicated that full-year bookings growth is anticipated at approximately 10.5%, with second-quarter growth projected at merely 5.8%. This represents a notable slowdown from the momentum investors had become accustomed to seeing.
“Q2 faces a challenging bookings growth comparable, after which we expect bookings growth to accelerate through the remainder of the year,” Munson explained.
The full-year adjusted EBITDA guidance stands at $310 million, translating to roughly a 25.7% margin. Second-quarter margin is projected at approximately 24%.
Executives emphasized that the company is prioritizing long-term user engagement rather than immediate monetization. This strategic decision means increased current spending, with financial returns anticipated further down the line.
“We are making long-term bets, and the returns on the investments we’re making are going to be 2027 and beyond,” Munson explained to Reuters.
Artificial Intelligence Spending Impacts Short-Term Profitability
Duolingo has been investing heavily in artificial intelligence-powered capabilities, including its premium Duolingo Max subscription tier and enhanced speaking features. This expenditure is anticipated to create margin pressure later in 2026 as adoption of these features increases.
The company reaffirmed its full-year revenue guidance at approximately $1.21 billion, aligning with analyst consensus.
For the second quarter, revenue guidance was set at about $295.5 million, modestly above the $294 million consensus forecast.
Duolingo has established a long-term objective of achieving 100 million daily active users by 2028. The current figure stands at 56.5 million.
Seeking Alpha’s Quant model gives DUOL a Strong Sell rating. One SA analyst pushed back on that view, writing: “Despite a sour FY26 outlook and only 10% y/y bookings growth guidance, I see no immediate red flags in DUOL’s user and subscription strategy.”
The after-hours decline in the stock price underscores investor anxiety that decelerating bookings growth — despite healthy user engagement metrics — indicates near-term challenges lie ahead for the company.
