Earnings call transcript: Duolingo’s Q3 2025 earnings soar, stock dips

Duolingo Inc. reported its third-quarter earnings for 2025, showcasing a significant earnings per share (EPS) of $5.95, dramatically surpassing the forecasted $0.759. Despite this strong financial performance, Duolingo’s stock experienced a slight decline of 0.77% in after-hours trading, closing at $262.04. The company also reported revenues of $271.7 million, exceeding expectations of $260.32 million, marking a 4.37% surprise. This continues Duolingo’s impressive 39.5% revenue growth over the last twelve months, according to InvestingPro data.

Key Takeaways

• Duolingo’s EPS exceeded forecasts by a substantial margin.
• Revenue surpassed expectations, driven by strong user growth.
• Stock price dipped slightly despite robust earnings.
• The company projects nearly $1.2 billion in bookings for the year.
• Focus remains on AI-driven educational innovations and user growth.

Company Performance

Duolingo’s performance in Q3 2025 was marked by significant growth, with a reported 33% year-over-year increase in bookings, reaching nearly $1.2 billion for the year. The company’s focus on expanding its user base and enhancing its educational offerings through AI has contributed to this robust performance. Monthly Active Users (MAUs) reached 135 million, with Daily Active Users (DAUs) growing at 36% year-over-year.

Financial Highlights

• Revenue: $271.7 million, up from the forecast of $260.32 million.
• Earnings per share: $5.95, surpassing the forecast of $0.759.
• Adjusted EBITDA margin of 29%.
• Max subscription bookings doubled year-over-year.

Earnings vs. Forecast

Duolingo’s actual EPS of $5.95 was a significant surprise, exceeding the forecast by 683.93%. This result highlights the company’s strong operational performance and effective user growth strategies. The revenue surprise of 4.37% further underscores Duolingo’s ability to outperform market expectations.

Market Reaction

Despite the impressive earnings beat, Duolingo’s stock saw a minor decline of 0.77% in after-hours trading, closing at $262.04. This movement comes as the stock remains within its 52-week range, with a high of $544.93 and a low of $256.63. The slight dip could reflect investor caution or profit-taking following the earnings announcement.

Outlook & Guidance

Looking ahead, Duolingo is focusing on AI-driven educational improvements and aims to achieve billions of users through an enhanced learning experience. The company continues to invest in product innovation and expects sustained user growth, although monetization may progress at a slower pace.

Executive Commentary

CEO Luis Vaughan stated, "We have line of sight to building a product that teaches better than ever before." This commitment to educational excellence is echoed by CFO Matt Scarupa, who remarked, "We’re not afraid to invest. We think we can invest and still operate very profitably."

Risks and Challenges

• Slower monetization could impact short-term financial performance.
• Competition in the educational technology sector remains intense.
• Macroeconomic pressures could affect user spending and growth.
• Regulatory changes in key markets like China could pose challenges.
• Dependence on AI advancements requires continuous innovation.

Q&A

During the earnings call, analysts inquired about Duolingo’s AI strategy and its impact on education. The company emphasized its shift towards user growth and detailed plans for geographic expansion and product improvements, addressing concerns about market saturation and competitive pressures.

Full transcript - Duolingo Inc (DUOL) Q3 2025:

Earnings Call Moderator: Good evening, everyone. Welcome to Duolingo’s third quarter twenty twenty five earnings webcast. Today, after market closed, we released our q three shareholder letter, which you can also find on our website at investors.duolingo.com. Today, we have Luis Vaughan, our cofounder and CEO, and Matt Scarupa, our CFO. Analysts can ask the question by using the raise hand feature.

Please note that this event is being recorded, and all attendees are in listen only mode. As a reminder, we’ll make forward looking statements regarding future events and financial performance, which are subject to material risks and uncertainties, some of which these risks are set forth in our filings with the SEC. These forward looking statements are based on our assumptions that we believe to be reasonable as of today, and we have no obligation to update these statements as a result of new information or future events. Additionally, we’ll present both GAAP and non GAAP financial measures on today’s call. These non GAAP measures are not intended to be considered in isolation from, a substitute for, or superior to our GAAP results, And we encourage you to consider all measures when analyzing our performance.

And now I will turn over to Luis.

Luis Vaughan, Co-founder and CEO, Duolingo: Hi, everyone, and thanks for joining us today. We had a strong q three with solid performance across all metrics, and we’re on track for another exceptional year. More than 50,000,000 people now use Duolingo every day. And we’re guiding to nearly 1,200,000,000 in bookings this year with 33% growth and an adjusted EBITDA margin of 29%. Putting that all together means that we have rapidly scaled our impact while expanding profitability.

And yet, we still feel early in our journey. We believe AI will fundamentally transform education and we have line of sight to building a product that teaches better than ever before. That’s what makes this such an exciting moment for Duolingo. And now now we’ll take your questions.

Q&A Moderator: We will now move to our question and answer session. At this time, if you would like to ask a question, please click on the raise hand button, which can be found on the black bar at the bottom of your screen. You may remove yourself from the queue at any time by lowering your hand. When it is your turn, you will receive a message on your screen asking to be promoted to panelist. Please accept, wait a moment, and once you have been promoted to panelist, you’ll hear your name called, and you may unmute your video and audio to ask your question.

Your Zoom application may disappear momentarily, and this is expected. Your window will reappear. We’re allowing analysts one relative follow-up to their main question. We will now pause a moment for the team to gather and assemble the queue. Our first question will be coming from Brian Smilek with JPMorgan.

Please unmute your line and ask your question.

Brian Smilek, Analyst, JPMorgan: Great. Thanks for taking my questions. Luis, just to start, can you just help us better understand the underlying drivers of DAU growth into 4Q and engagement overall? And how close do you think you are to getting back on track in terms of marketing in The US? I know you mentioned growing impression volume, but is that starting to translate to user growth now, or how should we think about that into the fourth quarter?

Luis Vaughan, Co-founder and CEO, Duolingo: Yeah. Great question, Ryan. Thank you. So we just posted 36% year over year growth for for q three, and and we’re happy with that. There’s puts and takes of of how we got there.

