Duolingo, Inc. Q4 2025 Earnings Call Transcript

Duolingo, Inc. (NASDAQ: DUOL) Q4 2025 Earnings Call dated Feb. 26, 2026

Presentation

Operator

Welcome, everyone, to Duolingo’s Fourth-Quarter 2025 Earnings Webcast. Today, after-market close, 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, who we are pleased to welcome as our new CFO. They will begin with some prepared remarks before we open the call for questions. [Operator Instructions]

Before we begin, please note we’ll make some 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. We undertake no obligation to update them.

We’ll also discuss both GAAP and non-GAAP financial measures. Reconciliations between 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 — Co-founder, Chief Executive Officer & Chairman

Thank you, everyone, for joining us. I want to start by talking about Matt Skaruppa, who up until today has precided over 100% of our earnings calls as our CFO. It really has been one of the singular honors of my career to work with Matt. Matt, I know you’re watching tonight and thank you really for everything you did for our mission. Now Matt is a hard act to follow, so I can’t think of anybody better to take his place than the person who helped us hire him. Our long-term Board member and Chair of our Audit Committee, Gillian Munson. She is our new CFO. She is here with us today, and I’m very much looking forward to working closely with her.

Now let’s get to the business at hand. 2025 was another strong year for Duolingo. For the first time, we surpassed 50 million daily active users, and that’s more than 5 times as many as we had when we IPOed in 2021. We also delivered over $1 billion in bookings, and more than $300 million in adjusted EBITDA. I’m proud that we have built a business that is profitable at-scale and that is having a huge positive impact in the world. But what excites me most is not what we’ve already achieved is what’s ahead. I’m more convinced than ever that the accelerating advances in AI will fundamentally change the way people learn. This creates an enormous opportunity for us. We are the most popular education app in the world by a margin and we intend to lead this shift. By leaning into this moment, we believe we can redefine the future of learning while generating exceptional value for our shareholders over the long-term. So huge opportunity ahead of us and the most important thing right now is to continue attracting users. We said this in our last earnings call.

Now, while our DAU growth over the past several years has been nothing short of phenomenal, it decelerated throughout 2025. And as the new year began, we continued seeing this trend. We now expect DAU growth to be about 20% year-over-year throughout 2026. This reinforced my conviction that we needed to take more decisive actions to reaccelerate DAU growth. Another way of saying — another way of seeing it is that long-term value in this business is driven by two things, the size of our active learner base, that’s like the size of the pie and how effectively we monetize that base. You can think of that as the piece of the pie that pays. At this moment, we are prioritizing growing the size of the pie.

So as I detailed in our shareholder letter, we have a carefully considered plan for 2026 that focuses on teaching better and user growth. In addition to the thousands of AB tests we plan to run in 2026 to improve our product, we have larger initiatives that fall into three categories: teaching language is better, improving the free user experience and feeding our next growth engines, meaning our subjects of math, music and chess. All of this is in-service of growing DAUs faster.

Our medium-term goal is to reach 100 million daily active users in 2028. If we succeed in doubling our DAUs, the payoff would be significant, a more resilient brand, a business with meaningfully higher bookings and profit and most importantly, a company that reaches and teaches far more people around the world. But in the short-term, the short-term implication is that this year, we’ll see slower bookings growth and lower profitability as captured in our guide.

I want you to know that I don’t take this decision lightly and that I know it may come as a surprise to some investors, but it’s fundamentally aligned with what I said to shareholders in my very first letter, which I will now read. Dear potential investors, the main thing you need to know is that I plan to dedicate my life to building a future in which through technology, every person on this planet has access to the best quality of education and not only that, but a future in which people want to spend their time learning. Duolingo Is a platform for building that future and we are just getting started.

And with that, I’ll turn it over to Gillian long-term Munson.

Gillian Munson — Chief Financial Officer

Thank you, Luis, for the really warm welcome. Being a full-time member of this team is going to be a great adventure. I’d be remiss if I didn’t say a huge thank you to my friend and colleague, Matt Skaruppa, who we are all going to miss and who I wish all the best.

