Key Takeaways
- Q4 2025 results exceeded expectations with EPS of $0.84 (vs $0.83 consensus) and revenue of $282.9M (vs $275.7M consensus)
- Shares plunged over 23% in after-hours trading following disappointing bookings guidance for Q1 and 2026
- Strategic pivot prioritizes accelerated user acquisition over near-term monetization efficiency
- Full-year 2026 bookings guidance of $1.27B–$1.30B significantly trails Street expectations of $1.39B
- Company announced $400 million stock repurchase authorization
The language learning platform delivered solid fourth-quarter results that surpassed analyst projections, yet investors sent shares tumbling on concerns about the company’s outlook and strategic direction.
The company reported earnings per share of $0.84, narrowly beating the consensus estimate of $0.83. Quarterly revenue hit $282.9 million, exceeding Wall Street’s forecast of $275.7 million. For the complete 2025 fiscal year, adjusted EBITDA surpassed $300 million, while total bookings eclipsed the $1 billion milestone for the first time in company history.
The platform’s daily active user count also surpassed 50 million — representing more than a fivefold increase since the company went public in 2021.
Despite these achievements, investor sentiment soured when management unveiled forward-looking projections.
For the first quarter of 2026, Duolingo projected bookings of approximately $301.5 million — substantially below the analyst consensus of $329.7 million. The full-year bookings forecast of $1.27–$1.30 billion similarly disappointed, falling short of the $1.39 billion that Wall Street anticipated.
The revenue outlook of $1.20–$1.22 billion for 2026 also came in below analyst projections of $1.26 billion.
Shares tumbled more than 23% in extended trading following the announcement, though they subsequently rebounded to close up 5.19% at $113.24 after the earnings report.
Management attributed the conservative guidance to an intentional strategic realignment. The company is deliberately de-emphasizing monetization tactics in favor of accelerating overall platform growth.
CEO 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 Audience
Central to this strategic shift is democratizing access to the platform’s artificial intelligence features. The “Video Call with Lily” functionality, which was previously exclusive to the premium Max subscription tier, will now become available to Super Duolingo subscribers.
Additionally, the company intends to make more AI-enhanced speaking features accessible to non-paying users. Management highlighted that operational costs for the AI video call feature have decreased by more than tenfold since its introduction, enabling economically sustainable expansion.
The adjusted EBITDA margin is anticipated to contract to approximately 25% in 2026 as the organization increases spending on AI development and marketing initiatives.
User Acquisition Momentum Decelerating
The pace of daily active user expansion decelerated throughout 2025 and is forecast to moderate to roughly half the velocity observed in previous years.
Bookings growth for 2026 is now estimated at approximately 11%. Management indicated that maintaining the previous strategic approach could have yielded bookings growth around 20% — a deliberate sacrifice the leadership team has chosen to accept.
In recent years, the platform implemented various mechanisms to encourage conversion to paid subscriptions, including advertisements and upgrade prompts. While these tactics improved bookings per user, they simultaneously constrained overall user acquisition, precipitating the current strategic recalibration.
The board of directors separately authorized a share repurchase program of up to $400 million.
At present trading levels, the stock remains significantly below its 52-week peak of $544.93, with a market capitalization hovering around $5.44 billion and a price-to-earnings ratio of 14.67.
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