I mean, on on the positive side, we have things like, the Luckin partnership that we just, that we talked about in in the shareholder letter, which which helped us, grow users in Asia quite a bit. We also had a number of product improvements that helped with retention, so that that was great. On the other side, just like we said last time, we paused, all the unhinged posts in our social media for a bit because we were listening to our to our community and trying to build brand love. And when we don’t post on hinge things, that, you know, basically, our posts were much less likely to go viral and, like, because of that, that did have an an impact on DAU growth. The good news is that over the last few weeks, we have started the unhinged posts again in our social media accounts.

And, while it hasn’t gotten all the way to the peak where it was, we’ve seen a lot of recovery. So that that’s that’s that’s really starting to show up, and and we do expect that to affect DAUs positively. In terms of q four for DAUs, we expect some amount of deceleration from q three, but we you know, we’re we’re pretty happy where with where it has stabilized. What I’ll say we’re not guiding to q four DAUs, but what I’ll say is that September and October were both at around 30% year over year, growth for for for DAUs, and that’s comping a a pretty strong quarter last quarter last year.

Brian Smilek, Analyst, JPMorgan: Great. That’s super helpful. And I guess, Luis, you also mentioned three core areas, monetization, user growth, and just teaching efficacy overall. Can you just elaborate on, you know, really what’s driving the decision to shift investments towards Longview? Is it the AI opportunity?

Or, you know, how should we just think about this impacting the bookings growth? I know you’ve obviously talked to 25% plus as your North Star years ago. So just curious, you know, how do we get back there over time?

Luis Vaughan, Co-founder and CEO, Duolingo: Yeah. I mean, look. We’re, like like you said, and like I said in the shareholder letter, there’s there’s a huge opportunity right now. We see a huge opportunity. Over the next few years, education and the way people learn, are they’re going to change fundamentally.

And and it’s because of AI. And also because of AI, we see we have line of sight now to create an app that can teach really, really well much better than anything that humanity has seen before. As good as a as a human tutor, but that is also more engaging. And if we’re able to do that you know, right now, we have I don’t know. We just posted a 135,000,000, monthly active users.

If we’re able to do an app that teaches just that well, way much much better than we have now, we would be talking about billions of users that we have, and that’s what we wanna shoot for here. So this is why we are we are, investing in the long term. And and what that look like looks like is that we are putting relative more relative investment in things like teaching better, which, you know, teaching better if if we teach better, what that does is that that helps user growth. But there’s a lag. You know, just whenever you improve your courses, users do grow, but it takes a while for that to happen.

And then user growth, there’s a lag to get to monetization because people take some time to subscribe. So this is kind of a a long term thing, but we’re we’re we’re we’re very bullish on this, and this is why we’re we’re we’re doing that. And and the goal here is because the opportunity is so large. The goal here is to be growing DAUs fast, for a for a very long time.

Brian Smilek, Analyst, JPMorgan: Great. Thank you, Louis and Matt.

Matt Scarupa, CFO, Duolingo: Alright.

Q&A Moderator: Our next question will come from Nathan Feather with Morgan Stanley. Please mute your, unmute your line and ask your question.

Nathan Feather, Analyst, Morgan Stanley: Hey, everyone, and thanks for taking the question. You know, given the scale of the opportunity ahead that you’re talking to, is the focus on greater, you know, long term prioritization a durable shift in strategy that we should expect to continue, or would you plan to return to the current prioritization mix at some point? And then in connection with that focus, should we expect the pressure on bookings that you’re seeing in 04/02 to continue into next year with the durability of that shift? Thank you.

Luis Vaughan, Co-founder and CEO, Duolingo: Well okay. So the for it’s gonna be years until we get to a point where we have an app that I think is, you know, just the best possible way to learn, you know, any major subject. So we we will be investing for a while, and that that’s important to know. I should say, though, you know, we’re not really guiding, for example, to to to next year, but we’re very excited about a lot of the numb of the initiatives that we’re gonna put out in the product for next year. We’re gonna have much better, video calls that are that are for beginners.

It’s something we’re calling guided video calls. The app is gonna be a lot more social. We’re gonna have all the you know, right now, the the math course only has a little bit of content. In the next few months, we’re gonna have the all of the common core k through 12 content in the math. Our chess course is gonna have player versus player, and it’s it’s it’s doing super well and growing really fast.

We’re gonna have a full revamp of our of our music course. And for the top nine languages that we teach, we’re gonna be able to teach from zero to Duolingo score one thirty, which is where you can get a job in that language. So there’s just a lot of, a lot of things that we’re very excited about. And I, you know, I don’t know, Matt, if you have something to add to that.

Matt Scarupa, CFO, Duolingo: Yeah. I think, Nathan, I wanna put it back in the context of kind of what we’ve said before. So we’ve talked to you all and our investors for a long time about wanting to maximize, platform LTV. And what Luis is describing is a, change of, you know, small proportion right now that is going to help us grow users for a long time, get users to do more lessons, learn better, spend more time on the app, and in general, be more engaged Duolingo users. And we think that if we do that and we do that effectively, we’ll both grow users for a long time, and we’ll increase platform LTV for a long time.

So I think that will we’re down to bookings and the financials ultimately as well. I think, you know, there’s a we guided to a really strong 2025. There was a you know? So we think that this can exist, like it has strong financial performance. And this is just a balancing act that we’ve always done, and we’re telling you all that we wanna, make sure that at the present moment, we’re balancing it so that we can grow really rapidly for a long time in the future.

Unidentified Speaker: Very helpful. Thank you.

Q&A Moderator: Our next question will come from Wyatt Swanson with D. A. Davidson and Company. Please unmute your audio and video and ask your question.

Wyatt Swanson, Analyst, D.A. Davidson and Company: Hey, guys. Thanks for the question. I’d love to hear a bit more about how the new chess course is progressing. I think at Duocon, you mentioned millions of daily active users. On that front, do you see any differences in engagement or retention for users on the chess course versus your core language courses?

And as it relates to that, kinda curious about your new PVP offering. Can you talk about, like, when you expect that to be fully rolled out?

