Duolingo stock sinks 15% as Q3 revenue forecast misses

Duolingo shares fell about 15% Thursday after the language-learning platform's third-quarter revenue forecast of $302 million missed Wall Street's $304 million estimate, overshadowing a second-quarter beat.

"We're enabling our teams to do more to grow DAU and not be as primarily focused on monetization in this moment," Chief Financial Officer Gillian Munson said, as the company prioritizes its long-term goal of 100 million daily active users over near-term subscription revenue.

Second-quarter revenue rose 18% to $298.5 million, above the $295.6 million consensus compiled by LSEG, while adjusted core profit also topped estimates. Daily active users climbed 23% to 58.7 million, ahead of Visible Alpha projections, though paid subscriber growth of 17% to 12.7 million came in slightly below consensus. Total bookings advanced just 8% to $289.1 million, and bookings per average daily user fell about 12% to $4.93.

Metric	Q2 2026	Q2 2025	Change
Revenue	$298.5M	$252.3M	+18%
Daily active users	58.7M	47.7M	+23%
Paid subscribers	12.7M	10.9M	+17%
Total bookings	$289.1M	$268.0M	+8%
Adjusted EBITDA	$77.3M	$78.7M	-2%
Gross margin	72.6%	72.4%	+20bps

The company reaffirmed full-year revenue growth of roughly 16% and bookings growth of about 11%, while raising its adjusted EBITDA margin outlook to 26.5% from 25% and guiding gross margin closer to 70% from 69%. Munson attributed the margin gains to lower artificial intelligence costs, saying Duolingo has adopted open-source models for features that do not require its most advanced systems. Current-user retention hit an all-time high of 84%, and a June "Streak Revival" campaign reactivated 15.4 million learners, nearly 8 million of whom had no active streak.

Chief Executive Officer Luis von Ahn said daily active user growth should stay above 20% for the rest of the year, supported by product improvements and marketing. Management also disclosed that employees could receive a cash bonus if fourth-quarter daily active user growth reaches at least 25%.

The decline erased part of the stock's recent gains, with shares indicated at $122.68 in premarket trading after closing Wednesday at $135.32. Analysts hold a consensus Hold rating, with a typical price target of $120 and a mean of $114.20, according to BarCharts data. The selloff tests whether investors accept slower near-term monetization in exchange for engagement gains, with the third-quarter earnings call the next catalyst for the stock.

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