We had a solid finish to the year and ended a strong financial position, a great platform from which to look forward strategically, as Luis explained. Turning to the go-forward plan and guidance. In our shareholder letter, we have included a lot of specific details to help you with your 2026 modeling, likely more than we will going forward. I’ll repeat a bit here and add some color in areas we really want to be sure we emphasize. At the highest-level, our 2026 guidance is bookings growth of 10% to 12%. Revenue growth of 15% to 18% and adjusted EBITDA margin around 25%. For our Q1 guidance, it is 11% bookings growth, 25% revenue growth and adjusted EBITDA margin of 25.5%.

Here are some details that I hope will help you with your models. Looking at bookings, quarter-to-date, as of last Friday, Q1 bookings growth was tracking above our Q1 guidance. However, it’s important to remember that we are heading into a particularly tough compare in the first-half with Dead Duo, a price increase, particularly strong advertising bookings and the rollout of energy. We are modeling some improvement to bookings growth rates at the end-of-the year, but have only factored in modest early returns on our investments at this point, which we think is prudent as shifts like the ones we are making can take some time to materialize.

Turning to revenue. We believe that the rate of year-over-year revenue growth will adjust down following bookings growth rates over the course of the year with some stabilization in the second-half. Given our Q1 guidance is 25% growth, the math implies that quarters three and four will be below the low-end of this guidance range.

As for costs, as you think about our COGS, the key thing to keep in mind is that we plan to share AI features with a far greater portion of our user base. This is anticipated in the lower gross margins that we outlined in our letter. Additionally, we are investing in 2026. As a result, we expect that R&D and sales and marketing spend growth will outpace revenue growth. Putting it all together, the trajectory of adjusted EBITDA margins will likely be slightly different in 2026 than in previous years. In Q1, we’ve guided to 25.5% adjusted EBITDA margin and we expect adjusted EBITDA margin to decline roughly 3 points sequentially in Q2. Then it will improve through the back-half of the year with Q4 being our highest-margin quarter in 2026. I’d note, however, that we do manage to annual targets and the timing of our spending could shift, which we will update you on as we continue the year. That’s a lot of detail we know. We hope that in combination with the shareholder letter, this does help you manage your estimates as we execute our strategy.

You may ask about our guidance philosophy. And so I thought I’d note that this year, our view is that like in Q4, our hope is to narrow the gap between our guidance and actuals versus what you have generally seen from Duolingo in the past. Finally, I would like to highlight our buyback authorization that was announced today. Our Board has authorized a buyback of up to $400 million in our shares. We believe this represents good capital allocation discipline and expect to execute upon this authorization in the coming year.

I couldn’t be more excited to have joined this company at this time. The size and scale of the market opportunity ahead is massive and I very much view 2026 as a foundational year to achieve that opportunity. Thank you, Luis. I’m excited to step into this role during this important moment at the company.

And now I’ll turn it back to the operator and we can take your questions.

Question & Answers

Operator

We will now move to a question-and-answer session. [Operator Instructions] We’ll take our first question from Bryan Smilek with JPMorgan. Bryan is just connecting now so it might just take a moment. Bryan please turn-on your video and unmute your line and ask your question.

Bryan Smilek

Great. Thanks for taking the questions today. Luis, to start, can you just elaborate a bit more on what you’re seeing in the market across AI and just overall innovation across the technology space that makes this the right time for the strategic shift to reaccelerate user growth? And I guess more fundamentally to achieve your 2028 target to double users. What are the, call it one to two top priorities across the product that will really enhance that DAU growth and drive the implied acceleration to get there? Thank you.

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Thank you, Bryan. Thank you for the question. Okay. In terms of AI, look, we really are in a unique time in history. AI is going to allow us to teach significantly better. And I also believe that the way people learn is just going to change. And the reason for that is, I think that in the next few years, we are going to see quality of teaching that is as good as a one-on-one tutor. We’re going to see that. But not only that, not only is it as good as a one-on-one tutor, but it will be as fun as a mobile game. So it’s this incredible thing that’s going to happen. And the things that we’re seeing is we’re just — we’re able to find where users or learners are having trouble and really specialize in that and answer all their questions and whenever they have any kind of confusion, we can get in there and really fix it.