Luis Vaughan, Co-founder and CEO, Duolingo: Yeah. So needless to say, we’re very excited about chess. It is the fastest growing course that we had. It’s it’s growing much faster than math and music and faster than the way originally languages grew. It’s true.

We have millions of users. We’re not saying exactly how many, but it is you know, it’s already surpassed math and music. The retention of chess users, you know, it hasn’t been around for all that long. Our chess course has been around for three, four months. But so far from what we can measure over the last three to four months is slightly higher than language learning.

And so we’re very happy with that. We also as as you mentioned, we started rolling out PVP. That means player versus player. So people being able to play with other people. At the moment, 50% of users on on iPhones, on on iOS can can see it.

It’s not yet on Android, but it’s gonna come out on Android pretty soon. So we expect that within the next, you know, few weeks and and small few weeks slash small number of months, every every person that has the Duolingo app will be able to do PvP chess. And, you know, over the next year, we just we’d expect quite a bit of growth from chess, and I’m very happy with it.

Wyatt Swanson, Analyst, D.A. Davidson and Company: Great. Thanks. And then just one quick follow-up. What does prioritization of user growth instead of monetization look like? And how should I think about the actual changes in the app?

Luis Vaughan, Co-founder and CEO, Duolingo: Yeah. I’ll give you an example. That’s just so so okay. We’ve always had to, make trade offs between whenever we run an experiment. Some experiments improve all metrics.

Great. That’s an easy call. Just launch it because it improves all metrics, and that happens. But there are times when experiments improve one metric but hurt another. I’ll give you a a fictitious example.

If right now, a free user free users get 25 energy units at the beginning of the day, and every exercise that they do spends one unit. If we were to do an experiment that decreases that from 25 to say 24, that’s one fewer unit of of of energy per day. We know that would make us more money. That it’s just us because more people run out of energy, so more people end up, you know, wanting to pay to subscribe. However, we also know that would decrease daily active users because it would frustrate some of the users.

We’ve always had to make decisions about, you know, different judgment calls about this. What we mean is that what we you know, the change that we are doing is that we are going to be prioritizing user growth over monetization in this type of of judgment call. So in the fictitious experiment that I just, gave you, we would not launch that experiment going from ’25 to 24 energy units even if it meant, you know, quite a bit of bookings gains if it has a real hit on daily active users. That’s that’s the type of stuff that that that we’re that we’re doing now. And, again, just to remind you that the reason we’re doing this is because the opportunity ahead is so big that, you know, it’s it’s just it’s just good for us to to to grow, you know, fast for a long period of time.

Matt Scarupa, CFO, Duolingo: There you go. Thanks, guys. Thanks, Wyatt.

Q&A Moderator: Your next question will come from Ralph Schackart with William Blair. Please unmute your audio video and ask your question.

Ralph Schackart, Analyst, William Blair: Great. Good evening, Luis and Matt. Luis and Matt, kinda going back to, you know, the line of questioning here. I guess maybe, you know, question is, like, you know, why now? What signals are you seeing on the shift or maybe this, you know, the same shift to focus more on growth over near near term profitability?

Is AI advancements, you know, kind of what’s prompting this? And then can you give us a sense of, you know, the duration of this, pivot or or shift? Is this something that’s gonna take, I don’t know, all through 2026? Is it more short term in nature? Anything you could add there would be great.

Thank you.

Luis Vaughan, Co-founder and CEO, Duolingo: Great. As as to why now, this I mean, it’s a great question. The reality is that over the last couple of years, it has just become progressively clearer and clearer that we are in a unique point in time, with education in terms of how education is gonna happen in the world and also how well we can teach at Duolingo. We just see it, in our own metrics in, you know, what how how fast we can put out content with things like video call. Do we just see how how much it is improving every every month?

And so that just kinda has been coming for for for a while. And what has happened is that over the over the last month or two, I’ve really rallied the company towards this this shift. And, really, it’s like, okay. It’s not like it was one day where I woke up and decided, oh, let’s do that. It’s just, you know, we really rallied the company to say, look.

Opportunity is huge for us. Let’s prioritize making sure that we can grow for a long period of time and also making, an app that can teach really better than anything that we’ve seen before. As to how long this is going to take, this is you know, it’s an interesting question. I mean, I think you’re asking something to the effect of, like, well, is this gonna hurt bookings, and is this gonna hurt bookings forever? You know, I I don’t think that’s the case.

It’s it’s just it’s going to take some time for for us to see, results financial results over these long term investments that we’re doing. But we’re going to be acting for a while like there is a humongous opportunity because there is one and, you know, until we get it. But but I think we’re going to be seeing good results from this even, you know, much much sooner than that. So it it’s not like our our you know, we’re saying, oh, throw throw away all the bookings or anything like that.

Matt Scarupa, CFO, Duolingo: Yeah. I think the only thing I’d add to that, Ralph, is that I mean, you’ve seen us navigate this trade off over the past three years as well. Users have grown 55% per year on average over the past three years, and bookings has grown about 45%. And all that while, we were making similar trade offs, and now we’re just slightly, focusing a little bit different as we navigate those. So it’s it’s not that we haven’t been making any of them.

And you’ve seen that, like, in the in the rest of the year guide and the q four guide, there was a small impact to this. And, you know, it’s not, you know, it’s not that big. And so would we expect some of that to persist into 2026? Sure. But, again, I think as a a general framing of this, it’s a it’s a relatively small, you know, financial impact from from this kind of reprioritization.

And we think that that’s worth it because as Luis said, it’s a huge opportunity. So the risk reward seems right.

Ralph Schackart, Analyst, William Blair: Okay. Great. Thanks, Luis. Thanks, Matt.

Q&A Moderator: Your next question will come from Alex Sklar with Raymond James. Please unmute your audio, video, and ask your question.

Luis Vaughan, Co-founder and CEO, Duolingo: Hi, Alex.

Alex Sklar, Analyst, Raymond James: Hey, guys. Thanks for taking the question. Just following up on on Wyatt’s question and maybe Ralph’s your remarks to Ralph’s at the end there. Just in terms of framing how meaningful some of these changes might be, is it as simple as maybe focusing a little bit less on paid conversion just to improve the freemium experience today, or or are there kind of broader thoughts about maybe moving video call down into some of the the lower packages? And then I’ve got a follow-up.

