TLDR

  • Duolingo exceeded Q4 2025 EPS expectations ($0.84 vs. the projected $0.83) and revenue targets ($282.9 million vs. the forecasted $275.7 million)
  • Stock plummeted over 23% in after-hours trading after Q1 and full-year bookings guidance fell short of analyst estimates
  • The company is shifting its strategy to prioritize faster user growth, which will impact bookings and margins
  • The 2026 bookings forecast of $1.27B–$1.30B missed analysts’ expected $1.39B
  • The board approved a $400 million share repurchase program

Duolingo outperformed earnings projections for Q4 2025, yet its stock took a sharp hit after the firm’s forward guidance fell significantly below Wall Street’s expectations.

Earnings per share (EPS) stood at $0.84, slightly above the $0.83 forecast. Revenue hit $282.9 million, surpassing the projected $275.7 million. Full-year 2025 adjusted EBITDA exceeded $300 million, and total bookings crossed the $1 billion mark for the first time.

DUOL Stock Card

Daily active users also topped 50 million — more than five times the number recorded at its 2021 IPO.

Up to this point, things looked positive. Then the guidance was announced.

Duolingo projected Q1 2026 bookings at approximately $301.5 million, while analysts had expected $329.7 million. For the full year, the company’s bookings guidance ranges from $1.27 billion to $1.30 billion, compared to analysts’ estimates of $1.39 billion.

The revenue guidance of $1.20–$1.22 billion also fell short of analysts’ expected $1.26 billion.

The stock dropped over 23% in after-hours trading before partially rebounding to close at $113.24 (a 5.19% increase) following the earnings release.

The soft outlook stems from a deliberate strategic shift: Duolingo is moving away from monetization optimization and toward accelerating user growth.

CEO Luis von Ahn stated clearly: “If we’re seeing faster user growth than we’re expecting — and our expectation is around 20% — then that means the strategy is working.”

AI Features Gain Broader Access

A core part of the new strategy involves expanding access to AI-powered features. The “Video Call with Lily” feature, previously exclusive to the premium Max tier, will now roll out to the Super Duolingo subscription level.

The company also plans to bring more AI-driven speaking tools to free users. Duolingo noted that the AI video call now costs over ten times less to operate than it did at launch, making broader access financially feasible.

Adjusted EBITDA margin is expected to decline to around 25% in 2026 as the company ramps up investment in AI features and increases marketing spend.

Growth Rate Slowing

Daily active user growth decelerated throughout 2025 and is expected to slow to roughly half the pace seen in prior years.

Bookings growth is now projected at around 11% for 2026. Duolingo said that under its previous strategy, it could have delivered around 20% bookings growth — a trade-off the company is consciously making.

Over recent years, the company has nudged users toward paid tiers via ads and subscription prompts. This lifted per-user bookings but came at the cost of slower overall growth, prompting the strategic shift.

The board also approved a share buyback program of up to $400 million.

At current levels, the stock trades well below its 52-week high of $544.93, with a market cap of approximately $5.44 billion and a P/E ratio of 14.67.