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Investing.com -- Evercore ISI upgraded Duolingo to Outperform from In Line, arguing that recent product improvements and accelerating user growth could drive a stronger earnings trajectory than Wall Street currently expects. The brokerage also more than doubled its price target to $210 on the stock. The brokerage said its new target implies more than 40% upside from the shares' Aug. 31 closing price of $146.98. It also raised its 2027 and 2028 earnings-per-share estimates to 10% and 25% above consensus, respectively, citing its proprietary survey, third-party user data, product analysis and recent channel checks. Evercore's latest survey of 1,300 U.S. language learners showed the company maintaining a dominant position in the category, with 53% of respondents using its service, compared with 13% for closest pure-play rival Babbel. User satisfaction also improved for a third straight year, with 66% of respondents saying they were extremely or very satisfied. The brokerage said artificial intelligence remains a competitive risk, with 36% of language learners using ChatGPT. However, more than half of those ChatGPT users also use Duolingo, and 63% of the overlapping users engage with Duolingo daily, suggesting AI adoption has not materially weakened the platform's user habit. Recent product launches are also supporting the bullish case. Evercore highlighted free speaking practice, Speaking Adventures, spoken tokens, Flashcards and the expansion of Video Call from the Max tier to Super. It said Duolingo's current user retention rate reached an all-time high of 84%, while the share of surveyed users using the app daily rose to 65% from 61% a year earlier. Third-party data points to further acceleration. SensorTower is tracking 17% year-on-year daily active user growth in the third quarter so far, up from 12% in the second quarter. Evercore expects DAU growth of 24% in the third quarter and 27% in the fourth, supporting management's goal of reaching 100 million DAUs by 2028. Evercore now forecasts about 99 million DAUs in 2028, versus 85 million for the Street. It estimates 2028 revenue of $1.79 billion and adjusted EBITDA of $530 million, 17% and 22% above consensus, respectively. Its 2028 GAAP EPS estimate of $5.10 is 24% above the Street's $4.10 estimate. The brokerage's sensitivity analysis suggests that 100 million average DAUs, combined with annual revenue per user of $18-$22 and operating margins of 15%-19%, could generate GAAP EPS of $4.77-$6.94, well above the Street's current 2028 estimate of $4.18. Evercore said the key risk to its bullish thesis is monetization. Revenue per average DAU was about $20 in the second quarter, down 4% year-on-year, while bookings per DAU fell about 12%. The brokerage also flagged competition and uncertainty around pricing and conversion as risks. Related articles Evercore upgrades Duolingo, sees strong user growth and earnings upside 5 reasons why Jefferies thinks Meta’s pullback is a buying opportunity As Claude disrupts stock market, Anthropic researcher warns ’world is in peril’

Image source: The Motley Fool. Wednesday, Aug. 5, 2026 at 5:00 p.m. ET Investor Relations - Deborah Belevan Co-Founder and Chief Executive Officer - Luis von Ahn Arellano Chief Financial Officer - Gillian Munson Deborah Belevan: Good evening, everyone, and welcome to Duolingo's Second Quarter Earnings Webcast. Today after market closed, we released this quarter's shareholder letter, a copy of which you can find on our IR website at investors.duolingo.com. On today's call, we have Luis von Ahn, our Co-Founder and CEO; and Gillian Munson, our CFO. They'll begin with prepared remarks before we open the call for questions. And please note, this call is being recorded. Before we begin, please note that we'll make forward-looking statements regarding future events and financial performance. These statements are subject to risks and uncertainties described in our SEC filings and are based on assumptions we believe to be reasonable as of today, and we undertake no obligation to update them. We'll also discuss both GAAP and non-GAAP financial measures. Reconciliations can be -- of the two can be found in our earnings materials, and we encourage you to review them when evaluating our performance. And now I will turn it over to Luis. Luis von Ahn Arellano: Thanks, Debbie, and thank you all for joining. Q2 was a strong quarter. DAUs grew 23% year-over-year, accelerating from Q1 and coming in slightly ahead of our expectations. And we're encouraged by what we're seeing so far in Q3. The vast majority of that growth came from the work we do every day through what we call The Green Machine. We test hundreds of product changes, measure their impact and double down on what works. Most changes are small, but they compound over time. As I discussed in our shareholder letter, that's also what's driving CURR, a measure of user retention to an all-time high. Another highlight of the quarter was Streak Revival. A onetime campaign we ran in June. The idea was simple: give learners who lost their longer streak, a chance to earn it back by completing 3 lessons. More than 15 million learners revived their streaks. And what's particularly encouraging is that these users are also showing better retention than a typical reengaged cohort. We brought learners back to a product that keeps getting better at teaching languages, chess, Math and Music, and they're staying. We're still early in executing our strategy of prioritizing user growth and teaching better, but Q2 gave us more confidence that we're on the right track. With that, I'll turn it over to Gillian. Gilian Munson: Thanks, Luis. Welcome, everyone. As Luis said, Q2 was a strong quarter. In addition to the DAU acceleration Luis just mentioned, topline results were in line with our expectations and profitability was slightly ahead of our plan. As we look at the remainder of 2026, I want to reiterate how we're managing the business. We are investing deliberately in the opportunities that we believe can make Duolingo a significantly larger business over the long term. At the same time, our team continues to operate with discipline. We continue to execute to our full year bookings and revenue target ranges of 10% to 12% bookings growth and 15% to 18% revenue growth. We have increased our target adjusted EBITDA outlook to 26.5% from the 25% we outlined at the start of the year. As for point estimates to help you build your models, please keep in mind the following: for the full year, we expect bookings growth of approximately 11% and revenue growth of roughly 16%. At constant foreign exchange rates, from our last call, the bookings growth rate would be about 0.5 point higher. For gross margin, we now expect to end the year closer to 70% as compared to the 69% we initially expected as we drive more AI content into our products offset by AI cost savings. We expect adjusted EBITDA to be approximately $320 million at the margin of roughly 25.5% I just mentioned. And we expect to generate over $375 million of free cash flow this year. While it is not included in our 2026 guidance, we do want you to know that the company has a bonus plan that will trigger if Q4 DAU growth is 25% or higher and would be paid out during Q1. Since it's currently uncertain whether that threshold will be met, we have not included it in our 2026 guidance. If it were achieved, we would expect the payout to be roughly $10 million in cash, potentially higher if DAU growth is higher. For Q3 itself, we expect bookings of approximately $307 million or growth of 9%. Revenue of $302 million, representing growth of 11%. We expect gross margin to be 71% and adjusted EBITDA of roughly $76 million, representing a margin of 25.2%. Our balance sheet and cash flow potential remains strong. We ended the quarter with $1.3 billion in cash and investments and generated $79 million in free cash flow. We repurchased about $44 million of stock during the quarter, bringing cumulative repurchases under our authorization to $72 million or approximately 700,000 shares. Putting it all together, our user momentum is strong, our business model continues to generate significant cash flow, and our team is executing well in an important investment year. We remain focused on reaching 100 million DAUs in 2028, and we believe the path there can create a significantly more valuable business for our shareholders. And now I'll turn it back to the operator, and we're happy to take your questions. Operator: Your first question comes from Wyatt Swanson with D.A. Davidson. Wyatt Swanson: Given DAUs are now expected to be above that 20% year-over-year growth in the second half of the year, could you maybe give some color as to why the full year bookings guide wasn't raised more? Like I realize you're in experimentation mode, but shouldn't a larger amount of users on the platform technically translate to increased bookings even if you're not pushing for monetization. Luis von Ahn Arellano: Yes, I think that's a great question. I mean the first thing to note is that our users don't monetize immediately. I mean, they -- some of them monetized -- it takes a while for them to monetize because we have this premium model. We do expect that higher DAUs will imply higher revenue. But it's going to take some time. And the second reason is exactly what you said. We said at the beginning of this year that we were going to operate in this box in terms of revenue, and we are going to continue with this box. Basically, roughly 11% year-over-year bookings growth and then the rest of the efforts are in increasing DAUs and in teaching better. Wyatt Swanson: Got it. Okay. That's helpful. And then you noted with the extension of free trials that helps improve both engagement and monetization. Could you just talk to some of the underlying mechanics