Duolingo NASDAQ: DUOL said daily active user growth accelerated for a second consecutive quarter in the third quarter, while bookings, revenue and profitability exceeded the company’s expectations.
Co-Founder and CEO Luis von Ahn said daily active users increased 29% year over year in the quarter, accelerating from 23% growth in the second quarter. The company expects fourth-quarter DAU growth to be similar to the third-quarter rate and said fourth-quarter bookings should be slightly ahead of its prior guidance.
“At the beginning of the year, we laid out a plan to prioritize teaching better and user growth,” von Ahn said. “We’re now seeing the user acceleration we hoped for.”
CFO Gillian Munson said growth was broad-based geographically, with year-over-year DAU growth accelerating in eight of Duolingo’s 10 largest countries. Subscription bookings growth was in the double digits in a majority of the company’s operating regions, she said.
User Growth Driven by Product Improvements
Von Ahn said most of the company’s user growth has come from ongoing product improvements rather than individual marketing events or partnerships. He described Duolingo’s “Green Machine” as an optimization process under which the company runs hundreds of A/B tests each week to improve its app.
Those experiments have primarily improved retention, which has contributed to the increase in active users, according to von Ahn. The company said its number of experiments in the most recent month was about 90% higher than a year earlier, while employee headcount rose about 10%.
Duolingo has also benefited from several events, including its prior-quarter streak revival initiative and third-quarter partnerships with games Brawl Stars and Eggy Party. Von Ahn said the partnerships brought in users who retained well because rewards required them to return to Duolingo across multiple days, helping establish a habit.
The company does not exchange payments with gaming partners, von Ahn said. Instead, the arrangements are structured as cross-promotions intended to benefit both parties. Duolingo expects such partnerships to occur a couple of times a year rather than become a large-scale strategy, he added.
Munson also said paid marketing has been a success during 2026. Paid marketing represents roughly 60% of Duolingo’s non-compensation marketing spend, which totals a little more than $100 million. The company said that spending is profitable and that it has continued to improve the returns it receives from customer acquisition efforts.
Monetization Focus Shifts While Protecting Free Experience
Management said it is beginning to place more emphasis on monetization after prioritizing user growth and teaching improvements earlier in the year. Von Ahn said the company’s internal guardrail is not to further degrade the experience for free users.
Rather than add friction to the free version of the service, Duolingo plans to pursue monetization through additional A/B testing, in-app purchases, longer free trials, better advertising and features intended to encourage subscriptions.
“The one thing that you’re not going to see us do is add friction to the free user experience,” von Ahn said.
He said longer free trials have improved conversion rates in testing, though they are not yet being offered to every user. Duolingo also cited monetization opportunities around Avatar Suits and Chess. The company said Chess reached 10 million daily active users and remains “completely under-monetized,” according to von Ahn.
Paid subscriber growth has continued to lag the recent acceleration in DAUs, but Munson said subscriber figures largely track revenue and could bottom in a couple of quarters as the company works through bookings from earlier periods. Management emphasized that users can take years to monetize, creating a larger audience for future subscription and advertising efforts.
Duolingo Max Sunset and Video Call Expansion
Duolingo is sunsetting its higher-priced Max subscription tier after lowering the cost of its AI-powered Video Call feature. Von Ahn said Video Call initially cost about $0.30 per call to operate but now costs well under $0.01 per call, mainly due to a shift to open-source or open-weight models.
The lower costs enabled the company to move Video Call into its Super Duolingo subscription tier, where it can reach about 10 times as many users as it did through Max. Management said A/B testing indicated that offering Video Call through Super is favorable for revenue and supports broader adoption of the learning feature.
Duolingo has stopped selling Max to new users. Munson said Max Individual subscribers will be moved to Super Family at a similar price, gaining the ability to add friends and family members. Max Family will remain through the end of the year, though it represents a smaller portion of paid users and bookings.
Management said the transition is expected to be slightly positive for bookings in the short term but not material. Over the longer term, the company expects the expanded Super offering to support subscriptions and learning engagement.
Fourth-Quarter and Full-Year Outlook
For the fourth quarter, Duolingo expects:
- Year-over-year bookings growth of 13%.
- Revenue growth of 14%.
- An adjusted EBITDA margin of 26.1%.
- Adjusted EBITDA of approximately $84 million, roughly flat from a year earlier.
Munson said fourth-quarter gross margin is expected to decline slightly from the third quarter as Video Call becomes available to all paid subscribers. Operating expenses are expected to rise faster than revenue because of continued investment and the second part of an employee bonus tied to reaccelerating user growth.
Third-quarter operating expenses included an $11 million bonus accrual, with an additional portion included in fourth-quarter guidance. The company expects to pay the full bonus in early 2027.
For the full year, Duolingo expects bookings growth of 12%, revenue growth of 18% and an adjusted EBITDA margin of 26.5%. The company plans to provide its full 2027 outlook in February.
Looking ahead, management said artificial intelligence is improving both its internal development process and its product offerings. Duolingo expects to spend single-digit millions on live AI inference costs for free users next year, while continuing to expand AI-powered learning features and use AI tools to increase the pace of experimentation and content creation.
About Duolingo (NASDAQ:DUOL)
Duolingo, Inc develops technology-based learning products designed to make education accessible and engaging. Its flagship Duolingo mobile and web platform offers gamified courses in languages including Spanish, English, French, German and Japanese, among others. Lessons incorporate interactive exercises, personalized practice and achievement-based features intended to support regular learning.
The company also operates the Duolingo English Test, an online English-proficiency assessment that can be taken remotely and is accepted by educational institutions and other organizations.
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