Luis Vaughan, Co-founder and CEO, Duolingo: Okay. So a way to see this is what you said first. It is it is, you know, as simple as in in some of the experiments, which, by the way, not every experiment. Many experiments we run, you know, just improve on metrics. This is good.

In some of the experiments where judgment calls are needed, we’re we’re gonna shift the balance a little bit more towards user growth. It’s not a humongous change, but it is a change. In terms of are we gonna move video call to other tiers, etcetera, that is likely to happen. At least we’re likely to attempt to do that, but that is unrelated to this. We were anyways you know, we’re always thinking about moving different features, in the different in the different plans, and we and we’ll test that.

It it may be the case that that I don’t know a video call, but it may be the case that some of the max features are better in super or even in the free tier, and we’ll test all of that. And while we test that, we’re trying to optimize lifetime value of our, like, platform LTV. We’re trying to optimize for that. So, you know, we we may see us test stuff like that.

Matt Scarupa, CFO, Duolingo: Okay. And, Alex, I’m glad you said the free to pay conversion because that’s exactly how, like, it really manifests in the business. And I just wanna make sure we’re clear on this. So for example, you know, Luis said over the past couple months, he mobilized the company. You know, in September, we saw some of this, and what it looked like was slightly lower free to pay conversion, but that free to pay conversion was still growing year over year.

So it was still good free to pay conversion. It was just on the margin. It was slightly lower. So I think that’s an example as you think about the the financial impact. You’re right to point out that that’s how it would, flow through.

Alex Sklar, Analyst, Raymond James: Alright. That that’s great color there. And maybe, for a follow-up, Luis, just on the last call, you brought up this idea on video call about average number of words spoken per session. And, you know, that was kind of a a new metric you were gonna start testing towards. What have you learned so far now that you’ve kind of been optimizing for that metric?

And then what what’s kind of the timeline to get some of the changes into the product as a result? Thanks.

Luis Vaughan, Co-founder and CEO, Duolingo: Thank you for asking that question. So, yes, this is actually a great metric, and we’ve managed to move it. This is this is important to know about our company. Whenever we fixate on a metric, we are very good at moving it. And this particular metric, have been moving at, you know, it’s it’s it’s more than doubled this year in terms of average number of words spoken per max subscriber.

And so we’re we’re we’re very happy with that. In terms of changes to video call that you’ll see coming soon, one that I’m very excited about is video call at the moment is a is a monolingual experience in the language that you’re learning. So if you’re learning Spanish, it’s all in Spanish. That’s great for practicing Spanish, but for beginner users, it’s it’s too hard. If you if you only know 20 words, it’s very hard for you to have a full conversation just in Spanish.

So the thing that we’re testing now is these things we’re calling guided video calls, which are basically bilingual. So it’s if you’re an English speaker learning Spanish, this would be part English, part in Spanish, and and and it’s a lot easier for beginner users. We’re seeing that when we give that to beginner users, they actually speak more words per call because they’re actually able to do something. And so we think that this is gonna, really help with max conversion. By the way, I should say two things.

Most of our users and certainly most of our max subscribers are beginner users. And so we really think this will help with mass conversion. The other thing that I’ll say is that these guided vehicles, we’re not advertising them yet, or we’re not using them for converting users into max subscription yet. So we we’ve put them out, and the next step is kind of to tell, nonsubscribers that these exist so that, we can get them to subscribe. So we’re we’re pretty excited about what that can do to Max.

Alex Sklar, Analyst, Raymond James: Alright. Great. Thank you both.

Luis Vaughan, Co-founder and CEO, Duolingo: Thank you.

Q&A Moderator: Your next question will come from Miguel Arounian with Citi. Please unmute your audiovideo and ask your question.

Luis Vaughan, Co-founder and CEO, Duolingo0: Hey, good afternoon guys. Sorry for the background. Just on, on on on AI and making education sort of, better than ever, you you the way you’re talking about things. Can you just does that accelerate your your road map in terms of, adding new language learning modules? I know within the the ones that you’re that you currently have, but moving into new subjects.

And, you know, what what is it about that what’s changing right now around AI that’s letting you do that, today?

Luis Vaughan, Co-founder and CEO, Duolingo: Yeah. The types of things you will see. It definitely accelerates our road map in, more coverage of languages. That doesn’t mean new languages. The reality is languages it’s very lopsided what languages people wanna learn.

You know, we now teach 40 languages. The the rest that we don’t teach is very little demand for them. But the top nine languages that we teach, these are kinda like the Spanish and English and French and German and Italian, like the the big languages that people want to learn. The top nine account for the vast majority of our users. And what you’ll see us do is you’ll see us go faster in terms of, adding content to these top nine languages.

And and right now, for most of them, we don’t get you to the place where we wanna get you, which is the a Duolingo score of one thirty, which is equivalent to CFR level of b two, which is where you can get a knowledge job in that language. You will see that over the next few months, we’re going to be adding content that can do that for all the top nine languages. The other thing that you’ll see is you’ll see us, just add a lot more, different modules in in in the way we teach languages that, that are just a lot smarter at teaching you. I mean, they’re gonna adapt a lot better to you. And you’re also going to see us, just use a lot more things that use AI in the background to, to allow for many more free responses so so that, you know, it adapts a lot more to you.

In terms of we’re gonna also be using AI for other subjects. We’re using it, pretty heavily for math, for getting a lot more content out there. So we’re gonna do that. In terms of adding other subjects, at the moment, we’re not working on any other subjects. I’m not gonna say that we’re not gonna add other subjects next year.

That may be the case. You know, like you saw with chess, it took us nine months from idea to actually launching. So it is possible that we’ll add other subjects next next year, although a little unlikely, but it is possible. But at the moment, we’re not working on any other subjects.

Luis Vaughan, Co-founder and CEO, Duolingo0: Okay. And then maybe another sort of another broad one on on AI. And can you just talk about what you’re seeing Gross margins coming in a little better than expected. And, you know, is that coming coming in faster than than you think?