as to how exactly that works going from 1 month to 2 months? Luis von Ahn Arellano: Yes. So the -- we're -- just to put it into context, our monetization team, their goal this year is to find things that monetize that are not at odds with user growth. I mean, historically, some of the ways that we have monetized have been by adding friction to the free use of product and that is at odds with user growth. So one of the things that has worked the best is longer free trials. And in particular, the main one that we're trying is historically Duolingo -- free trial in Duolingo and we say, "Hey, you can try for free. It's been 7 days. So we give you 7 days for free. That's what historically has happened. We are now shifting most of our free trials, not quite all of them yet to a 1-month free trial. And what -- the way that works is basically significantly more people decide to take that trial because it's just a better deal. And because of that, we got a larger number of people actually converting to payers. And the other nice thing is that as soon as they agree to go on the free trial, the experience just gets better because we turn off energy, we turn off the ads. So this actually increases daily active users as well. So we like it very much, and it's having a lot of good traction. Operator: Your next question comes from the line of Andrew Boone with Citizens. Andrew Boone: I wanted to ask about just your role in terms of influencers, how do we think about international marketing and kind of the changes that you guys highlighted in the letter? And then secondly, as we think about the U.S., Luis, understood the strength in the quarter and kind of resurrected users. Can you talk about top of funnel though? How do you feel about trends there and kind of the broader opportunity of attracting new users that may be new to Duolingo? Luis von Ahn Arellano: Yes. So I should say our marketing team, just to put it in historicals, most of our growth has been organic through word of mouth. In fact, for the first several years, it was 100% organic to word of mouth. Then we added mainly one form of marketing, which was social -- our own social media accounts. And that's still going really well. We are -- I mean we're getting more than 1 billion impressions per quarter on our own social media accounts, which is incredible. But our marketing team is really starting to expand to having other important tools. One of them is creators like groups of creators. And that's working quite well, actually, specifically in certain countries, countries like China, Indonesia and India. Something like 2/3 of our total social media impressions come from influencers. And what we're finding is that we are able to not spend a ton of money on this and what's nice is that these people have different audiences than us. And so this really just brings in a lot of new users. And this is something that we're very happy with. We use influencers differently in different countries, some countries more than others. But that's working really well. I should also mention that our marketing team has just become significantly more sophisticated on performance marketing. So while still the majority of our growth is organic, we're getting good traction on both usage of influencers and performance marketing. And we are seeing that in top of funnel. So it is increasing. So we actually feel pretty good about our top of funnel. It is increasing. And you asked about the U.S., in particular, the U.S. growth has increased quite a bit in the last quarter, and that's something that we're happy with. By the way, if you look at our growth, our DAU growth is really broad-based. Basically, all regions are growing and their -- all regions are growing faster than they were before. Asia is still the fastest growing but U.S. has increased. Gilian Munson: One thing I might add to that, Andrew, is the top of the funnel is part of the story of the quarter. It got better. As you know, that's been a focus area of ours. We've talked about how we want to get better there. And in almost every region, the rate of growth there improved in top of the funnel in the quarter, which is a great accomplishment for the team. Operator: Your next question comes from the line of Nathan Feather. Nathaniel Feather: My end, both of them on the monetization angle. I guess, Interested to hear with the learnings you've seen so far from giving video call to new Super subscribers? And how is that influencing your plans for video call and Max generally as we go from here? Luis von Ahn Arellano: So video call is an interesting thing. We're -- I mean, we love this feature. It's an excellent feature for learning conversations, practicing conversation. It really works. We have, in fact, research that shows that if you use video call, you get better at conversation. So it really works, it's really good. When we first started adding video call to the platform, the first time that we put a video call in the platform, I remember the team that was working on it told me, okay, we can give this to users, but it's going to cost like $0.30 per call. to give to users. And that was expensive. And this is why we decided to put it behind our most expensive plan, which is Max but we said back then is if we can decrease the cost of this, we're going to try it in different places because it is our aim to give video call to as many people as possible because it really helps in learning a language. The good news is that through a lot of really hard work, we've been able to bring down the cost of video call. It is now under $0.01 per video call. And the reason for that is mainly a move towards open source models. It's just a lot cheaper to do that, and we don't see a loss in quality in there. So we're very happy with that. And because of that, we're able to now give video call to Super subscribers. The state that we're in right now is most new Super subscribers get video calls. So if you buy Super right now, you will get video call as well. We expect that over the next few months, we're going to give video call to existing user subscribers. We haven't quite done that to all of them. We expect that we're going to do that as well. And that's really good because more people are going to be able to practice conversation. Now that calls into question what are we doing with Max? And my answer is, I don't know yet. We're -- there's a few possibilities. One possibility could be that, while Super subscribers get a limited version of video call, like limited number of video calls and Max subscribers get unlimited. That is a possibility. Another possibility truthfully is that we may actually sunset Max. But -- what I will tell you is that we're going to have an answer to this in the next couple of quarters. And in addition to that, we're going to try to do this without a loss of revenue. And that's partly why we're not going super fast here because we're trying to figure out how to do this without losing much revenue. But again, our intent is that we give it to as many users as possible. Nathaniel Feather: Okay. Great. That's really helpful. And then one thing we've seen reports that you're testing in ad-supported tier. So I guess help us think through, do you see any opportunity for maybe a lower priced tier, something in between Super and the free model and from a user segmentation perspective, what are you really going after there? Luis von Ahn Arellano: Yes. We are testing that. It's called Super Lite. It is being tested. And now I really want to emphasize the word tested. We are -- I don't know what's going to happen with Super Lite in the end. It is cheaper than Super, it's about half the price, depending on the geography. It is ad supported, so you get ads. And in addition to that, basically, you don't get unlimited energy, you get twice as much energy. So that's the idea. At the moment, it's still a small fraction of our subscribers are in Super Lite. But part of the reason is that we're early in the testing. We're just not advertising it very well. And of course, the goal with a Lite plan like this would be, if we're pretty sure that you're not going to buy Super then we should try to sell you Super Lite. That's kind of the idea. And you're going to see us experiment with that over the next few months. I don't know what will end up happening, but it's something we're trying. Operator: Your next question comes from the line of Bryan Smilek with JPMorgan. Bryan Smilek: Luis, good to see CURR at an all-time high. Just curious, could you share more color on just overall retention by cohort. Are these new free trial users that are engaging on a daily basis, exhibiting higher engagement trends? Just curious anything you can add there from a retention perspective going forward. Luis von Ahn Arellano: Yes. So like we mentioned in the letter, our retention, our user retention, pretty much all metrics of user retention are at an all-time high. The one we look at the most, this one called CURR, which is current user retention rate. We're very happy that it is an all-time high and that it has increased by about a percentage point in the last year because tiny changes to CURR end up implying pretty large changes in daily active users over time because it really compounds. This is pretty broad-based. Basically, you see it in every region, you see across all types of users. The reason for this is just that the product is stickier. I mean basically, we have added a number of things, and it's hard to pinpoint to a single one because again, every single -- we have a new version of the app every single week and every version of the app has approximately 350 changes. So it's hard to point to something that actually did it. But it's just generally our product is just stickier and we're very happy with that because that's kind of the best type of growth you can expect that is just pure, it's a