Duolingo is a gamified language learning app attempting to become the standard for expressing proficiency. It’s quickly expanding into other categories like chess, music, math and literature.
Table of Contents
a. Key Points
Nice margin upside driven by AI-related efficiencies.
Third-party data shared throughout the quarter looks to be spot on.
Investing in building out performance marketing capabilities to help growth.
b. Demand
Beat bookings estimates by 2.5% & beat guidance by 2.3%.
14% Y/Y bookings growth was 9% on a constant currency basis. This company was growing bookings at a 40%+ constant currency clip just a handful of quarters ago.
Beat revenue estimates by 2.4% & beat guidance by 2.2%.
Beat daily active user (DAU) estimates by 1.4%.
Monthly active users (MAUs) rose by less than 6% Y/Y.
Missed subscriber estimates by 1.6%.
c. Profits & Margins
Beat 71.2% gross profit margin (GPM) estimates by 180 basis points (bps; 1 basis point = 0.01%).
Gross margin expansion was driven by reductions in per-unit AI costs and timing of AI spend growth?
Beat EBITDA estimates by 14.2% & beat guidance by 13.6%.
Beat $0.75 GAAP EPS estimate by $0.14.
Beat FCF estimate by 32%.
d. Balance Sheet
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Duolingo expects 3.5-4% dilution for 2026. This doesn't include buybacks, which have reduced its share count by 1% since the program began.
$1.1B in cash & equivalents.
No debt.
e. Guidance & Valuation
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