Duolingo Inc. (NASDAQ:DUOL) shares dropped more than 9% in premarket trading on Thursday after the language-learning platform issued third-quarter revenue guidance that came in below Wall Street expectations, overshadowing stronger-than-expected second-quarter earnings.
The company forecast third-quarter revenue of approximately $302 million, compared with analysts’ consensus estimate of $303.9 million. However, adjusted EBITDA for the quarter is expected to reach around $76 million, slightly ahead of previous forecasts, with analysts at Wolfe Research attributing the improvement to savings generated through artificial intelligence.
The brokerage added that it sees “limited near-term meaningful positive estimate revision opportunities against high investor expectations,” while remaining optimistic about Duolingo’s “long runway for penetration growth in a large, expanding language learning market combined with improving product features.”
User growth accelerates in the second quarter
Duolingo reported adjusted earnings of $0.66 per share for the second quarter, comfortably ahead of analysts’ expectations of $0.58. Revenue increased 18% year over year to $298.5 million, narrowly exceeding market forecasts.
Daily active users rose 23% to 58.7 million, marking faster growth than in the previous quarter and surpassing the company’s own expectations. Paid subscribers increased 17% to 12.7 million by the end of the period.
Management attributed the stronger user growth to ongoing product enhancements, increased marketing investment and a one-off Streak Revival campaign in June, which brought back 15.4 million learners to the platform.
Chief Executive Luis von Ahn said, “Q2 was a strong quarter. We continued to execute our 2026 strategy of prioritizing user growth and teaching better.”
Profitability outlook improves
Total bookings climbed 8% year over year to $289.1 million, although growth slowed compared with the first quarter due to tougher year-earlier comparisons.
The company also raised its full-year adjusted EBITDA margin forecast by almost one percentage point to approximately 26.5%, reflecting stronger-than-expected gross margin performance.
Adjusted EBITDA declined 2% to $77.3 million, resulting in a margin of 25.9%, compared with 31.2% in the same period last year. Duolingo said the lower margin reflected its deliberate strategy of increasing investment to drive long-term user growth.
Gross margin improved slightly to 72.6%, up from 72.4% a year earlier.
Duolingo stock price