And, you know, how is that impacting the one of the big questions we get is just generally on the competitive landscape and how AI is, you know, evolving that. What what are you seeing there? Thanks.

Luis Vaughan, Co-founder and CEO, Duolingo: Okay. In terms of cost, look. Costs are coming down. They’ve come down just without us doing anything. Costs have are are coming down.

For us, this has not been the top priority, optimizing costs. At the moment, the the top priority is just making the best possible experience for our users that teach us the best and that is the most engaging. Every now and then, if we see low hanging fruit, we will in terms of optimizing cost, we will do it. But it’s not like we have all of our people trying to optimize cost. And the reason we can do that is because most of our AI features, at least the ones that cost the most money, are behind Duolingo Max.

And because the price of that is, you know, is is high enough that we’re you know, for us, the usage of AI is is anyways profitable. So we’re that’s why we’re not going not trying to optimize the cost on that. You know, in terms of the competitive lands landscape, you know, I I think people, you know, people say things like the the two things that people say about the competitive landscape with AI are, number one, why would anybody wanna learn a language with Duolingo when you can just learn it with chat GPT? Okay. I you know, we’re not particularly worried about that.

You know, the we’ve said it before. The main thing that that we do really well, not only do we teach well, but the main thing that we do really well is keep people engaged. And in order to learn a language, you need to be engaged for years. Really, takes years to learn a language coming every day, and we need to keep you engaged actually doing it. And not only that, we also need to have curriculum for years for you to do that.

So, you know, with ChatGPT, can go there and can ask it to teach you a few words here and there, but, you know, it’s not like you can have really curriculum for years, that that that teach that. So we’re not particularly worried about that aspect. And then the other thing that people, you know, have said that they’re worried about is, oh, well, nobody’s gonna wanna learn a language because, you know, the we’re gonna have simultaneous language translation and also not worried about that. You know, I I believe in 100% of the Google IO conferences over the last ten years, they have showcased simultaneous language translation. They do it every single year, and it’s good.

It works. But this has been happening for the last ten years, and we have not seen the desire to learn a language go down at all. In fact, it has come up. And I think the biggest reason for that is because if you look at our users, they fall into two big categories. One big bucket is people who are learning a language as a hobby.

It kinda doesn’t matter whether a computer can do that. It’s because they’re the same with chess, by the way. Computers are way better than humans at chess, but still, you know, we have millions of people wanting to learn chess. That’s so it doesn’t matter if it’s a hobby. The other big group of people that are learning a language with us are people who are learning English, and they actually wanna learn English.

Like, that is, you know, for them, you know, being able to have, a phone that they have to hold out, it just kinda that’s not what they what they wanna do. So we just we’re not particularly worried about the that. It just so happens that, people like to tweet about that. We’re not worried about it.

Matt Scarupa, CFO, Duolingo: Yeah. Great. Thank you. Just a couple points on this since we, the AI cost and and Max. So just just to make sure everyone’s aware, you know, Max is now 9% of our subscribers.

It, doubled in q three year over year in terms of bookings. So, you know, it’s clearly, doing well in that regard. It’s underperforming our lofty expectations for it, though. We expected you know, a bit more than that. And so that’s why Luis is talking about, guided calls and all the other things we’re gonna do to, help it achieve what we we think it can achieve.

And then finally, because AI costs have come down, though, I don’t want folks to take away that we’re not willing to invest. As as Luis is talking about the seminal moment we’re in to go attack, you know, a very large opportunity, you know, we’re, we’ve shown that we can grow to this scale incredibly profitably. You know, we’re guiding to a 29% adjusted EBITDA margin for the year, which is very, very close to our, you know, long term adjusted EBITDA margin range. And so as we do that, we are, not gonna be afraid to invest in innovation. And so we’re, you know, we’re gonna make those investments over time.

Luis Vaughan, Co-founder and CEO, Duolingo0: Thanks, guys.

Q&A Moderator: Your next question will come from Mark Mahaney with Evercore ISI. Please unmute your audio video and ask your question.

Luis Vaughan, Co-founder and CEO, Duolingo1: Okay. A couple of things I wanted to go through. One, I know you had some price actions or price increases earlier in the year. Have you what what kind of reactions have you seen to those? Secondly, I think you were gonna hold off on doing any other I think it was I think it was just on, like, new new people coming in on the standard plan.

But your thoughts on rolling out other price increases. I don’t think you’re gonna do that now given your your prioritization of user growth in, in the fourth quarter and beyond, but just talk about that. And then third, just so just so we’re clear on the the deceleration, in bookings and revenue growth in q four is largely due to the fact that you’re gonna sort of slow down the conversion rate from, from free to paid and really just focus on user growth. Just wanna make sure that that’s the main driver, and, it’s not like you’re seeing a reduction in retention amongst paid subs, higher churn amongst paid subs possibly because of the price increase. Thank you.

Luis Vaughan, Co-founder and CEO, Duolingo: I mean, I can take some of those. I’ll I’ll take the last one. Yes. The the the the the change in q four is is is pretty much because of the shift to go to longer term initiatives, and and that means user growth. And, also, spending some of our some of our not only are we prioritizing user growth, we’re also spending relatively more effort shifting some effort to teaching better, which, you know, we’re taking it some of that from from our our monetization efforts.

So that’s that’s that’s basically what you’re seeing. And, you know, it’s not like a humongous thing, but it is it is it is a shift. You know, in terms of price increases, you’ll see us you we’ll be testing prices. We’ll be we’ll be testing all kinds of things, and and we we’ll see us launch the things that we think are good for the whole platform. I don’t know exactly what’s going to win, but you’ll see us test prices.

And by that, I mean, up and down. We’ll we’ll probably test some prices much lower, or a package. And this I’m I’m I’m speaking about things that we we may do, but I I don’t know if we’ll end up doing them if if we don’t like the results. We’ll we’ll probably do a package that is, like, half price, that is, like, you know, super light. That’s the type of stuff that we you you may see us do.

