Duolingo Q1 Earnings Call Highlights

Key Points

• Duolingo is prioritizing improved instruction and speaking practice—rolling out features like spoken tokens, Speaking Adventures, expanded Video Call capabilities, and used AI to publish 20,500 course units in Q1 and push courses to B2 proficiency for its top languages.
• Daily active users rose 21% year-over-year, with Asia the fastest-growing region; management expects DAU growth to stay around 20% through 2026, driven by word-of-mouth and retention improvements.
• Management reiterated full-year 2026 targets—bookings roughly 10.5%, revenue roughly 16.1%, and adjusted EBITDA margin about 25.7%—while reporting Q1 adjusted EBITDA of $83M, holding >$1B cash with no debt, and planning continued buybacks and M&A optionality.

Duolingo NASDAQ: DUOL executives used the company’s first-quarter 2026 earnings call to highlight product execution focused on improving instruction—particularly speaking practice—while reiterating full-year financial targets that reflect what CFO Gillian Munson described as a “key strategic investment year.”

Product focus: “Teaching better” and more speaking for more users

Co-founder and CEO Luis von Ahn said the first quarter was “about execution,” centered on improving learning outcomes and shifting the way the company grows users. Daily active users (DAUs) increased 21% year-over-year, which von Ahn said was “right in line with what we expected as we make this strategic shift.”

A major theme of the quarter was expanding speaking practice across the app, which von Ahn called “historically the hardest thing to do well on a mobile app.” Duolingo introduced several speaking-oriented features and made speaking a bigger part of the experience for both free users and paying subscribers. Von Ahn highlighted:

• Spoken tokens, which enable learners to speak answers to “almost any exercise.”
• Speaking Adventures, which place learners in “real-world conversational scenarios.”
• Flashcards designed to build recall by saying words aloud.
• Ongoing improvements to Video Call for paid subscribers; von Ahn said Duolingo has “more than doubled the average number of words spoken per user” in the feature over the past year.

Von Ahn also pointed to a content milestone: Duolingo now offers courses up to professional proficiency (B2 on the CEFR scale) across its nine most-learned languages. He said the company published 20,500 course units in Q1 alone—“more than 10 times what we were shipping per quarter just 2 years ago”—and attributed the pace to AI. “AI has fundamentally changed what’s possible for us,” he said.

DAU growth drivers: word of mouth, retention, and regional strength in Asia

Asked about what drove DAU growth, von Ahn said Duolingo is “growing in every single region,” with Asia as the fastest-growing region. He described the company’s user growth engine as largely consistent with prior periods: “Word of mouth has historically been the main growth driver for us. Most of our users come to Duolingo through word of mouth.”

He added that Duolingo has increased its marketing budget “a little bit,” but said it remains small relative to other apps. Another key contributor, he said, has been retention improvements from product changes, reflected in a DAU-to-MAU ratio that “keeps increasing pretty much every quarter, and it increased again this quarter.”

Von Ahn maintained the company’s outlook for DAU growth for the remainder of 2026, telling analysts to expect it to stay “around 20% throughout the year,” with modest variability due to comparisons.

Financial results and 2026 targets: investing deliberately while maintaining profitability

Munson called Q1 “a solid quarter,” citing double-digit growth in bookings and revenue, gross margin expansion, and adjusted EBITDA of $83 million—about 29% of revenue. She reiterated how Duolingo is “managing the business towards the targets” shared on the prior quarter call: 10%-12% bookings growth, 15%-18% revenue growth, and adjusted EBITDA margin of about 25%.

Munson also provided point estimates for full-year 2026 based on what the company can see “today,” consistent with those ranges:

• Bookings growth: roughly 10.5%
• Revenue growth: roughly 16.1%
• Adjusted EBITDA margin: 25.7%

For quarterly dynamics, Munson said expected Q2 bookings growth of about 6% reflects a difficult comparison that included last year’s initial rollout of “Energy,” a price increase on its most popular subscription plan, and “exceptional advertising performance.” She said the company expects bookings growth to accelerate in the second half, with about three points of acceleration in Q3 and further improvement in Q4.

On revenue, Munson guided to about 17% growth in Q2, followed by a step down in Q3 before stabilizing in Q4. She also discussed profitability trends as AI use expands: gross margin is expected to be approximately 71% in Q2, trending down to roughly 69% by year-end as AI-powered feature usage increases. Adjusted EBITDA margin in Q2 is expected to be roughly 24%, with Q3 “flat to slightly down” from Q2 before approaching 27% in Q4.

AI: scaling content and personalization while managing cost “waves”

Von Ahn described AI as central to Duolingo’s long-term goal of matching the effectiveness of a one-on-one tutor while remaining “as fun as a mobile game.” He pointed to improvements in Video Call conversation quality and the rapid expansion in course content, and said the company is working toward significantly more personalization, including models to better choose exercises and potentially generate content based on individual learner needs.

Munson said the financial impact of AI shows up in both gross margin and operating expenses. While gross margin guidance assumes more AI “ingredient” in the product, she noted the company has also seen “waves of efficiency” as teams optimize costs. She cited Q1 margin performance as better than expected even as AI content expanded, because “on a per unit basis, the costs have come down a lot.” Looking ahead, she said she would “expect us to be in that 69% range on the gross margin,” with operating expense management adjusted accordingly.

Monetization tests, marketing investments, and capital allocation

Several questions focused on Duolingo’s evolving monetization approach. Von Ahn acknowledged what he called a “weird” dynamic: Duolingo is “at the same time under-monetized and over-monetized.” He said about 12% of monthly active users are paying subscribers, which he believes “should be much higher,” while some past monetization tactics introduced too much friction for free users and conflicted with DAU growth.

He said the company is prioritizing monetization tactics “that are not at odds with DAU growth,” highlighting longer free trials as one example. Von Ahn said Duolingo has historically used a seven-day free trial, but is finding longer trials can increase bookings while also being user-friendly.

On subscription tiers, von Ahn reiterated plans to broaden access to Video Call by adding it to the company’s mid-tier Super Duolingo through experiments, particularly for new Super subscribers. He said the company has not scaled the change across the entire user base and that “at the moment, there’s no change for Max.” He outlined possible future paths for Max, including pricing changes or differentiated usage limits, but said it is too early to provide outcomes.

Marketing was another focus. Von Ahn said Duolingo has “under-invested in performance marketing” historically and is becoming “a lot more professional about it,” including building better attribution and infrastructure. He also explained a key performance marketing constraint: in many regions, Duolingo’s free product is so strong that acquired users may remain satisfied without subscribing, limiting profitability. Munson added that the company is increasing marketing investment in 2026 with a “multi-tiered approach,” not only performance marketing.

Munson said Duolingo entered Q2 with over $1 billion in cash, no debt, and expects to generate over $350 million in free cash flow in 2026. The company plans to continue executing against its $400 million buyback authorization; repurchases to date total 514,000 shares, or about 1% of fully diluted shares outstanding. Munson also said the company continues to evaluate M&A opportunities, noting that historically deals have been “fairly small in nature.”

About Duolingo NASDAQ: DUOL

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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