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DUOL Q3 Earnings Miss Estimates, Revenues Beat, Shares Rise 25.3%
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Key Takeaways
DUOL's Q3 earnings miss estimates, but revenues rise 13.7% y/y to $309M, beating expectations by 1.4%.
Duolingo's daily active users jump 29% y/y to 64.9M, while subscription revenues grow 18% to $270M.
DUOL raises its 2026 revenue outlook to $1.22 billion and adjusted EBITDA forecast to $323 million.
Duolingo, Inc. (DUOL - Free Report) reported mixed third-quarter 2026 results. Earnings of 54 cents per share missed the Zacks Consensus Estimate of 55 cents by 1.8%. Earnings declined 90.9% from $5.95 in the year-ago quarter, which benefited from a significant one-time tax gain.
The company's third-quarter 2025 earnings of $5.95 per share included a one-time income tax benefit of $222.7 million, net of a return-to-provision adjustment, resulting from DUOL's release of the valuation allowance previously established against its federal and state deferred tax assets.
Revenues increased 13.7% year over year to $309 million and surpassed the consensus estimate of $304.7 million by 1.4%. Daily active users (DAUs) grew 29% to 64.9 million, accelerating from 23% growth in the preceding quarter, supported by product improvements and stronger user retention.
Despite the earnings miss, investor sentiment toward DUOL remained positive, with shares gaining 25.3% since the company reported results on Nov. 3.
The positive market reaction was supported by the company’s upward revision to its full-year 2026 revenue guidance. DUOL raised its revenue outlook to approximately $1.22 billion from $1.21 billion, implying 18% year-over-year growth. The revised forecast is broadly in line with the Zacks Consensus Estimate of $1.22 billion.
Over the past year, DUOL's shares lost 16.8% compared with the industry's 27.1% decline. The Zacks S&P 500 composite gained 7.9% during the same period.
Image Source: Zacks Investment Research
DUOL Benefits From Accelerating User Growth
Monthly active users increased 13% year over year to 153.1 million. Paid subscribers rose 14% to 13.1 million, reflecting continued expansion in the company's paying user base.
Management attributed the acceleration in DAU growth primarily to improvements driven by its Green Machine experimentation system. Partnerships with mobile games Brawl Stars and Eggy Party also attracted millions of new and returning users. DAU growth accelerated across eight of Duolingo's 10 largest countries, highlighting broad-based engagement gains.
Duolingo's Subscription Bookings Drive Growth
Subscription revenues increased 18% year over year to $270 million, remaining the primary contributor to top-line growth. Advertising revenues declined 1% to $20.8 million, while Duolingo English Test revenues grew 2% to $9.9 million.
In-app purchase revenues fell 38% to $6.9 million, while other revenues increased to $1.5 million from $0.5 million. Total bookings advanced 12% to $316.1 million, representing a four-percentage-point acceleration sequentially. Subscription bookings increased 16% to $278.4 million, supported by stronger user growth and improving monetization trends.
DUOL Expands AI Features & Monetization Initiatives
Duolingo continued expanding access to Video Call, its artificial intelligence (AI)-powered conversational practice feature. The company plans to make unlimited Video Call available to all Super subscribers by year-end, supported by lower AI inference costs. Management reduced the cost per call from approximately 30 cents initially to well below 1 cent.
The company decided to discontinue Duolingo Max, its highest subscription tier. Existing Max individual subscribers will transition to Super Family at a similar price, with minimal expected impact on bookings. Meanwhile, Junior's Toy Hunt demonstrated the potential of avatar collection events to drive lesson completion and support in-app purchases.
Duolingo's Expenses Rise on Growth Investments
Gross profit increased 14% year over year to $225.1 million. Gross margin expanded 40 basis points to 72.9%, benefiting from lower AI-related costs and favorable hosting expenses.
Operating expenses increased 24% year over year to $200.9 million, including an $11.4 million accrual for a company-wide performance bonus tied to user growth targets. Research and development expenses rose to $107.7 million, sales and marketing expenses increased to $42.2 million and general and administrative expenses reached $51 million during this quarter.
