DUOL Q2 Earnings Beat Estimates on Strong User Growth

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.

DUOL Gains From Expanding User Engagement

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.

Duolingo’s Subscription Revenues Drive Growth

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.

DUOL Balances Monetization With User Growth

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.

Duolingo’s Costs Rise on Strategic Investments

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.

DUOL Maintains Strong Liquidity and Buybacks

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.

Duolingo Raises Profitability Outlook

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.

Recent Earnings Snapshots

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.

7 Best Stocks for the Next 30 Days

Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."

Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention. 

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

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research