Matt Scarupa, CFO, Duolingo: Yeah. And, Mark, just to round it out, I think, two points. One is, you know, we’ve talked a lot about, taking price up as a price point. Every now and again, we do that. Luis just said we’re gonna continue to experiment with with that, and that will continue to happen.

ARPU, has gone up this year every quarter, kinda mid single digits. That’s also reflected in the guide, and that’s mainly come more from max than it has from price point, changes. I will say that, you know, we did take pricing at at various times over the past little bit, and that does influence our ability to discount during our one and only discount of the year. So, again, if you have a higher price, you can, run different experiments with the level of discounting. And, you know, one of the things that, happens every q four when we talk about it is we talk about the ability in our q four bookings guide because q four is our most variable quarter because we run this New Year’s promotion.

This year, we did energy, which is a core pricing mechanic, and we have never run a New Year’s promo with energy. And so we’re gonna be experimenting with all sorts of things as we get towards the end of the year with the promo on how we run it, how we show it and display it, when we run it, all of these type of things. So that is also, baked in here, in the guide.

Brian Smilek, Analyst, JPMorgan: Okay. Thank you, Matt. Thank you, Luis.

Alex Sklar, Analyst, Raymond James: Thank you, Mark.

Q&A Moderator: Your next question will come from Ryan MacDonald with Needham and Company. Please unmute your audio, video, and ask your question.

Luis Vaughan, Co-founder and CEO, Duolingo2: Hi. Thanks for taking my questions. Luis, maybe stick with me a little bit on this question. I apologize in advance. But how learners people learn differs by generation and by demographic.

I think we’ve already seen that with sort of advanced English earners require needing different requirements from Duolingo than maybe the traditional core base. So can you talk about how or if you are going to be targeting certain demographics, you know, Gen z learns or generations Gen z seemingly learning different than millennials with with some of these product updates? And then how should we think about the metrics that, you know, you will be looking to towards to prove out this works? Because, obviously, user growth can be beneficial can be benefited by some changes, but that might not always mean that that sticky user growth where MAUs might not always convert to DAUs. So, again, long winded question.

I apologize. But how are you how are you targeting? Or what what are you targeting in terms of these changes, and then how are you measuring success?

Luis Vaughan, Co-founder and CEO, Duolingo: Yeah. I mean, you asked about you know, it it’s true. Some people learn different than others. That that is that that is true. But you would be surprised that, there are a lot more similarities than differences.

The reality is, I mean, you know, this is not just generations, also, geographically. I mean, we always hear these things about like, oh, well, people in that country do that or people in that country do that. What we have found time and again is that not only a

Luis Vaughan, Co-founder and CEO, Duolingo1: lot

Luis Vaughan, Co-founder and CEO, Duolingo: of people learn pretty similarly, but also the things that get people to use the product more are pretty similar across the geographies. I mean, like like a streak, it works in every country, or it just so there’s a lot of similarities. So, you know, at the moment, you’re gonna see us, just make a better course for the masses. That’s what we’re gonna be spending most of our effort on. Of course, the courses do adapt to each individual.

And probably one of the places where where there’s most adaptation that is needed the pace of learning really is different than it it just happens that as you get older, you you get slower. That is just that’s noncontroversial. As somebody who’s getting older and slower, I can tell you that. So the pace but that’s very easy to adapt. We’re just we we really do just, you know, adapt to the pace pretty easily, and we’ve been doing that for a while.

Now in terms of the metrics, that we’re gonna be looking for, certainly, user growth is an important metric that we’re gonna be that we’re really keyed in on right now, probably the most important metric in the company. So we’re gonna be looking at that a lot. Now the thing about improvements in teaching, and this is what I was saying before, they don’t translate to user growth immediately. Because, you know, if you if you improve a course and it’s much better, over time, maybe people are starting feeling that they’re learning a little better, so there’s more retention, or maybe there’s more word-of-mouth because the people are saying, like, it really worked for me. Let me tell you about it.

So it does translate. We know that improvements in teaching do translate to user growth, but it’s not immediate. And this is kind of what we mean by long term. You know, what we’re gonna be looking at that, there are things like just improvements in learning outcomes. We can measure, how well people are learning.

And the good news is that really almost every year since we started measuring that, every year Duolingo is actually teaching better than the year before. We’re probably going to see improvements in how well we teach move faster than in the past because we are taking it you know, we’re we’re we’re spending more effort on it. So we’re probably gonna be seeing that. And and our hypothesis, but it is a hypothesis that I very much believe in, is that that will translate to user growth. It’s just not going to be linear or quick.

Luis Vaughan, Co-founder and CEO, Duolingo2: Makes sense. Okay. And and and I’m also older and slower, Luis, so no no, no problems there.

Luis Vaughan, Co-founder and CEO, Duolingo: Aren’t we all? Aren’t we all?

Matt Scarupa, CFO, Duolingo: Exactly. We all are.

Luis Vaughan, Co-founder and CEO, Duolingo: But wiser but wiser.

Q&A Moderator: That’s right.

Luis Vaughan, Co-founder and CEO, Duolingo2: We hope. We hope. Matt, I know you probably don’t wanna obviously get into a conversation about 2026 guidance or anything like that, but obviously a lot of course investments, a lot of content investments. Can you just give us a sense of, like, the magnitude we should expect here? And and, like, is there an expect expectation still that you can continue to expand EBITDA margins even through this process as we think over the next couple of years?

Matt Scarupa, CFO, Duolingo: Yeah. No. I appreciate, Ryan. And though even though you asked very in a guide to 2026 on this call, we’ll do that in February. But I will you know, and I I mentioned this on earlier question.

We have made incredible progress towards our long term margin while we’ve been growing the platform to a scale that has a 135,000,000 monthly actives, and we guided to nearly 1,200,000,000 of bookings this year. So we’ve everyone that we can scale the business, operate with discipline, and expand margins. And that’s great, and we wanna continue to do that. And we’re going to continue to operate with discipline and grow the business, along the lines of what Luis is talking about, hopefully, to a whole other order of magnitude. While we do that, though, we’re not afraid to invest.