Net income declined to $27.2 million from $292.2 million, reflecting the absence of a $222.7 million one-time tax benefit recorded in the year-ago quarter. Net margin stood at 8.8% at the end of this quarter. Adjusted EBITDA decreased 2% year over year to $78.7 million, while the corresponding margin contracted 400 basis points to 25.5%.
DUOL Generates Cash Despite Margin Pressure
Net cash provided by operating activities increased 6% year over year to $89.4 million. However, free cash flow declined 3% to $75.3 million, with the corresponding margin contracting 410 basis points to 24.4%.
Duolingo ended the quarter with approximately $1.4 billion in cash and short-term investments. The company repurchased $6.4 million worth of shares during the quarter. Through Oct. 30, 2026, cumulative repurchases under its $400 million authorization reached $82 million.
DUOL’s Upbeat Growth Outlook Includes Higher EBITDA Forecast
For the fourth quarter of 2026, management expects revenues of approximately $322 million, indicating 14% year-over-year growth. The projection is marginally below the Zacks Consensus Estimate of $322.14 million for the same period. Bookings are projected at $382 million, reflecting 13% growth. Adjusted EBITDA is forecast at $84 million, suggesting a 26.1% margin.
The company’s bookings are expected to reach $1.30 billion, indicating 12% year-over-year growth.
Full-year adjusted EBITDA is projected at $323 million, up from the previous forecast of $320 million, while the expected margin remains 26.5%. Management anticipates a fourth-quarter gross margin of 72%, reflecting the broader rollout of AI-powered features and continued investment in product development.
Trane Technologies plc (TT - Free Report) reported better-than-expected third-quarter 2026 results. TT’s earnings per share of $4.86 outpaced the Zacks Consensus Estimate by 2.5% and increased 25.3% from the year-ago quarter. TT’s revenues of $6.76 billion surpassed the consensus estimate by 5% and improved 17.7% year over year.
Waste Connections, Inc. (WCN - Free Report) reported impressive third-quarter 2026 results. WCN’s adjusted earnings of $1.58 per share outpaced the consensus mark by 4% and rose 9.7% from the year-ago quarter. WCN’s total revenues of $2.64 billion surpassed the consensus mark by 1.2% and increased 7.3% year over year.
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DUOL Q3 Earnings Miss Estimates, Revenues Beat, Shares Rise 25.3%
Key Takeaways
Duolingo, Inc. (DUOL - Free Report) reported mixed third-quarter 2026 results. Earnings of 54 cents per share missed the Zacks Consensus Estimate of 55 cents by 1.8%. Earnings declined 90.9% from $5.95 in the year-ago quarter, which benefited from a significant one-time tax gain.
Duolingo, Inc. Price, Consensus and EPS Surprise
Duolingo, Inc. price-consensus-eps-surprise-chart | Duolingo, Inc. Quote
The company's third-quarter 2025 earnings of $5.95 per share included a one-time income tax benefit of $222.7 million, net of a return-to-provision adjustment, resulting from DUOL's release of the valuation allowance previously established against its federal and state deferred tax assets.
Revenues increased 13.7% year over year to $309 million and surpassed the consensus estimate of $304.7 million by 1.4%. Daily active users (DAUs) grew 29% to 64.9 million, accelerating from 23% growth in the preceding quarter, supported by product improvements and stronger user retention.
Despite the earnings miss, investor sentiment toward DUOL remained positive, with shares gaining 25.3% since the company reported results on Nov. 3.
The positive market reaction was supported by the company’s upward revision to its full-year 2026 revenue guidance. DUOL raised its revenue outlook to approximately $1.22 billion from $1.21 billion, implying 18% year-over-year growth. The revised forecast is broadly in line with the Zacks Consensus Estimate of $1.22 billion.
Over the past year, DUOL's shares lost 16.8% compared with the industry's 27.1% decline. The Zacks S&P 500 composite gained 7.9% during the same period.
Image Source: Zacks Investment Research
DUOL Benefits From Accelerating User Growth
Monthly active users increased 13% year over year to 153.1 million. Paid subscribers rose 14% to 13.1 million, reflecting continued expansion in the company's paying user base.