better product. Bryan Smilek: Great. That's super helpful. And then also kind of building on Nathan's question around Max overall. More from the speaking angle as well, can you just share more color in terms of overall engagement with more intermediate and advanced learners, which would, in my view, likely start to take on more speaking practice within the app. Luis von Ahn Arellano: Yes, we're getting -- I mean, -- so there's two things to say about that. The first one is that if you have access to video call, the engagement is very good. And in fact, that feature has gotten significantly better. One of the main metrics that we have for this feature is a number of words spoken by DAU who has access to that. That graph is a beautiful graph because it is entirely up into the right over the last couple of years. It's just every month, it is a little better than the previous month in terms of us getting you to speak more. And ultimately, this will just translate in people learning better and being engaged with it. So there's video call. We're also in the free tier, making people speak more. Just there's more speaking exercises and there's also more ways to answer, exercises that -- before you had to tap on the phone. Now you can answer it with your voice. So we're pretty happy with that. And it's exactly what you said. This is much more important to advanced and intermediate users, and we see that as something that will over time really help with certainly monetization, but also word of mouth because if people are learning better, they're going to tell their friends, et cetera. So we're very proud of that. Operator: Your next question comes from the line of Ryan MacDonald with Needham. Ryan MacDonald: Maybe just to ask on the bonus incentive comment sort of at the end of the prepared remarks. Obviously, the team internally is operating towards trying to get to that 25% rate. How should we think about that translating to, let's call it, the pace of new experimentation between now and the end of the year and if that picks up, are there any sort of features or initiatives that you'd call out that you're most excited about? Or is this really about just letting the changes in the experiments you've already made continue to sort of mature within the market and sort of let them sort of produce results? Luis von Ahn Arellano: It's a bit of both. So certainly, our rate of experimentation will continue. I mean it's pretty high this year. So if you look at actually a number of experiments that we're putting up per week, that keeps growing over the last year that has significantly increased. In fact, it is -- has increased faster than our head count. So that means that per person, we're actually putting out more experiments every week. So we're -- you will see that throughout the rest of the year. There's a lot of experimentation that's going to happen. And generally, that's across all the things that we experiment, teaching better and the daily active user growth are where we're spending our focus, but you're also going to see experimentation and monetization, et cetera. And it's related to the bonus in some way, but mainly it's just -- this year, our goal as a company was -- we decided we are going to focus most of our efforts of our incredible experimentation machine to just make it so that we can continue growing daily active users because we think that if -- as we said many times, if we can get to a company that is 100 million daily active users, that's just -- that's just a much bigger business, and that's where we want to get to. But you will see experimentation. You'll see a lot as you usually see from us. Ryan MacDonald: Excellent. And then maybe on Max. You obviously are sort of working on a lot of things with Max right now and then one being sort of Super -- or voice being rolled out more to Super. Is there any sort of, I would call it, new feature product development that's sort of maybe geared or aimed towards the Max here at this point that could potentially sort of continue to extend the life of that tier? Or is really everything more focused sort of at the lower tier experimentation right now? Luis von Ahn Arellano: So I won't rule that out. It may happen that we develop something that we end up putting behind Max. We're developing a lot of features, and there may be some that because of cost of them or something we end up putting them behind Max. But that is not the goal. The goal really is to try to give speaking -- particularly speaking, features which are the most expensive ones to provide. The goal is to provide it to as many users as possible because, again, we just believe that the more people have access to this, the more word of mouth, the more users we have and the larger this business becomes. So that's the goal. But -- so I guess, what I'll say is that's not -- it's not what we're trying to do. But maybe that in 2 months, I come back and say, "Hey, Max actually got a new feature." And it's not because I'm trying to be secretive to you. I just don't know what will end up happening in terms of cost of certain features that we're developing. Operator: Your next question comes from the line of Shweta Khajuria with Wolfe Research. Shweta Khajuria: First one is on attention span for users as attention span, I guess, decreases, how is the engagement and session time across the app trending? And I guess what -- how are you addressing that? And then the second is on Math and Music. Could you please talk about just the product road map as you see Math and Music developed through the year and how that could drive contribution to DAU growth. Luis von Ahn Arellano: Yes. Thank you. I think part of your question is something that we've said in the past, which is just the world, in general, attention span is going down. I mean if you look at how people use things like social media apps, they use them in like 10-second bursts. Whereas for Duolingo, our lesson on Duolingo is maybe 2 minutes. That is something that we need to address. And we are working on that, trying to make the minimum session length longer. We are -- we have not yet -- we're testing stuff there, but we have not yet released anything. Part of the issue there is that if you make the minimum session length shorter, that's good, but you've got to make sure that people actually also come back many other times in the day so that it compounds. And that's kind of what we're trying -- what we're experimenting with but it is something we're actively experimenting with. In terms of Math and Music, so we're pretty excited about both of those. I should say there's still -- certainly when compared to chess. They still -- even though they do have single-digit millions of DAUs, they're much smaller than chess. So we do expect growth from both of them, but the contribution to our overall -- I mean we have 60-some million daily active users, even a 50% growth here doesn't contribute all that much but we are -- we do expect that they're growing -- we expect them to grow. Probably the easiest one to talk about in terms of strategy is Math because we are -- we understand that pretty well or at least better than Music, I think. With Math, originally, when we launched Math, I thought -- and I was wrong, I thought that we could get the average person on the street to get addicted to learning math. I was wrong. I don't believe we can do that. But -- so now our strategy is actually to mainly teach math to the people who actually need to learn math, which are basically K through 12 students. Now we may not sell to schools. That's not our goal to sell to schools, but it's at least that the user -- our user base for Math is mainly under 18. And as soon as we started working on that, that clarified a lot of things, and I think we started making a lot more progress rather than trying to get your average 35-year-old person who hates math to suddenly love it. I would love to do that, but I just -- I've given up on that one. And in Music, it's a bit early. I mean, we are working a lot on Music. I'll have -- we'll have more to say about Music in maybe a quarter or 2. Operator: Your next question comes from the line of Mark Mahaney with Evercore. Mark Stephen Mahaney: Your comment about video call functionality. I'm sorry, Luis, were you saying that you could make it available to all Duolingo users or all Super subscribers? Luis von Ahn Arellano: Our goal -- I would love to make it available to all Duolingo users. I don't think we can do that right now. My goal in the moment is to make it available to all Super subscribers. Mark Stephen Mahaney: Okay. And the gating factor to -- for it not to be available to all users is just price, right, or cost, I mean, and you bring it out by another 90% next year, and you could do it? Luis von Ahn Arellano: Yes. But there's one other thing that we do have to take into account. This is one of the main things that gets people to buy. So if suddenly all users have it, there's less incentive to buy and then we would have to find other reasons to get people to buy. So there's a little bit of a trade-off here. So it's both cost and this is one of the main things that get people to buy. Mark Stephen Mahaney: Okay. And then I want to switch gears and ask you about advertising. And I think you've -- you've maybe changed a little bit over the last couple of years in terms of your view on both advertising revenue and on advertising spend. Where are you on that journey? Is there something that you've seen that's made you maybe a little bit more constructive on marketing spend and the efficiency of it and the desirability perhaps of advertising revenue? Luis von Ahn Arellano: You are right that over the last couple of years, I have come -- I've come around to add both in terms of ad revenue and ad spend. A couple of things to say. For the -- in terms of ad revenue, I mean, for the foreseeable