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Duolingo (DUOL) Up 29.6% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Duolingo, Inc. (DUOL - Free Report) . Shares have added about 29.6% in that time frame, outperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Duolingo due for a pullback? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent drivers for Duolingo, Inc. before we dive into how investors and analysts have reacted as of late.
Duolingo’s Q2 Earnings Beat Estimates
Duolingo, Inc. reported better-than-expected second-quarter 2026 results.
Reported earnings of 66 cents per share beat the Zacks Consensus Estimate of 61 cents by 8.2%. Earnings declined from 91 cents in the year-ago quarter as the company continued investing in product development and user growth.
Revenues increased 18.3% year over year to $298.5 million and topped the consensus estimate of $297.3 million by 0.4%. Daily active users grew 23% to 58.7 million, accelerating from the first quarter, while paid subscribers increased 17% to 12.7 million.
DUOL Gains From Expanding User Engagement
Monthly active users rose 10% year over year to 140.6 million. Management attributed the stronger daily active user growth to product improvements, marketing efforts and a one-time Streak Revival campaign conducted in June.
Current User Retention Rate, which measures the proportion of recurring users returning the following day, reached an all-time high of 84%. The metric improved roughly one percentage point from the prior year, reflecting the combined impact of hundreds of product experiments conducted through Duolingo’s Green Machine testing process.
The Streak Revival campaign allowed eligible learners to restore their longest previous streak by completing three lessons. About 15.4 million learners participated, including nearly 8 million who did not have an active streak when the campaign began.
Duolingo’s Subscription Revenues Drive Growth
Subscription revenues increased 22% year over year to $258 million and accounted for the bulk of the company’s top-line expansion. Subscription bookings advanced 10% to $250.3 million.
Total bookings rose 8% to $289.1 million, or 6% on a constant-currency basis. Growth moderated from the first quarter due to a difficult year-ago comparison related to the initial Energy rollout, a price increase and stronger advertising performance.
Advertising revenues grew 2% to $21.1 million, while Duolingo English Test revenues remained nearly flat at $10.1 million. In-app purchase revenues declined 23% to $8 million. Other revenues increased to $1.3 million from $0.5 million.
DUOL Balances Monetization With User Growth
The company continued testing monetization initiatives designed to avoid adding friction for free users. Longer free trials have increased trial participation and payer conversions while improving the user experience by removing advertisements and Energy restrictions during the trial period.
Duolingo is also testing Super Lite, a lower-priced, advertising-supported subscription tier that provides more Energy than the free product but fewer benefits than Super. The offering remains in an early testing phase and represents only a small portion of subscribers.
Most new Super Duolingo subscribers now have access to Video Call, the company’s AI-powered conversational practice feature. Management plans to extend access to existing Super subscribers later in 2026 after reducing the cost per call to less than 1 cent through greater use of open-source models.
Duolingo’s Costs Rise on Strategic Investments
Gross profit increased 19% year over year to $216.7 million. Gross margin expanded 20 basis points to 72.6%, exceeding management’s expectation of approximately 71%, supported by AI cost efficiencies and the measured rollout of AI-powered features.
Operating expenses increased to $182.8 million from $149.2 million. Research and development expenses rose to $92.2 million, sales and marketing expenses increased to $40 million, and general and administrative expenses advanced to $50.6 million.
Net income declined 26% to $33.2 million, while net margin contracted to 11.1% from 17.8%. Adjusted EBITDA decreased 2% to $77.3 million, and the corresponding margin narrowed 530 basis points to 25.9% as Duolingo prioritized investments in user acquisition and product improvements.
DUOL Maintains Strong Liquidity and Buybacks
Net cash provided by operating activities declined 3% year over year to $88.3 million. Free cash flow decreased 9% to $78.6 million, while free cash flow margin contracted 790 basis points to 26.3%.
Duolingo ended the quarter with approximately $1.3 billion in cash and short-term investments. The company repurchased $44.4 million of shares during the quarter, bringing total repurchases under its $400 million authorization to $71.9 million through Aug. 1, 2026.
Duolingo Raises Profitability Outlook
For the third quarter of 2026, management expects revenues of approximately $302 million, indicating 11.1% year-over-year growth. Bookings are projected at $307 million, while adjusted EBITDA is forecast at $76 million, implying a 25.2% margin.
Duolingo maintained its full-year revenue and bookings targets. Revenues are expected to reach approximately $1.21 billion, up 16.3%. Bookings are projected at $1.29 billion, indicating growth of 10.9%.
The company raised its full-year adjusted EBITDA margin outlook to approximately 26.5% from its earlier expectation of about 25%. Adjusted EBITDA is projected at $320 million, reflecting stronger-than-expected gross margin performance and lower AI costs.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
At this time, Duolingo has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for value investors.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Duolingo has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
View the Zacks #1 Rank List
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Duolingo (DUOL) Up 29.6% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Duolingo, Inc. (DUOL - Free Report) . Shares have added about 29.6% in that time frame, outperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Duolingo due for a pullback? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent drivers for Duolingo, Inc. before we dive into how investors and analysts have reacted as of late.
