TLDR
- Duolingo forecast Q4 bookings of $329.5-$335.5 million, missing Wall Street estimates of $343.6 million, causing shares to drop 20%
- The company is shifting focus toward user growth and teaching quality over monetization in the near term
- Q3 revenue beat estimates at $271.7 million, driven by 34% growth in paid subscribers to 11.5 million users
- Annual revenue forecast raised to $1.028-$1.032 billion, up from previous guidance of $1.01-$1.02 billion
- Partnership with Luckin Coffee in July drove strong performance in China, though management acknowledged geopolitical risks
Duolingo shares dropped 20% in after-hours trading Wednesday after the language-learning company issued a Q4 bookings forecast that missed analyst expectations. The company projected bookings between $329.5 million and $335.5 million for the quarter.
Wall Street analysts had expected bookings of $343.6 million. The miss came despite the company posting stronger-than-expected results for the third quarter.
$DUOL (Duolingo) #earnings are out: pic.twitter.com/d2rIjtEsFh
— The Earnings Correspondent (@earnings_guy) November 5, 2025
CEO Luis von Ahn explained the shift in strategy to Reuters. “We will focus on monetization, but the balance is shifting a little bit,” he said.
“On a relative basis, we’re going to work more on teaching quality than we have in the recent past.” This represents a deliberate move away from aggressive monetization toward longer-term platform improvements.
The company operates on a freemium model where most users access the app for free. Duolingo has worked to convert these users into paid subscribers through offerings like Super Duolingo and Duolingo Max.
Super Duolingo provides an ad-free experience. Duolingo Max incorporates generative AI features that help personalize learning.
Von Ahn highlighted the company’s success with AI monetization. “We are one of the few companies that has found a way to make profit off of AI,” he said. “This is actually profitable for us.”
Strong Q3 Results and User Growth
The third quarter showed continued strength in key metrics. Revenue reached $271.7 million, beating analyst estimates of $260.3 million.
This marked another quarter where Duolingo exceeded revenue expectations. The company has topped revenue estimates every quarter since going public in 2021.
Paid subscribers jumped 34% year-over-year to 11.5 million users. The growing user base helped drive conversions from free to paid tiers.
The AI-powered features contributed to revenue growth but did affect margins. The gross profit margin came in at 72.5% for the quarter.
This was still above analyst estimates of 71.4%. The company maintained profitability while investing in AI capabilities.
China Performance and Strategic Concerns
Growth in China stood out as a bright spot for the quarter. A partnership with Luckin Coffee launched in July helped boost brand visibility in the region.
This collaboration drove outsized performance in the Chinese market. However, management acknowledged the risks that come with operating in China.
Von Ahn noted the geopolitical considerations. “China comes with a risk,” he said. “There’s geopolitics, et cetera.”
The company raised its full-year revenue guidance following the Q3 beat. The new forecast calls for revenue between $1.028 billion and $1.032 billion.
This compares to previous guidance of $1.01 billion to $1.02 billion. Analysts had expected $1.02 billion for the year.
Near-Term Growth Headwinds
Management expects some slowdown in user growth heading into Q4. Daily active users grew around 30% year-over-year in both September and October.
CFO Matthew Skaruppa addressed the potential for continued pressure. “There was a small impact to this,” he said regarding the strategic shift.
“Would we expect some of that to persist into 2026? Sure.” This suggests the focus on teaching quality over monetization could affect results into next year.
The company projects full-year bookings of nearly $1.2 billion with a 33% growth rate and a 29% EBITDA margin.
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