We think we can invest and still operate very prop profitably, but, we are not, going to prioritize, linear margin expansion from from here when we should be we view the, opportunity as so big so we can prioritize investing. That’s how we think about it.

Luis Vaughan, Co-founder and CEO, Duolingo2: Got it. Really helpful. Thanks for the time.

Q&A Moderator: Your next question will come from Andrew Boone with Citizens. Please unmute your audio video and ask your question.

Alex Sklar, Analyst, Raymond James: So much for

Luis Vaughan, Co-founder and CEO, Duolingo3: thanks for taking the questions. I’d love to talk about kind of a topic that we’ve revisited maybe three or two or three years ago, right, in terms of advanced English learners and, basically, the improvement of efficacy driving those learners to the platform and kind of, like, whether AI has accelerated that and whether some of that thesis came to fruition and whether any of the slowdown in growth is impacting those types of learners, or or is there anything else you can kinda speak to in terms of that cohort?

Luis Vaughan, Co-founder and CEO, Duolingo: Yeah. But as as we mentioned, the you know, I I don’t know whenever it was. A couple of years ago, we started talking about this. English learning is a major opportunity. I mean, there’s 80% of the people who are learning a language in the world are learning English.

And so we started we started investing in in teaching better for English learners. We have done that. We’ve done we’ve done a a major launch here throughout this year. We not all of our English courses now cover up until up until Duolingo score one thirty, which is the place where you can get a job, a knowledge job in that language. So we have that, and we’ve been improving how well people learn English.

And we are seeing that in the metrics. Our our number of English learners and certainly our number of advanced English learners has been growing steadily. The other thing that I’ll say is that, the regions at the moment that are growing fastest are English learning regions. And so, you know, we’re seeing that, you know, Asia is a really good example that, you know, there’s we are certainly still posting or have never stopped posting, unhinged content in Asia, you know, kind of on the social media side, but also, we’re just getting a lot more users there. So that that’s that’s the parts that are growing the fastest.

So we’re I’m I’m I’m pretty happy with the progress there. We did mention that it was going to take a while, and it is taking a while, for really the word to get out, that Duolingo is very, very good at advanced English. And so while I believe that we’ve made good progress in that, it was still not there yet. As in this is this is an a thing that even throughout next year, we’re gonna be seeing an increase in the number of advanced English learners that we’re going to have.

Luis Vaughan, Co-founder and CEO, Duolingo3: And then can we just get an update in terms of family plan? I know there were a bunch of features that you guys were adding and then just broader adoption. Where are we today and and where can that go? Thanks, guys.

Matt Scarupa, CFO, Duolingo: Yep. Yeah. In terms of, broader adoption, the family plan continues to do well. I think it was about 29% of subscriber the most recent quarter, so it’s it’s grown it’s grown nicely. And I think there’s a bunch of reason to believe that it’s gonna continue to grow nicely.

For example, last year you know, in q four of last year, you know, really everything basically went right, which is why we grew so fast last year, I think 42% year over year last year. Part of that was that the family plan during New Year’s promo did really well. So there’s, you know, there’s reasons to believe that we still have room to run-in family plan, Andrew. Thank you.

Q&A Moderator: Your next question will come from Justin Patterson with KeyBanc. Please unmute your audio video and ask your question.

Luis Vaughan, Co-founder and CEO, Duolingo: Hi, Justin. Good afternoon.

Luis Vaughan, Co-founder and CEO, Duolingo4: You know, I’d love to hear a little bit more about just learnings from energy. There was a lot of optimism on this, on this product, you know, roughly ninety days or so ago. So would love to hear how just that has evolved and might be playing into some of the the trends we’re talking about on this quarter. And then, you know, when we think about just the arc of reacceleration here, much how of this is really dependent on getting the product right versus really really tapping into that cultural relevance that Duolingo had earlier this year and then, you know, encountered that speed bump around the the social backlash? Thanks so much.

Luis Vaughan, Co-founder and CEO, Duolingo: Okay. So energy. We’re very happy with energy. It did exactly what we wanted it to do. It increased bookings and also increased DAUs.

So that was good. The kind of the way it went is we launched all of energy for I or iOS users first, then, for Android. We we rolled it out over over a span of a couple of months for each one of these platforms. By now, it is done. We have, I don’t know.

It was a couple of weeks ago. We have every single person who has updated the app in the last, I don’t know, six to nine months, has energy in in there. And we’re very happy because it it did exactly what we expected it to do, and and it’s been launched. Now in terms of you know, you asked a question about product versus kind of marketing. Look.

Both are important for us to grow, product and marketing. The the the longer term thing is if we have a product that is extremely retentive, that also teaches really well, That’s the best thing you can do, and that’s where we spend most of our efforts. And we’re gonna continue spending most of our efforts on that. Yes. The cultural relevance matters, but, you know, to me, that’s that’s just a an accelerant to something that that is, you know, where the main dish is is the product.

In terms of, you know, kind of being culturally relevant, etcetera, we really are seeing a a complete pickup on that. I don’t know if you’ve watched, for example, the things that happened in Halloween. I mean, there were throughout the world, certainly, there were, you know, thousands of Halloween costumes that were just Duolingo costumes. So we we see that we’re seeing that quite a bit. And so we’re we’re we’re not particularly worried about that.

Matt Scarupa, CFO, Duolingo: Yeah. And the only thing I’d add to that, Justin, is, there is a you know, we talked about it on the last call, which is we’ve had some success particularly in The US spending a little bit more on actual marketing, seeing a nice return in The US in particular. And so, that happened in q three, and we’re gonna you know, it’s it’s relatively small dollars, but we’re gonna continue that into q four because, you know, The US growth, as we’ve talked about before, is slower than the rest of the world, in part because of the rest of the world, you know, is growing really rapidly. But, you know, that continues. And so that’s just the other element we’d add to the, to the marketing mix.

Luis Vaughan, Co-founder and CEO, Duolingo4: Alright. Thank you both.

Q&A Moderator: Our next question will come from Shweta Khajuria with Wolfe. Please unmute your audio video and ask your question.

Luis Vaughan, Co-founder and CEO, Duolingo: Thanks, Shweta.