future, we will remain a subscription business. I mean our subscription business is much larger than ads, and it will continue being like that for a while. However, we see a pretty large opportunity with ads. I mean we are -- we have a lot of users. We have a lot of active users and pretty much every app our size or larger than us, makes a ton more money from ads than we do. So we see a pretty big opportunity there, which is why we have become a lot more sophisticated on that over the last -- there was a time at Duolingo a couple of years ago, where our entire investment in ad revenue was half a person, there's one person whose halftime job was to deal with ads. So this is how much we were investing in them. We now have a team it's significantly much more professional. They know what they're doing. I would expect that over the next few quarters, that there -- that you're going to see some improvements in our ads business. This takes some time to get the hang of it. But what I'm seeing is we're just going to be able to give significantly higher quality ads in our product that also make us more money. So we're working on that. This is active work stream that we're doing, so there is that. In terms of ad spend, like for marketing, for -- marketing for us, we're also significantly more sophisticated. I mean it was a while where I was massively allergic to performance marketing. The way I see it now is I don't think that we want to get addicted to performance marketing because that's never good. However, it is a good tool to have to complement your other marketing strategies. So our marketing team, which I really think is probably the best marketing team in the world has now started adding as another strategy performance marketing and we're very happy with that. It's -- we're seeing the results in our top of funnel for that. Operator: Your next question comes from the line of Ygal Arounian with Wedbush. Ygal Arounian: I guess, as I listened to the call and what we're talking about here, feels a little bit like we're starting to maybe shift or start to focus a little bit more on monetization, talking about ads and new tiers. Is that fair, not to say that you're moving away from the optimization around DAUs, but it does feel like you are maybe shifting a little bit the monetization side. How do you think about that transition? When is the right time? What's involved? And then I have a follow-up. Luis von Ahn Arellano: Yes. I mean it's perceptive of you. It's a good question. I mean the reality is, this year and for a while, we really -- one of the main thing that we're concentrating on is expanding our active user base because we just think that more users is just better for everything. It's significantly larger business, et cetera. And we have this aggressive goal to try to get to 100 million daily active users. We feel good about that goal. We think we can make it. And if we do get there, kind of all things get better, just more users, you can make more money, all things get better. It is true that our experimentation, when we started the year, we had a little bit of a pause in monetization in the sense that we're like whoa, whoa, whoa, wait, any monetization that we're doing that is counter to DAU growth, don't do it. And the reality is we were doing a number of things that were countered to DAU growth. So we kind of had a little bit of a reset. At this point, enough time has passed that we understand levers significantly better. So we are a little more back into like, okay, this type of monetization is good. This type of monetization is good. So for example, we mentioned longer free trials. We understand that, and we are kind of going hard on those. Ads is another business that we're perfectly happy if we have significantly better quality of ads and make more money from them, we're very happy with that because that's also DAU aligned. So we are funding that. So it is true that we're probably taking it more seriously, I don't know if that's the right term. We're focusing a little more on it than when compared to 6 months ago. So that is true. I don't think there's a time when we're like -- a lot of people ask us, "Oh, when are you going to stop worrying about DAUs and when are you going to start making money?" A lot of people ask us that. I don't think that we're going to have a shift like that. we're going to continue really trying to get to 100 million DAUs in 2028. But you'll see probably increased monetization focus kind of gradually over time as we find ways to monetize that are not at odds with DAU growth. Ygal Arounian: Okay. That's really helpful. And then I want to come back to the comments you made about the open source models and how that's driven down AI compute cost. So, a, how should we think about that opportunity in terms of the margin structure over time? It feels like there's multiple levers you could pull on that. And I mean, it's an interesting theme because we've heard this over and over again, this earnings cycle from a lot of companies in this -- like lean into open source models. And then how does that change the product velocity because I know AI has been a big component in driving your product velocity. So does that become a bigger opportunity with the cost coming down? Luis von Ahn Arellano: Yes. I mean, so at the highest level, it just turns out that there's -- when compared to a year ago. There's just significantly better open source options now. And while for some stuff, they are behind the Frontier labs, they're not that behind for most things, maybe 3 to 6 months. I mean it just turns out that for a lot of applications, you don't need the absolute smartest model, like the reality is the quality is indistinguishable for many applications that we use. For example, serving a call like a conversation practice to somebody who can only speak 100 words of a language. You don't need to serve a -- your model doesn't need to be as good as a philosopher. You're probably going to talk about I don't know, frying eggs, like you're not going to talk about very sophisticated stuff. So we find that in a lot of cases, we can switch to the open source model. Internally, of course, we're still using many models from, let's say, OpenAI and Anthropic, and we'll continue doing that. And it will just always be a decision -- a trade-off between, can we do it at roughly the same quality but with the open source? And if that's the case, we'll use the open source. There are still cases where we're not able to and in those cases, we'll continue paying. But I do expect that what will happen is that the cost per usage of AI like whatever it is, the cost per token, if you want to call it, will come down for us because we will continue moving more and more to open source. And I also, just like you said, that will probably mean that we're able to offer more and more AI features to more users. And so I'm pretty excited about that in general. Gilian Munson: Yes. And the way to think about it is, we set out the year to be very patient with ourselves about what the business model is going to be. So we really have been trying to stick to this idea that we're going to grow bookings 10% to 12%, revenue 15% to 18%. And when we started the year at 25% adjusted EBITDA margin felt like the right level of investment relative to growth. What we're basically saying is by going up about 1.5 points on that adjusted EBITDA margin, we are seeing AI cost savings that will give us a bit structurally a better margin even with our goal to put voice call out to all Super users over the course of the year. Operator: Your next question comes from the line of Justin Patterson with KeyBanc. Justin Patterson: First, could you talk through just what's driving the confidence level behind that acceleration in Q4? Is that simply easy comps? Or are you just seeing something with the product side finally starting to click there. And then Luis, I just wanted to go back to making the mission affordable or making education affordable for the masses. Obviously, as you increase advertising in there, you do start to have a tension -- tension point in there, people get frustrated with the user experience in it. Does that start to cause some bad behaviors. So I'd love to hear more how you're thinking through the guardrails of still monetizing across the business while still having education be widely accessible within here. Gilian Munson: Let me cover the bookings guidance. So on the bookings guidance, the reality is how the year is playing out hasn't really changed too much. Of course, we've held the guidance. Q2 was a little better than we expected. So you're basically seeing us adjust for that in the guidance. I think it's important to remember that our bookings guidance also includes about 0.5 point of FX headwind. So net-net, you're probably at a little bit of a better place. But I think the year is playing out the way we thought. We've always thought that acceleration is going to come over time. This is not a slow and steady. That's not the way this place is. But we know that it's going to take a little time for the work we're doing to play through, and that's what you see in terms of us holding which -- the guidance, which implies Q4 gets better from a year-over-year rate of growth perspective. Luis von Ahn Arellano: Yes. And your question about making education affordable. I mean this is a very mission-driven company. Hopefully, we have shown that we will continue being a very mission-driven company. Our mission is to develop the best education in the world and make it universally available, and that is our goal. The way we're going to be operating is similar to what we're operating right now -- how we're operating right now, which is -- we are -- first and foremost, care about our reach. And that every extra active users that we reach means there's one other person that we're