Duolingo (DUOL) Stock Drops 23% After Weak Bookings Guidance

TLDR

• Duolingo beat Q4 2025 EPS ($0.84 vs $0.83 forecast) and revenue ($282.9M vs $275.7M forecast)
• Stock dropped over 23% after-hours after Q1 and full-year bookings guidance came in below estimates
• Company is shifting strategy toward faster user growth, which will weigh on bookings and margins
• 2026 bookings forecast of $1.27B–$1.30B missed analyst estimates of $1.39B
• Board approved a $400 million share buyback program

Duolingo beat earnings expectations for Q4 2025, but the stock took a hard hit after the company’s forward guidance fell well short of what Wall Street was expecting.

EPS came in at $0.84, just above the $0.83 forecast. Revenue reached $282.9 million, topping the projected $275.7 million. Full-year 2025 adjusted EBITDA came in above $300 million, and total bookings crossed $1 billion for the first time.

Duolingo, Inc., DUOL

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

So far, so good. Then came the guidance.

Duolingo forecast Q1 2026 bookings of around $301.5 million. Analysts were expecting $329.7 million. For the full year, the company guided to $1.27–$1.30 billion in bookings, against estimates of $1.39 billion.

Revenue guidance of $1.20–$1.22 billion also trailed analyst expectations of $1.26 billion.

The stock dropped more than 23% in after-hours trading before recovering somewhat to close up 5.19% at $113.24 after the earnings release.

The reason for the soft outlook comes down to a deliberate strategy shift. Duolingo is pivoting away from monetization optimization and toward driving faster user growth.

AI Features Get Wider Access

A key part of the new strategy involves expanding access to AI-powered features. The “Video Call with Lily” feature, previously only available on 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 the AI video call now costs more than ten times less to run than it did at launch, making broader access economically viable.

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 through 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 tradeoff the company is consciously making.

The company spent recent years nudging users toward paid tiers through ads and subscription prompts. That lifted bookings per user but came at the cost of slower overall growth, prompting the change in direction.

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

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

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