Duolingo (NASDAQ:DUOL) Announces Earnings Results, Beats Expectations By $0.06 EPS

Key Points

• Duolingo beat quarterly expectations, reporting adjusted EPS of $0.66 versus the $0.60 consensus and revenue of $298.45 million versus $295.58 million. Revenue rose 18.3% year over year, although EPS declined from $0.91 in the prior-year quarter.
• Daily active users increased 23% year over year and retention reached a record high. The company raised its full-year adjusted EBITDA margin outlook to 26.5%, with expectations for approximately $320 million in adjusted EBITDA and more than $375 million in free cash flow.
• Management maintained its full-year bookings and revenue-growth guidance while expanding monetization initiatives, including Super Lite, longer free trials and broader AI-powered Video Call access. However, the future of the higher-priced Max subscription remains uncertain, and analysts maintain a consensus Hold rating.

Duolingo (NASDAQ:DUOL - Get Free Report) announced its earnings results on Wednesday. The company reported $0.66 EPS for the quarter, beating analysts' consensus estimates of $0.60 by $0.06, FiscalAI reports. The firm had revenue of $298.45 million for the quarter, compared to analysts' expectations of $295.58 million. Duolingo had a return on equity of 14.07% and a net margin of 38.44%.Duolingo's quarterly revenue was up 18.3% on a year-over-year basis. During the same quarter in the prior year, the firm earned $0.91 EPS.

Here are the key takeaways from Duolingo's conference call:

• Daily active users grew 23% year over year in Q2, accelerating from Q1, while user retention reached an all-time high. Duolingo said growth was broad-based and supported by ongoing product experimentation.
• The company raised its full-year adjusted EBITDA margin outlook to 26.5% and now expects roughly $320 million of adjusted EBITDA, gross margin near 70%, and more than $375 million in free cash flow.
• Duolingo is expanding monetization in ways it believes support user growth, including longer free trials, a lower-priced Super Lite tier, improved advertising, and broader access to Video Call as AI costs decline. AI cost savings are expected to support margins while enabling more features for users.
• Management maintained full-year guidance of approximately 11% bookings growth and 16% revenue growth despite stronger user trends, noting that freemium users take time to monetize and that the company is prioritizing DAU expansion and product quality.
• The future of the higher-priced Max subscription remains uncertain as Video Call is rolled out to Super subscribers; management said Max could be restructured or even sunset, although it intends to avoid a material revenue loss.

Duolingo Trading Down 1.8%

NASDAQ DUOL traded down $2.43 during mid-day trading on Wednesday, hitting $135.32. The company's stock had a trading volume of 1,834,575 shares, compared to its average volume of 1,008,954. The stock's fifty day simple moving average is $124.54 and its two-hundred day simple moving average is $115.32. Duolingo has a 52-week low of $87.89 and a 52-week high of $468.00. The company has a debt-to-equity ratio of 0.07, a current ratio of 2.62 and a quick ratio of 2.62. The firm has a market capitalization of $6.30 billion, a P/E ratio of 37.33, a price-to-earnings-growth ratio of 1.05 and a beta of 0.87.

Insider Activity at Duolingo

In related news, insider Natalie Glance sold 3,360 shares of the firm's stock in a transaction dated Monday, May 18th. The stock was sold at an average price of $113.59, for a total transaction of $381,662.40. Following the sale, the insider directly owned 173,401 shares in the company, valued at approximately $19,696,619.59. This trade represents a 1.90% decrease in their position. The sale was disclosed in a filing with the SEC, which can be accessed through this link. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. The sale was made to cover tax withholding obligations related to the vesting of equity awards. Also, General Counsel Stephen C. Chen sold 1,977 shares of the business's stock in a transaction that occurred on Monday, May 18th. The stock was sold at an average price of $113.61, for a total value of $224,606.97. Following the transaction, the general counsel directly owned 52,807 shares in the company, valued at $5,999,403.27. This trade represents a 3.61% decrease in their ownership of the stock. The disclosure for this sale is available in the SEC filing. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. The sale was made to cover tax withholding obligations related to the vesting of equity awards. In the last three months, insiders sold 9,506 shares of company stock worth $1,073,864. Corporate insiders own 16.62% of the company's stock.

Institutional Trading of Duolingo

Hedge funds have recently made changes to their positions in the company. Alpine Woods Capital Investors LLC purchased a new position in shares of Duolingo in the fourth quarter valued at $333,000. Vident Advisory LLC increased its stake in Duolingo by 5.8% during the 4th quarter. Vident Advisory LLC now owns 2,647 shares of the company's stock worth $465,000 after buying an additional 145 shares during the period. Cim LLC lifted its holdings in Duolingo by 6.0% in the 4th quarter. Cim LLC now owns 4,390 shares of the company's stock worth $770,000 after buying an additional 248 shares in the last quarter. Empowered Funds LLC acquired a new position in Duolingo in the 4th quarter worth $331,000. Finally, Wellington Management Group LLP boosted its position in Duolingo by 1.7% in the 4th quarter. Wellington Management Group LLP now owns 25,404 shares of the company's stock valued at $4,458,000 after buying an additional 431 shares during the last quarter. Hedge funds and other institutional investors own 91.59% of the company's stock.

Analyst Upgrades and Downgrades

A number of research firms recently commented on DUOL. Scotiabank reaffirmed a "sector perform" rating and set a $130.00 price objective on shares of Duolingo in a research note on Tuesday, July 28th. KeyCorp restated a "sector weight" rating on shares of Duolingo in a report on Thursday, June 4th. Wedbush initiated coverage on shares of Duolingo in a research note on Thursday, July 16th. They set a "neutral" rating and a $139.00 price target on the stock. Wells Fargo & Company raised their price target on shares of Duolingo from $81.00 to $82.00 and gave the stock an "underweight" rating in a research note on Tuesday, July 7th. Finally, Morgan Stanley lifted their price target on shares of Duolingo from $95.00 to $125.00 and gave the stock an "equal weight" rating in a report on Thursday, July 16th. Two investment analysts have rated the stock with a Buy rating, nineteen have issued a Hold rating and two have issued a Sell rating to the stock. According to data from MarketBeat, the company has a consensus rating of "Hold" and a consensus price target of $151.88.

Duolingo Company Profile

Duolingo, Inc NASDAQ: DUOL is a technology-driven education company that operates a widely used language-learning platform. Founded in 2011 by Luis von Ahn and Severin Hacker, Duolingo offers a freemium service featuring bite-sized lessons, gamified exercises and adaptive learning algorithms. The company's core product is its mobile and web application, which supports instruction in more than 40 languages, ranging from widely spoken tongues such as English and Spanish to lesser-taught options including Irish and Swahili.

In addition to its flagship language courses, Duolingo has expanded its product suite to include the Duolingo English Test, an on-demand, computer-based English proficiency exam designed for academic and professional admissions.

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