teaching, means there's one other person that instead of scrolling -- doom scrolling on social media is actually learning something that is valuable to them. So we're -- that's what we're emphasizing. But we also believe that turns out that our mission -- I really do believe that even though we're a very mission-driven company, I think that if we succeed in our mission, that's also aligned with just making this a very large business. The more users we have in one way or another, the more we'll be able to monetize them. Operator: Your last question comes from the line of Arvind Ramnani with Truist. Arvind Ramnani: Just a couple of questions. Just with China just continuing to become a kind of important geo for you all, and you all are running OpenAI and Anthropic to run your models or I think mostly OpenAI, does it create some sort of data residency risk, regulatory risk, there's just -- there's just a lot going on in terms of regulation and sort of protection measures and would you just kind of move to a local model in that market? Just how are you thinking about it? Because Luis, I know you're fairly forward thinking about AI and not [ as reactive ]. So we just love to see -- not the you're making any changes, but how are you thinking about it? Luis von Ahn Arellano: Yes. So you're right. Thank you for asking about China. I mean, China is a very exciting market for us. It keeps growing. It is our second largest market in terms of daily active users, and we expect it to become our largest market in terms of daily active users in a year or 2. Also China monetizes pretty well for us, monetizes about as well as France. So we're -- it's an exciting good market for us. When it comes to AI, there's a lot there. The reality is that in China, we simply cannot use the AI models, the kind of U.S. AI models. We have to use local models. That's by law. So we do that. In China, all of our usage of AI uses Chinese models, that is just that -- you have to do that. And in terms of regulatory risk, it's important to mention that, of course, we understand that China poses some regulatory risk. That's kind of outside of our control, how they operate the country. But we feel pretty good about what we're doing there in terms of our government relations. So I feel pretty good, but I don't know what the government will decide at any point. Arvind Ramnani: Yes. And just on this topic, right? Can you just give us just a rough estimate, right? Like I'm not looking for anything precise but just a rough estimate of what your AI costs are? And is it like largely on Anthropic OpenAI? Or are they kind of open-weight models? And just in terms of like your cost of revenues like does AI cost you like 1%, is it 10%? Just directionally, how significant are your AI expenses? Gilian Munson: Yes. Our expenses on AI and cost of goods sold are tens of millions of dollars. So they're significant to the cost of goods sold. Hosting is another big cost for us as well. But those are the two biggies going through the cost of goods sold. Inside the business, we also use AI, and that is more closer to the $10 million range internally. Arvind Ramnani: Yes. Perfect. That sounds great. Yes, I think those are the main questions. I mean unless Luis, if you have any like broader thoughts on just -- there's a lot of debate right now in like AI sovereignty, open-weight models or closed-weight models. Are you able to share anything, I love to get your high-level view on that. Luis von Ahn Arellano: I mean at the highest level, our view inside the company is that it is in our best interest as a company to use open-weight models as much as possible. So if I had a magic wand, I would try to move everything to an open-weight model. It's not always possible because sometimes the frontier models are more advanced. But from a company standpoint, it is just significantly better because it's way cheaper to use open-weight models. Arvind Ramnani: Perfect. Perfect. And so would you expect like this sort of having a hybrid cloud, where do you think that's where we end up? Like you have some sort of orchestration where you put some traffic towards like the highest-quality models versus open weight, is that how you expect? Luis von Ahn Arellano: That's probably. My guess is that most companies that use AI heavily have a portfolio of models that they use where for some uses, you kind of have to pick this one model that happens to be a proprietary model. But for other things, you try to use the open-weight models. So my sense is most companies will have a portfolio model like that. That's certainly what we have. What I would say is that our expectation is that over the next some time, that portfolio will be weighted a little more towards open-weight models than it is today. Operator: I'm showing no further questions. This concludes the Q&A section of the call. I would now like to turn the call back to the host for closing remarks. Luis von Ahn Arellano: Thank you, operator. I'd just like to thank everyone for joining us, and we look forward to seeing you on the next call. Before you buy stock in Duolingo, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Duolingo wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $403,337!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,334,946!* Now, it’s worth noting Stock Advisor’s total average return is 958% — a market-crushing outperformance compared to 214% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 12, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Duolingo. The Motley Fool has a disclosure policy. Duolingo (DUOL) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Duolingo's latest quarter gave investors fresh evidence that user growth is accelerating, but one Wall Street firm still sees a problem with what the market is paying for the language-learning company. Duolingo (DUOL) reported second-quarter revenue of $298.5 million, up 18% from a year earlier, while total bookings rose 8% to $289.1 million. Daily active users increased 23% to 58.7 million, and paid subscribers rose 17% to 12.7 million. The company also reaffirmed its full-year targets for 10% to 12% bookings growth and 15% to 18% revenue growth, while raising its adjusted EBITDA margin outlook to about 26.5%. Those results arrived one day after Bank of America took a more cautious view of the stock. In a note given to TheStreet, BofA analyst Omar Dessouky downgraded Duolingo to Underperform from Neutral and cut his price objective to $93 from $103. Based on the $135.80 share price listed in the note, that target implied roughly 31.5% downside. Dessouky's concern centered on whether Duolingo can sustain the growth needed to support its valuation. The analyst said the stock had rallied more than 20% since early June alongside an improvement in monthly active users. June MAUs rose about 6% from May, following 3% growth in May and a 2% decline in April, according to the note. BofA argued that the June acceleration did not appear to be driven by major product improvements. The firm instead pointed to a June promotion tied to Airbnb that offered users a free month of Super Duolingo without requiring a credit card. Duolingo's earnings report added another wrinkle to that argument. Block, Inc. Q2 2026 Earnings: Recap of $XYZ Earnings Call, Forecast Walt Disney Co. Q3 2026 Earnings: Recap of $DIS Earnings Call, Forecast Palantir Technologies Inc. Q2 2026 Earnings Call: Recap of $PLTR Earnings & Outlook Management said Q2 user growth accelerated because of product changes, marketing, and a one-time Streak Revival event. The June campaign allowed eligible users to restore their longest-ever streak by completing three lessons, and 15.4 million learners participated. Nearly 8 million of them did not have an active streak when the event began. That disclosure gives some support to BofA's broader concern that part of June's acceleration came from a temporary event, although Duolingo pointed to a different one-time factor than the analyst did. The company also said its current-user retention rate reached an all-time high of 84%, up about one percentage point from a year earlier. Management expects DAU growth to remain above 20% for the rest of 2026, arguing that product improvements and marketing should provide more durable support. The firm said Duolingo was trading at roughly 16 times its 2027 EBITDA estimate, compared with about 10 times for a group of mid-cap subscription companies with similar expected EBITDA growth. Dessouky said that premium was difficult to justify without more confidence in Duolingo's longer-term product-market fit. BofA cut its 2027 bookings growth forecast to 9% from 11% and lowered its 2027 EBITDA estimate to $338 million from $388 million. The analyst had expected second-quarter bookings to reach $294 million, above the $284 million Street estimate and company guidance cited in the note. Duolingo ultimately reported $289.1 million, still above that comparison point but below BofA's forecast. Management guided to $307 million of bookings in the third quarter, representing about 8.9% year-over-year growth. That figure is nearly identical to BofA's $307 million estimate. The disagreement becomes more pronounced further out. Duolingo has been expanding AI-powered learning features such as Video Call and has laid out a longer-term vision for a more conversational learning experience. BofA said it is not yet willing to assume those changes will produce the growth required to justify today's premium valuation. For investors, the latest earnings report strengthened the near-term user-growth story. BofA's downgrade argues that the harder question begins after that. Related: Duolingo CEO issues stark forecast for 2026 This story was originally published by TheStreet on Aug 11, 2026, where it first appeared in the Investing section. Add TheStreet as a Preferred Source by clicking here.