We also in the case of teaching languages, we can finally practice conversation better. We have this feature video call with Lilly. It keeps getting better and better at being able to practice your conversation. And so we can see improvements in how well people are learning. And the same is true for our other subjects, certainly with math, like I said in our shareholder letter, I believe that this year, we’re going to have the best tutor app for math. This is going to be Duolingo math. And it will just — I think this is a huge market potential. There’s about a billion people learning math in the world. So we’ll be able to teach them as many as we can really well. So I’m very excited about AI in general. And this is why I think now is the time to try to attract as many users as possible.

Now in terms of what are the top priorities that will allow us to get to 100 million daily active users by 2028. It’s a number of things. In general, the three buckets that we’re going to be investing in are teaching languages better. Languages is our largest subject and it will continue being our largest subject for a while. We’re going to continue — we’re going to teach language is significantly better and there’s a lot of work there. Another one is in making the free user experience better. The less friction that there is in the user — in the free user experience, the more users we have. We have seen this over the last 15 years. Whenever we remove friction from the free user experience, DAUs grow. So that is another one. And then the third thing that we’re going to be doing is just investing a lot in our new growth engines, that’s our new subjects. So in particular, chess has grown quite a bit as I said in our shareholder letter, we have about 7 million daily active users in chess. And this is less than a year after we launched. At this point, we believe we’re the second-largest chess thing in the world. And which is by the way, incredible because if you search for chess on the App Store, we don’t appear in the results. We just haven’t even gotten there to doing App Store optimization, but we already got the 7 million daily active users. So those are the things that I think are going to help us get there.

Bryan Smilek

Great. Thanks. And then I guess, elaborating a bit more, you mentioned video call as well too. Can you talk about the philosophy and the product roadmap really across Max versus Super? And you’ve been very transparent in the past in terms of oscillating the features and the relative pricing set. So how should we think about just overall the Max roadmap as you start to shift those video calls to Super users as well?

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Yeah. When we started Max a few years ago, we introduced some AI features. We were super-excited about all the AI features because they really can help us teach better. At the time, cost for AI inference was way higher than it is now. And so we decided to put our AI features behind a much higher subscription tier, which is Duolingo Max. That’s what we have done. But we said back then that as AI costs came down, we would experiment putting features in the different tiers because ultimately our goal is to be able to teach as many people as possible. At this point, the cost of a video call has gone down very significantly over the last couple of years since we launched video call and we feel pretty comfortable being able to put it inside Super Duolingo.

Now, like everything we do, this is going to be an AB test. We’re going to AB test what happens if we put some video call in Super Duolingo? I’m not sure what that AB test will do. It may be that this increases revenue because more people sign-up to Super Duolingo because the retention of Super Duolingo is significantly higher because video call is there or it may be that it decreases bookings because we’re not making as much money from selling Max. I don’t know what it will do. But whatever it does, we’re going to take the appropriate options.

So for example, if the decrease in bookings is too high, we may do something like we meter video calls. So for example, on Super Duolingo, you only get access to one video call a day versus on Max you get unlimited. Now I’m saying all of this very much in advance because I don’t actually know what will win in these AB tests. But what I will tell you is that for sure, we will put some form of video call in our Super tier because we just think that it will help us teach a lot better to a significantly larger number of people. There’s about 10 times as many subscribers on Super than they are on Max. So if we put video call in Super, 10 times as many people have access to conversational practice.

And the other thing that I think is we’re going to do this on our own terms. I mean, my sense is that over-time, it will not make sense to have a feature like video call on their plan that is so expensive as Max. So we’re doing it from a position of strength right now where our finances are very strong and we’re going to just do that as opposed to if we had to do it defensively three years from now because a competitor popped up. I mean, at the moment, we really are not worried about competition. So we’re getting ahead of it.

Gillian Munson — Chief Financial Officer

And Bryan, we designed the guidance to give the company the room to go do all of this and experiment with this and do the right thing for our customers and that’s precisely how the guidance and the way we’re thinking about the financials this year are designed.

Bryan Smilek

Great. Thank you both.

Operator

Our next question comes from Ralph Schackart with William Blair. Please unmute your line, turn-on your video and ask your question.