Management attributed the acceleration in DAU growth primarily to improvements driven by its Green Machine experimentation system. Partnerships with mobile games Brawl Stars and Eggy Party also attracted millions of new and returning users. DAU growth accelerated across eight of Duolingo's 10 largest countries, highlighting broad-based engagement gains.
Duolingo's Subscription Bookings Drive Growth
Subscription revenues increased 18% year over year to $270 million, remaining the primary contributor to top-line growth. Advertising revenues declined 1% to $20.8 million, while Duolingo English Test revenues grew 2% to $9.9 million.
In-app purchase revenues fell 38% to $6.9 million, while other revenues increased to $1.5 million from $0.5 million. Total bookings advanced 12% to $316.1 million, representing a four-percentage-point acceleration sequentially. Subscription bookings increased 16% to $278.4 million, supported by stronger user growth and improving monetization trends.
DUOL Expands AI Features & Monetization Initiatives
Duolingo continued expanding access to Video Call, its artificial intelligence (AI)-powered conversational practice feature. The company plans to make unlimited Video Call available to all Super subscribers by year-end, supported by lower AI inference costs. Management reduced the cost per call from approximately 30 cents initially to well below 1 cent.
The company decided to discontinue Duolingo Max, its highest subscription tier. Existing Max individual subscribers will transition to Super Family at a similar price, with minimal expected impact on bookings. Meanwhile, Junior's Toy Hunt demonstrated the potential of avatar collection events to drive lesson completion and support in-app purchases.
Duolingo's Expenses Rise on Growth Investments
Gross profit increased 14% year over year to $225.1 million. Gross margin expanded 40 basis points to 72.9%, benefiting from lower AI-related costs and favorable hosting expenses.
Operating expenses increased 24% year over year to $200.9 million, including an $11.4 million accrual for a company-wide performance bonus tied to user growth targets. Research and development expenses rose to $107.7 million, sales and marketing expenses increased to $42.2 million and general and administrative expenses reached $51 million during this quarter.
Net income declined to $27.2 million from $292.2 million, reflecting the absence of a $222.7 million one-time tax benefit recorded in the year-ago quarter. Net margin stood at 8.8% at the end of this quarter. Adjusted EBITDA decreased 2% year over year to $78.7 million, while the corresponding margin contracted 400 basis points to 25.5%.
DUOL Generates Cash Despite Margin Pressure
Net cash provided by operating activities increased 6% year over year to $89.4 million. However, free cash flow declined 3% to $75.3 million, with the corresponding margin contracting 410 basis points to 24.4%.
Duolingo ended the quarter with approximately $1.4 billion in cash and short-term investments. The company repurchased $6.4 million worth of shares during the quarter. Through Oct. 30, 2026, cumulative repurchases under its $400 million authorization reached $82 million.
DUOL’s Upbeat Growth Outlook Includes Higher EBITDA Forecast
For the fourth quarter of 2026, management expects revenues of approximately $322 million, indicating 14% year-over-year growth. The projection is marginally below the Zacks Consensus Estimate of $322.14 million for the same period. Bookings are projected at $382 million, reflecting 13% growth. Adjusted EBITDA is forecast at $84 million, suggesting a 26.1% margin.
The company’s bookings are expected to reach $1.30 billion, indicating 12% year-over-year growth.
Full-year adjusted EBITDA is projected at $323 million, up from the previous forecast of $320 million, while the expected margin remains 26.5%. Management anticipates a fourth-quarter gross margin of 72%, reflecting the broader rollout of AI-powered features and continued investment in product development.
Duolingo currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Earnings Snapshots
Trane Technologies plc (TT - Free Report) reported better-than-expected third-quarter 2026 results. TT’s earnings per share of $4.86 outpaced the Zacks Consensus Estimate by 2.5% and increased 25.3% from the year-ago quarter. TT’s revenues of $6.76 billion surpassed the consensus estimate by 5% and improved 17.7% year over year.
Waste Connections, Inc. (WCN - Free Report) reported impressive third-quarter 2026 results. WCN’s adjusted earnings of $1.58 per share outpaced the consensus mark by 4% and rose 9.7% from the year-ago quarter. WCN’s total revenues of $2.64 billion surpassed the consensus mark by 1.2% and increased 7.3% year over year.