Interested in Nerdy Inc.? Here are five stocks we like better. Q2 performance improved: Revenue fell 4% year over year to $43.3 million, but gross margin expanded to 64.7%, net loss narrowed to $6.9 million, and adjusted EBITDA loss improved to $900,000. Nerdy is refocusing on consumer learning: The company will wind down Varsity Tutors for Schools and exit First Tutors, expecting to cut annual fixed costs by about $11 million. The exits reduced 2026 revenue guidance to $168 million–$175 million, while management maintained that the consumer business outlook is unchanged. Product and efficiency investments continue: Nerdy is expanding AI-enabled learning tools, including a Study Plan and a self-service checkout funnel, while reducing headcount. Management expects year-end cash of approximately $30 million–$32 million and believes existing liquidity can fund operations through free-cash-flow breakeven. Duolingo Speaking Volumes: Forms Bullish Chart Ahead of Earnings Nerdy (NYSE:NRDY) reported second-quarter results that showed improved margins and a narrower loss, while the online learning company announced plans to wind down its Varsity Tutors for Schools business and exit First Tutors, a smaller U.K. tutoring operation. Founder, Chairman and Chief Executive Officer Chuck Cohn said the decisions are intended to concentrate the company’s capital, product development and management attention on its consumer learning business. Consumer revenue totaled $36.5 million in the quarter, representing 84% of Nerdy’s total revenue of $43.3 million. → Sandisk Just Delivered a Blowout Quarter—Here's Why the Stock Is Falling “Q2 demonstrated continued improvement in Nerdy’s operating performance,” Cohn said, describing the company as a more focused consumer learning business centered on connected tools for learning, tutoring and progress tracking. Total revenue was down 4% year over year to $43.3 million, within the company’s guidance range of $42 million to $44 million. Consumer average revenue per month, or ARPM, rose 5% from a year earlier to $366. → 4 Oil and Gas ETF Plays as Prices Stay Sky-High Learning Memberships stood at 29,100 as of June 30, down 5% year over year. However, the company said the rate of membership decline moderated for the fourth consecutive quarter. Chief Financial Officer Atul Bagga said Nerdy expects active member growth to turn positive by the end of 2026, supported by retention initiatives and a more efficient customer-acquisition approach. Gross margin expanded 320 basis points year over year to 64.7%. Net loss improved to $6.9 million, compared with a $12 million loss a year earlier. Non-GAAP adjusted EBITDA loss narrowed 68% to $900,000 from $2.7 million in the prior-year quarter. Free cash flow was negative $6.3 million, improving from negative $8.2 million a year earlier. Cash and cash equivalents totaled $38.4 million at quarter-end. Bagga attributed the gross-margin improvement to lower amortization of capitalized internal-use software following abandonment charges in the fourth quarter of 2025, as well as lower expert costs. Sales and marketing expense declined 15% year over year to $11.5 million, while general and administrative expense fell 14% to $22.9 million. → No Hangover: Revisiting Microsoft One Week After Earnings Nerdy said it will shut down Varsity Tutors for Schools, or VT4S, and leave First Tutors. Cohn said VT4S accounted for a low-single-digit percentage of the overall business but carried complexity amid a school funding environment that has been challenged for several years. The company expects the exits to reduce its annual fixed-cost run rate by approximately $11 million. It anticipates incurring roughly $2 million to $4 million in exit-related costs, mostly during the third quarter. Bagga said the school-focused business was profitable, but management sees a larger opportunity and higher potential return on investment in consumer learning products. The exits also are intended to support Nerdy’s path toward sustained profitability and free-cash-flow breakeven. The company reduced its 2026 revenue guidance to a range of $168 million to $175 million, from a prior outlook of $180 million to $190 million. Management said the lower forecast reflects the businesses being exited rather than a change in expectations for the consumer business. For the third quarter, Nerdy expects revenue of $32 million to $35 million and a non-GAAP adjusted EBITDA loss of $9 million to $6 million, excluding exit costs. The company described the third quarter as its seasonally lowest-revenue period, with back-to-school cohorts converting into revenue late in the quarter and into the fourth quarter. For the full year, Nerdy now expects non-GAAP adjusted EBITDA between a loss of $4 million and approximately break-even, excluding exit costs. Its prior outlook called for approximately break-even adjusted EBITDA. Nerdy said it is using artificial intelligence tools to accelerate product development while reducing fixed headcount. Total headcount was down 34% year over year at the end of the second quarter, and the engineering organization was 30% smaller than a year earlier, according to Cohn. AI-related expense totaled $2 million in the quarter, compared with $700,000 in the first quarter and $400,000 in the year-earlier period. Bagga said nearly all employees use AI tools daily, and the company expects AI usage to rise while efficiency improvements keep AI spending at or below current levels. Cohn said Nerdy has launched or rebuilt nearly every part of its digital learning experience surrounding live tutoring since the beginning of 2026. Its content library now includes more than 15,000 lessons spanning 220 subjects, alongside diagnostics, quizzes, practice tests, flashcards and other learning materials. The company is integrating those resources into a “Study Plan” designed to combine a learner’s goals, available time, mastered skills and recommended activities, including live tutoring. The plan is visible to students and tutors, and Nerdy expects to extend it to all tutoring relationships in August. Nerdy is also moving toward a self-service customer-acquisition model. Historically, most customers converted through a telesales-assisted process, but Cohn said learners can now register online, experience the platform and purchase Learning Memberships through a self-service checkout funnel. Management believes the approach can lower acquisition costs and improve scalability. Nerdy now expects to finish 2026 with approximately $30 million to $32 million in cash and cash equivalents, including $20 million drawn on its term loan. Its previous year-end cash expectation was $40 million to $45 million. Bagga said the change primarily reflects the timing of VT4S collections and expected wind-down costs. Because VT4S contracts are generally annual, prepaid arrangements, exiting before the peak booking period reduces expected cash collections. He said the lower year-end cash outlook does not reflect changed economics in the consumer business. Based on its current operating plan, Nerdy said its existing liquidity is expected to fund the company through free-cash-flow breakeven. Nerdy, Inc (NYSE:NRDY) is an American education technology company that operates a live online learning marketplace. Through its flagship Varsity Tutors platform, the company connects students, professionals and lifelong learners with a network of thousands of educators for personalized one-on-one tutoring, group classes and test preparation. The platform leverages proprietary matching algorithms to pair learners with instructors based on subject expertise, learning style and scheduling preferences. Founded in 2007 by entrepreneur Chuck Cohn, Nerdy began as Varsity Tutors in Washington, DC, before establishing its headquarters in St. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Nerdy Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Make better investment decisions with Simply Wall St's easy, visual tools that give you a competitive edge. Duolingo (DUOL) is back in focus after its early August earnings release and updated outlook for the third quarter and full year 2026. The new numbers give you fresh context for assessing the stock. See our latest analysis for Duolingo. Duolingo’s latest earnings beat and guidance sit against a mixed share price backdrop, with a 21.21% 90 day share price return but a year to date share price decline of 25.83% and a 1 year total shareholder return decline of 64.65%. This points to some recent momentum but a still weak longer term picture. If Duolingo’s sharp swings have you thinking about where else growth and risk might line up differently, this could be a good moment to broaden your watchlist with 69 profitable AI stocks that aren't just burning cash. Duolingo’s user and revenue trends look strong, yet the stock has swung sharply after guidance. Is a solid business now offered at a sensible price, or are you still paying a premium for that strength? The most followed narrative for Duolingo pegs fair value at $114.49, which sits below the last close of $130.90. That gap is central to how some investors frame the stock today. Read the complete narrative. The narrative from REmmy leans heavily on Duolingo’s cash position, profit margins and growth adjusted valuation. Curious how those ingredients combine into that fair value and perceived mispricing story. Result: Fair Value of $114.49 (OVERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, the Duolingo narrative could be challenged if Vision 2026 spending weighs on earnings longer than expected, or if AI competitors start eroding user engagement. Find out about the key risks to this Duolingo narrative. While the leading community narrative tags Duolingo as overvalued against a $114.49 fair value, the SWS DCF model presents a different perspective. On that view, Duolingo at $130.90 is compared with an estimated future cash flow value of $289.91, which is interpreted in that model as suggesting the stock is undervalued. Which perspective do you think better fits the risk you are willing to take? Look into how the SWS DCF model arrives at its fair value. Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Duolingo for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 51 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity. With mixed signals around Duolingo’s valuation and outlook, it makes sense to move quickly, test the underlying data, and shape your own view using 2 key rewards and 2 important warning signs If Duolingo has sharpened your focus on growth, valuation and risk, use this momentum to compare it with other stock ideas that fit different roles in your portfolio. Target stability first by using the 79 resilient stocks with low risk scores to help keep portfolio swings in check while still putting your capital to work. Chase value with discipline by scanning the 51 high quality undervalued stocks that combine quality fundamentals with prices that may sit below their assessed worth. Strengthen your income stream by reviewing the 8 dividend fortresses that pair higher yields with an emphasis on durability. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include DUOL. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

