Record-Breaking 2025 Ends on High Note, But Cracks Emerge (Image Credits: Images.fastcompany.com)
Duolingo investors watched in dismay as shares plunged more than 25% in premarket trading following the release of fourth-quarter 2025 earnings.
Record-Breaking 2025 Ends on High Note, But Cracks Emerge
Duolingo shattered milestones in its fiscal year 2025, achieving revenue of $1.03 billion for the first time and total bookings of $1.15 billion, a 33% increase from the prior year.
Net income reached $414.1 million over the full year. The fourth quarter alone delivered solid gains across key metrics. Daily active users climbed to 52.7 million, up 30% year-over-year. Paid subscribers grew to 12.2 million, a 28% rise, while revenue hit $282.9 million, reflecting 35% growth, and bookings stood at $336.8 million, up 24%.
CEO Luis von Ahn highlighted this momentum in a statement: “We closed 2025 with strong momentum, surpassing 50 million daily active users and generating more than $1 billion in bookings for the first time.”
Pivoting to Users: 2026 Vision Prioritizes Scale Over Immediate Gains
Duolingo outlined an aggressive expansion strategy for 2026, emphasizing user acquisition and product enhancements at the expense of short-term profitability.
Von Ahn explained the approach: “In 2026, we are deliberately prioritizing user growth and teaching better. We’ll focus on improving the free learner experience to grow word of mouth and feed our next user growth engines like chess, math and music, even though that moderates near-term financial growth.” The company aims to double its user base to 100 million daily active users in the medium term.
Central to this plan involves extending artificial intelligence features to lower-tier subscription plans, potentially drawing more users but sacrificing higher-margin premium upsells. Such moves seek to build loyalty and pave the way for future revenue acceleration.
Guidance Disappoints, Fueling Investor Exodus
Wall Street reacted harshly to Duolingo’s projections for the coming year, which fell short of consensus estimates and signaled slower expansion.
| Metric | Duolingo Guidance | Analyst Expectations |
|---|---|---|
| Q1 2026 Bookings | $301.5M (+11% YoY) | $329.7M |
| FY 2026 Bookings | $1.274B-$1.298B (+10-12% YoY) | $1.39B |
| Q1 2026 Revenue | $288.5M (+25% YoY) | N/A |
| FY 2026 Revenue | $1.197B-$1.221B (+15-18% YoY) | $1.26B |
These figures, as reported by Reuters, underscore a deliberate slowdown in monetization to fuel growth engines.
Stock Slide Echoes AI-First Backlash
Shares closed at $117.45 the previous day but tumbled below $85 in early trading, extending a brutal decline from a May 2025 peak above $544 – a drop exceeding 78% even before Thursday’s rout.
The downturn traces back to a late April 2025 internal memo proclaiming an “AI-first” shift, which phased out contractors for AI-replaceable tasks and sparked user backlash on social media. Von Ahn later clarified at an event that no full-time staff lost jobs, yet the damage lingered. For details on earnings, see the investor release.
Key Takeaways
- Duolingo hit $1B+ revenue in 2025 but eyes moderated growth for user scale.
- AI tools expand to cheaper plans, betting on loyalty over quick profits.
- Guidance misses spark 25%+ plunge, reviving AI memo concerns.
Duolingo’s gamble on long-term dominance through sheer user volume challenges investors accustomed to rapid monetization, raising questions about balancing innovation with returns. What do you think of this strategic pivot? Share in the comments.