Duolingo’s Q2 Earnings Beat Estimates
Duolingo, Inc. reported better-than-expected second-quarter 2026 results.
Reported earnings of 66 cents per share beat the Zacks Consensus Estimate of 61 cents by 8.2%. Earnings declined from 91 cents in the year-ago quarter as the company continued investing in product development and user growth.
Revenues increased 18.3% year over year to $298.5 million and topped the consensus estimate of $297.3 million by 0.4%. Daily active users grew 23% to 58.7 million, accelerating from the first quarter, while paid subscribers increased 17% to 12.7 million.
DUOL Gains From Expanding User Engagement
Monthly active users rose 10% year over year to 140.6 million. Management attributed the stronger daily active user growth to product improvements, marketing efforts and a one-time Streak Revival campaign conducted in June.
Current User Retention Rate, which measures the proportion of recurring users returning the following day, reached an all-time high of 84%. The metric improved roughly one percentage point from the prior year, reflecting the combined impact of hundreds of product experiments conducted through Duolingo’s Green Machine testing process.
The Streak Revival campaign allowed eligible learners to restore their longest previous streak by completing three lessons. About 15.4 million learners participated, including nearly 8 million who did not have an active streak when the campaign began.
Duolingo’s Subscription Revenues Drive Growth
Subscription revenues increased 22% year over year to $258 million and accounted for the bulk of the company’s top-line expansion. Subscription bookings advanced 10% to $250.3 million.
Total bookings rose 8% to $289.1 million, or 6% on a constant-currency basis. Growth moderated from the first quarter due to a difficult year-ago comparison related to the initial Energy rollout, a price increase and stronger advertising performance.
Advertising revenues grew 2% to $21.1 million, while Duolingo English Test revenues remained nearly flat at $10.1 million. In-app purchase revenues declined 23% to $8 million. Other revenues increased to $1.3 million from $0.5 million.
DUOL Balances Monetization With User Growth
The company continued testing monetization initiatives designed to avoid adding friction for free users. Longer free trials have increased trial participation and payer conversions while improving the user experience by removing advertisements and Energy restrictions during the trial period.
Duolingo is also testing Super Lite, a lower-priced, advertising-supported subscription tier that provides more Energy than the free product but fewer benefits than Super. The offering remains in an early testing phase and represents only a small portion of subscribers.
Most new Super Duolingo subscribers now have access to Video Call, the company’s AI-powered conversational practice feature. Management plans to extend access to existing Super subscribers later in 2026 after reducing the cost per call to less than 1 cent through greater use of open-source models.
Duolingo’s Costs Rise on Strategic Investments
Gross profit increased 19% year over year to $216.7 million. Gross margin expanded 20 basis points to 72.6%, exceeding management’s expectation of approximately 71%, supported by AI cost efficiencies and the measured rollout of AI-powered features.
Operating expenses increased to $182.8 million from $149.2 million. Research and development expenses rose to $92.2 million, sales and marketing expenses increased to $40 million, and general and administrative expenses advanced to $50.6 million.
Net income declined 26% to $33.2 million, while net margin contracted to 11.1% from 17.8%. Adjusted EBITDA decreased 2% to $77.3 million, and the corresponding margin narrowed 530 basis points to 25.9% as Duolingo prioritized investments in user acquisition and product improvements.
DUOL Maintains Strong Liquidity and Buybacks
Net cash provided by operating activities declined 3% year over year to $88.3 million. Free cash flow decreased 9% to $78.6 million, while free cash flow margin contracted 790 basis points to 26.3%.
Duolingo ended the quarter with approximately $1.3 billion in cash and short-term investments. The company repurchased $44.4 million of shares during the quarter, bringing total repurchases under its $400 million authorization to $71.9 million through Aug. 1, 2026.
Duolingo Raises Profitability Outlook
For the third quarter of 2026, management expects revenues of approximately $302 million, indicating 11.1% year-over-year growth. Bookings are projected at $307 million, while adjusted EBITDA is forecast at $76 million, implying a 25.2% margin.
Duolingo maintained its full-year revenue and bookings targets. Revenues are expected to reach approximately $1.21 billion, up 16.3%. Bookings are projected at $1.29 billion, indicating growth of 10.9%.
The company raised its full-year adjusted EBITDA margin outlook to approximately 26.5% from its earlier expectation of about 25%. Adjusted EBITDA is projected at $320 million, reflecting stronger-than-expected gross margin performance and lower AI costs.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
At this time, Duolingo has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for value investors.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Duolingo has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.