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.” 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.” 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

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. DAU growth of 23% was driven by 'The Green Machine,' a systematic approach of testing hundreds of small product changes that compound to improve user retention. The 'Streak Revival' campaign successfully re-engaged over 15 million learners, demonstrating that users returning for specific incentives show higher retention than typical re-engaged cohorts. Management is intentionally operating within a specific 'box' for revenue and bookings growth to prioritize long-term daily active user expansion and teaching efficacy. Marketing strategy is shifting from purely organic word-of-mouth to a sophisticated mix of social media, influencer partnerships in Asia, and performance marketing. Current User Retention Rate (CURR) reached an all-time high, which management attributes to the product becoming fundamentally stickier through constant iterative updates. The company is successfully transitioning to a multi-subject platform, with Math and Music reaching single-digit millions of DAUs, though they remain small relative to the core language business. Full-year guidance assumes a bookings growth acceleration in Q4, and the company has established a $10 million employee bonus trigger if Q4 DAU growth reaches 25% or higher, though this potential payout is not currently included in the 2026 guidance. Management expects to reach 100 million DAUs by 2028, viewing this scale as the primary driver for future business value and monetization potential. Gross margin targets were raised to approximately 70% for the year, reflecting structural savings from shifting AI workloads to open-source models. The company plans to roll out video call features to all Super subscribers over the next few months, moving away from keeping it exclusive to the higher-priced Max tier. Future monetization efforts will focus on 'DAU-aligned' strategies, such as longer free trials and higher-quality ad experiences that do not introduce user friction. Management is considering sunsetting the 'Max' subscription tier or redefining its value proposition as core AI features like video calls move to the 'Super' tier. AI compute costs have been reduced from $0.30 to under $0.01 per video call by transitioning to open-source models, significantly impacting the margin profile. In China, Duolingo is legally required to use local AI models instead of U.S.-based models like OpenAI, introducing a unique regulatory and technical operating environment. The company is testing 'Super Lite,' a lower-priced, ad-supported subscription tier to capture users unlikely to purchase the full Super subscription. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management explained that new users do not monetize immediately due to the freemium model, creating a lag between user growth and revenue. The company is intentionally limiting monetization friction to ensure user growth remains the primary focus for the current fiscal year. Luis von Ahn stated a preference for moving as much as possible to open-weight models to reduce costs, noting that quality is often indistinguishable for educational tasks. The company will maintain a portfolio approach, using proprietary models like OpenAI only for 'frontier' tasks that open-source cannot yet handle. Management admitted to being historically 'allergic' to performance marketing but now views it as a necessary tool to complement organic growth. The ads team has been professionalized to increase revenue from the free user base, which management believes is currently under-monetized compared to peers. Management pivoted the Math strategy to focus on K-12 students who 'need' to learn, rather than trying to convince math-averse adults to engage with the subject. While these subjects have millions of users, their current impact on total DAUs is limited given the scale of the language platform.

Duolingo, Inc. (DUOL) came out with quarterly earnings of $0.66 per share, beating the Zacks Consensus Estimate of $0.61 per share. This compares to earnings of $0.91 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +8.20%. A quarter ago, it was expected that this company would post earnings of $0.79 per share when it actually produced earnings of $0.89, delivering a surprise of +12.66%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Duolingo, which belongs to the Zacks Technology Services industry, posted revenues of $298.45 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 0.37%. This compares to year-ago revenues of $252.26 million. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Duolingo shares have lost about 21.5% since the beginning of the year versus the S&P 500's gain of 13%. While Duolingo has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Duolingo was favorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.58 on $305.89 million in revenues for the coming quarter and $2.81 on $1.21 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Technology Services is currently in the bottom 39% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, NextNav Inc. (NN), has yet to report results for the quarter ended June 2026. The results are expected to be released on August 11. This company is expected to post quarterly loss of $0.16 per share in its upcoming report, which represents a year-over-year change of +46.7%. The consensus EPS estimate for the quarter has been revised 12% higher over the last 30 days to the current level. NextNav Inc.'s revenues are expected to be $0.9 million, down 25% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Duolingo, Inc. (DUOL) : Free Stock Analysis Report NextNav Inc. (NN) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Duolingo, Inc. DUOL 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. Duolingo, Inc. price-consensus-eps-surprise-chart | Duolingo, Inc. Quote 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. 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. 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. 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. 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. For the third quarter of 2026, management expects revenues of approximately $302 million, indicating 11.1% year-over-year growth. The projection is below the Zacks Consensus Estimate of $305.9 million. 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%, broadly in line with the Zacks Consensus Estimate of $1.21 billion. 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. DUOL currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Trane Technologies TT reported impressive second-quarter 2026 results. TT’s adjusted earnings of $4.31 per share outpaced the consensus mark by 0.9% and rose 11.1% from the year-ago quarter’s actual. TT’s total revenues of $6.35 billion surpassed the consensus mark by 2.9% and increased 6.4% year over year. Rollins ROL posted unimpressive second-quarter 2026 results. ROL’s adjusted earnings of 32 cents per share missed the Zacks Consensus Estimate by 5.9% but rose 6.7% year over year. Total revenues of $1.08 billion fell short of the consensus estimate by 1.7% but increased 7.9% from the year-ago quarter. Verisk VRSK reported second-quarter 2026 diluted adjusted earnings of $1.98 per share, beating the Zacks Consensus Estimate of $1.94 by 2.1%. The figure increased 5.3% from the year-ago quarter. Revenues of $806.3 million topped the consensus mark of $802.4 million by 0.5% and rose 4.3% year over year. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Duolingo, Inc. (DUOL) : Free Stock Analysis Report Rollins, Inc. (ROL) : Free Stock Analysis Report Verisk Analytics, Inc. (VRSK) : Free Stock Analysis Report Trane Technologies plc (TT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