Luis Vaughan, Co-founder and CEO, Duolingo5: Hi, Luis. Hi, Matt. Thanks for taking my question. I actually have two. First one is on China.

If you could please talk about how engagement has trended in China through the quarter, through the year, and what your expectations are, what you’re seeing there, and even if you could comment on likelihood of MAX there either this year or next. And then second is on renewal rates at MAX in particular. Could you please talk about how that trended in q three so far and what your expectations are? Thank you.

Luis Vaughan, Co-founder and CEO, Duolingo: Yeah. Okay. Let me take the China one, and then I’ll let Matt take the the renewal rates one.

Alex Sklar, Analyst, Raymond James: Sure.

Luis Vaughan, Co-founder and CEO, Duolingo: Okay. China. We are, of course, doing very well in China. I believe it’s our fastest growing country. It is our second largest country in terms of DAUs and growing fast.

It’s still not, you know, that large of a fraction of our business. It’s about 6% of our business at the moment, but it is growing and it is growing very fast. And and and the the engagement is very high. Retention is high. Max in China is being tested at the moment.

And so we we have, the permission to test it in in, you know, it’s China because of this as an LLM, you need to, get permission to test this. So it is being tested, and so this is going to this is going to launch in in some number of weeks or months. It’s hard for me to tell you exactly because it does depend on approvals, but it is it it’s moved along pretty well. So, you know, what what I’ll say at the very high level about China is that it’s a pretty major opportunity for us, but, of course, China comes with a risk in that. You know, there’s geopolitics, etcetera.

So the way we’re treating it is we’re not spending a crazy amount, for example, in marketing in China. We’re spending a very modest amount there, but we just happen to be growing quite a bit. So it’s nice, and it’s a really nice opportunity. But if at any point in time something happens, you know, we just didn’t end up investing all that much there. That’s kinda how we’re treating it.

And then I’ll I’ll let Matt talk about max renewals.

Matt Scarupa, CFO, Duolingo: Yeah. So just to put it in context, max renewals, you know, are important, but the broader I think there was a question earlier around broader platform retention. That remains strong. You know, no real changes in that. And then on max in particular, we mentioned last call that we were gonna start to see in q three and then in q four larger cohorts come through the max renewal cycle.

And what we saw is that max right now, again, it’s they’re still small as they’ve been ramping up, but was renewing slightly better than super. But it’s early, and q four is a relatively cohort relatively sizable cohort. So we’ll talk about this again on the next call.

Luis Vaughan, Co-founder and CEO, Duolingo5: Okay. Thank you. Okay. Thanks, Luis. Thanks, Matt.

Unidentified Speaker: Mhmm. Thank you.

Q&A Moderator: Your next question will come from Han Yee Kao with Citix. Please unmute your line and audio, and we’ll ask your question.

Unidentified Speaker: Hi, Louis. Hi, Louis. Hey. It’s good. It’s so good to have you connected, and it’s really excited to hear the last question from like, Max is finally rolling out in China.

And I’m going to expand that question a little bit further because, geographically, you see that you you saw that China was the fast growing country in the in past quarter. And for this in this quarter, you talk about, like, growing more users. So what geographically would you think? Like, which country do you think, like or which region do you think will be most potential to grow in the in the next quarter? And and my next and and another question is related to your Duolingo score you published in this year’s Store count because, like, that was related to the efficacy.

And so I’m wondering, like, how do you think that this kind of efficacy measurement will relate to the core user perform performance metrics? And how will will that be, like, the key motivation for you to grow the grow the users in the next quarter? Yeah.

Luis Vaughan, Co-founder and CEO, Duolingo: Yeah. Thank you for the question. So, you know, region wise, the fastest growing region as a region is Asia for us. And we expect that to be true for a bit. I I would expect that’s gonna be true.

I don’t know I don’t know the future, but I would expect that to be true, you know, for a bit. And and certainly, China is is is is is leading that, but it’s not just China. It’s basically all of Asia that is that is growing pretty fast. In terms of the score, we’re very excited about the score. You know, our announcement was that, first of all, all of our major language courses now have the Duolingo score.

And, also, you can share the Duolingo score on LinkedIn. We’re seeing quite a numb a good number of people sharing their score on LinkedIn, and so that really means they’re using it kind of for job purposes. And we have that, the score there. The score, also is, in the same range as our Duolingo English test, at least for for English learners. And English learners are the one that that would care more about a score like that, particularly English learners in Asia are the ones that would care, more about a score.

So we’re very excited about that, and and it is something you know, the the ultimate goal for it is to become the proficiency standard for at least the major languages and certainly for English where rather than when people ask you, you know, how much French do you know or how much English do you know, at the moment what people say is like, oh, I’m intermediate. We want people to say, I am a Duolingo 60 in French or I’m a Duolingo 80 in in English. That is that is what we want, and we think we’re making pretty major progress. In the case of of the the score, particularly for English, the Duolingo English test is now accepted by over 6,000 educational institutions, in the world, including all Ivy League universities and also the the 99 of the top 100 universities in The United States accept the the dual English test. So we think, you know, the combination of that prestige plus the the large scale that we have in the app plus doing things like sharing with on LinkedIn will hopefully get us to be the the the the standard for proficiency.

Unidentified Speaker: Okay. Thank you. And one thing is that we are not using that, using linking that’s, it’s, like, in China. So we are really hoping to, like, connect it to the another another social media platform in China.

Matt Scarupa, CFO, Duolingo: We we

Luis Vaughan, Co-founder and CEO, Duolingo: are working on that. I can’t really give you details on that, but we are working on it’s it’s not just going to be LinkedIn, that we have that we have the score on. We’re we’re working on that.

Unidentified Speaker: Okay. Okay. Thank you, Luis.

Matt Scarupa, CFO, Duolingo: Just one moment.

Q&A Moderator: I am showing no further questions, and this concludes the q and a section of the call. I would now like to turn the call back to the host for closing remarks.

Luis Vaughan, Co-founder and CEO, Duolingo: Thanks, operator. I just like to thank everyone for joining us, and we look forward to seeing you on the next call.

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