For the quarter ended June 2026, Duolingo, Inc. (DUOL) reported revenue of $298.45 million, up 18.3% over the same period last year. EPS came in at $0.66, compared to $0.91 in the year-ago quarter. The reported revenue represents a surprise of +0.37% over the Zacks Consensus Estimate of $297.35 million. With the consensus EPS estimate being $0.61, the EPS surprise was +8.2%. While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to determine their next move, some key metrics always offer a more accurate picture of a company's financial health. As these metrics influence top- and bottom-line performance, comparing them to the year-ago numbers and what analysts estimated helps investors project a stock's price performance more accurately. Here is how Duolingo performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts: Total bookings: $289.1 million versus $286.09 million estimated by four analysts on average. Subscription bookings: $250.3 million versus $243.43 million estimated by three analysts on average. Daily active users (DAUs): 58.7 million versus 58.03 million estimated by three analysts on average. Monthly active users (MAUs): 140.6 million versus the three-analyst average estimate of 139.37 million. Paid subscribers (at period end): 12.7 million versus the three-analyst average estimate of 12.59 million. Revenues- Subscription: $258.04 million versus $254.89 million estimated by four analysts on average. Compared to the year-ago quarter, this number represents a +22.5% change. Revenues- Advertising: $21.05 million versus the four-analyst average estimate of $22.83 million. The reported number represents a year-over-year change of +2.2%. Revenues- Duolingo English Test: $10.11 million versus $9.71 million estimated by three analysts on average. Compared to the year-ago quarter, this number represents a +0.2% change. Revenues- In-App Purchases: $8 million versus $10.75 million estimated by two analysts on average. Compared to the year-ago quarter, this number represents a -23% change. Revenues- Other: $1.26 million versus the two-analyst average estimate of $0.79 million. The reported number represents a year-over-year change of -96%. View all Key Company Metrics for Duolingo here>>> Shares of Duolingo have returned +4.4% over the past month versus the Zacks S&P 500 composite's +3.5% change. The stock currently has a Zacks Rank #2 (Buy), indicating that it could outperform the broader market in the near term. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Duolingo, Inc. (DUOL) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Interested in Duolingo, Inc.? Here are five stocks we like better. User growth and retention accelerated: Daily active users rose 23% year over year, slightly exceeding expectations, while user retention reached an all-time high. Duolingo remains focused on reaching 100 million DAUs by 2028. Full-year guidance was maintained, with profitability improving: The company kept its outlook for 10%–12% bookings growth and 15%–18% revenue growth, while raising its adjusted EBITDA margin target to 26.5% and gross-margin outlook to about 70%. Monetization and AI initiatives are expanding: Duolingo is testing longer free trials, a lower-priced “Super Lite” subscription and increased advertising. Falling AI costs are enabling broader access to its Video Call feature and supporting margin improvements. 2 Falling Knives That Might Be Worth Catching Duolingo (NASDAQ:DUOL) reported accelerating user growth in the second quarter, with daily active users rising 23% year over year, as the language-learning company continued to prioritize product improvements, retention and long-term audience expansion. Co-founder and CEO Luis von Ahn said the company’s daily active user, or DAU, growth accelerated from the first quarter and came in slightly above expectations. He said the company was encouraged by early trends in the third quarter and remains focused on reaching 100 million DAUs by 2028. → SpaceX’s First Earnings Report Could Decide Whether Shorts or Bulls Have Control Duolingo: This Beaten-Down Growth Stock May Bounce Back “The vast majority” of growth came from Duolingo’s ongoing product experimentation process, which von Ahn called the “Green Machine.” The company tests hundreds of product changes, measures their performance and expands the initiatives that work, he said. Duolingo releases a new app version weekly, with roughly 350 changes per version, according to von Ahn. Von Ahn said user retention metrics reached all-time highs during the quarter. In particular, the company’s current user retention rate, or CURR, increased by about one percentage point over the past year. He said the improvement was broad-based across regions and user types, reflecting a “stickier” product rather than a single feature or change. → 3 Drone Stocks That Should Soar After the Summer Slump Duolingo Stock: EdTech Growth Meets Subscription Strength Duolingo also ran a one-time Streak Revival campaign in June, allowing learners who had lost their longest streak to restore it by completing three lessons. More than 15 million learners revived their streaks, von Ahn said, adding that these users have demonstrated stronger retention than a typical re-engaged user cohort. The company is also working to improve its top-of-funnel user acquisition. Von Ahn said Duolingo’s own social media accounts generated more than 1 billion impressions per quarter. It has also expanded its work with content creators, particularly in China, Indonesia and India, where influencers account for roughly two-thirds of the company’s total social media impressions. → The Bitcoin Comeback May Already Be Underway—2 ETFs for Exposure While most growth remains organic, Duolingo has become more active in performance marketing. Von Ahn said the company is seeing traction from both creator partnerships and performance marketing, while CFO Gillian Munson said top-of-funnel growth improved in almost every region during the quarter. The U.S. also posted faster growth, although Asia remained the company’s fastest-growing region. Munson said second-quarter top-line results were in line with expectations and profitability was modestly ahead of plan. The company maintained its full-year outlook for bookings growth of 10% to 12% and revenue growth of 15% to 18%. For modeling purposes, Duolingo expects approximately 11% bookings growth and roughly 16% revenue growth for the full year. At constant foreign exchange rates from the prior earnings call, bookings growth would be about half a percentage point higher, Munson said. For the third quarter, the company forecast: Bookings of approximately $307 million, up 9% year over year. Revenue of approximately $302 million, up 11% year over year. Gross margin of 71%. Adjusted EBITDA of roughly $76 million, representing a 25.2% margin. Duolingo now expects to finish the year with gross margin closer to 70%, compared with an earlier expectation of 69%, citing increased AI content in its products and AI-related cost savings. Munson said the company increased its adjusted EBITDA outlook to 26.5% from 25% at the start of the year, while also providing a point estimate of approximately $320 million in adjusted EBITDA and a roughly 25.5% margin. It expects to generate more than $375 million in free cash flow for 2026. The company ended the quarter with $1.3 billion in cash and investments and generated $79 million in free cash flow. It repurchased about $44 million of stock during the quarter, bringing cumulative repurchases under its authorization to $72 million, or about 700,000 shares. Von Ahn said stronger user growth will ultimately support revenue, but noted that users in Duolingo’s freemium model do not necessarily monetize immediately. The company is maintaining its planned bookings-growth range while prioritizing DAU expansion and improvements in teaching. Among the company’s monetization experiments, Duolingo has been shifting many free trials from seven days to one month. Von Ahn said longer trials have increased the number of users willing to begin a trial and, as a result, increased conversions to paying subscribers. Trial users also receive an improved experience with ads and the energy system turned off, which he said supports daily active user growth. Duolingo is also testing “Super Lite,” an ad-supported subscription offering priced at approximately half the cost of Super Duolingo, depending on geography. The plan provides more energy than the free tier but does not offer unlimited energy. Von Ahn emphasized that the offering remains in early testing and represents only a small share of subscribers. The company is pursuing ad revenue more actively as well. While von Ahn said subscriptions will remain Duolingo’s larger business for the foreseeable future, he sees a substantial advertising opportunity given the company’s active user base. Duolingo has expanded from minimal ad-revenue resources several years ago to a more developed team focused on improving ad quality and monetization. Duolingo is broadening access to its AI-powered Video Call feature, which is designed to help users practice conversation. The feature initially cost about $0.30 per call to provide and was placed behind the company’s premium Duolingo Max plan. Von Ahn said the cost has since fallen below $0.01 per call, largely through the use of open-source models. Most new Super Duolingo subscribers now receive Video Call, and the company expects to extend it to existing Super subscribers over the coming months. Von Ahn said Duolingo is still determining the future of the Max tier, including whether Max could offer unlimited Video Calls while Super subscribers receive limited access, or whether the company could eventually sunset Max. “Our intent is that we give it to as many users as possible,” von Ahn said, while noting the company is trying to avoid a loss of revenue as it broadens access. Munson said AI expenses within cost of goods sold are in the tens of millions of dollars, while internal AI-related spending is closer to $10 million. Von Ahn said Duolingo expects its mix of AI models to shift increasingly toward open-weight models where quality is sufficient, though it will continue using proprietary frontier models for some applications. In China, now Duolingo’s second-largest market by DAUs, the company uses local AI models because U.S. models cannot be used there under local law. Von Ahn said China monetizes at roughly the same level as France and could become Duolingo’s largest market by DAUs within one or two years. Duolingo, Inc (NASDAQ:DUOL) is a technology-driven education company that operates a widely used language-learning platform. Founded in 2011 by Luis von Ahn and Severin Hacker, Duolingo offers a freemium service featuring bite-sized lessons, gamified exercises and adaptive learning algorithms. The company's core product is its mobile and web application, which supports instruction in more than 40 languages, ranging from widely spoken tongues such as English and Spanish to lesser-taught options including Irish and Swahili. In addition to its flagship language courses, Duolingo has expanded its product suite to include the Duolingo English Test, an on-demand, computer-based English proficiency exam designed for academic and professional admissions. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Duolingo Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.