Ralph Schackart — Analyst, William Blair

Good evening, Luis and Gillian. Thanks for taking the question. How’s it going? Luis, last call when you talked about the reprioritization for 2026, and I think it was sort of contemplated it was going to have some impact on the financials for 2026, but maybe not to the level guided that was presented today, at least that was my interpretation. I could certainly have that wrong. But I guess, did something change since last quarter in terms of how you thought about 2026 for the user growth? Is this larger than perhaps you originally anticipated? And then maybe a question for Gillian, on the 20% DAU growth. When these friction points or monetization friction points are removed, should we expect some reacceleration in the DAU metrics? And I guess you sort of suggested that you’re tracking above in bookings, maybe just some kind of early reads on as you’re removing some of these friction points, how the user growth is responding. Thank you.

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Thank you, Ralph, for your question. So yes, in the last call, as you said, we said that we would be concentrating on user growth. And for similar reasons as now, one, we had seen deceleration of DAU growth throughout 2025, some deceleration of user growth. And in addition to that, we think this is just a unique opportunity where instead of decelerating user growth, we should be accelerating user growth because we should — it’s just capture this opportunity. So that was what we said in the last earnings call. What happened between then and now are two things. The first is that we kept on seeing this trend of user deceleration. And by now, we expect about 20% year-over-year DAU growth throughout 2026. And that — that — and the other thing is that my conviction of AI just increased even more and that just made it so that I have even more conviction that we need to spend really the vast majority of our efforts on DAU growth. And as we built the plan for 2026, this is what came out. I mean, the guidance that we’re giving. And in terms of the 20%, I guess, Gillian, you can go ahead and-answer.

Gillian Munson — Chief Financial Officer

Yeah. So as Luis said, we really do expect that 20% through the year. In terms of the Q1, what we’re seeing so far, it is tracking ahead of the guidance. And we think that shows everyone that there is a lot of health in the business, but you do have some really, really tough comps coming. And so the overall guide reflects that. I think it’s really important to put in context that Luis is talking about is the confidence we’ve gotten in going for the bigger price. And so when you think about that 20% and the $100 million target, that would imply an acceleration to much higher-growth rates in the next couple of years. And if you kind of play that out in terms of what the financials could look at, that is just as Luis said, a much bigger business. So as we look at the business, we think to ourselves, okay, we could have grown the business, probably we would be at about a mid-teens CAGR over the next couple of years. If we could keep our margins where they are, we’re probably looking at a $1.5 billion business, $400 plus million in adjusted EBITDA. But we at the company are really motivated to go for the bigger prize, which is much more aligned with what Luis and Severin were thinking about when they founded the company.

So then if you sort of play-out the DAU, these was all back-of-the-envelope. But if we can get to that DAU and even reasonable monetization assumptions from where we are today and we believe we can scale our expenses over-time, you’re looking at a business in a couple of years, it could be $2.5 billion with over $700 million in adjusted EBITDA. And I think around this entire company, we’re really motivated to go for the bigger prize. And so that’s what you’re seeing in kind of how we’re thinking about it. In terms of when you’re going to see it in the model, we’ve really modeled it late in the year. So it’s going to take a little while. What we’re working on is going to take a little while to see-through it, but we do have a little bit in the end-of-the year. We think it’s prudent to keep that small for now until we kind of get going, you’ll start to see more-and-more as we move into ’27 and ’28.

Ralph Schackart — Analyst, William Blair

Great. Thanks, Luis. Thanks, Gillian.

Operator

The next question comes from Mark Mahaney with Evercore. Please turn-on your video, unmute your line and ask your questions.

Mark Mahaney — Analyst, Evercore

Okay, great. I want to ask a growth question and a product question. The growth question is, you mentioned these factors that caused this deceleration of large numbers, increased maybe over focus on monetization. There are two other potential reasons too. So just address those, which is market saturation and competitive intensity. Maybe there’s — so just — and other new data points that just remind you or open your eyes even more to the long-term growth opportunity here.

And then in the products, the video calls is a wonderful product. These other things that you’re talking about, the speaking adventures, is that on the come, like how soon should we expect that? And getting to this more advanced content with all of your nine largest languages up to that 129 score. Is that something that happens now? Or is that something that’s a multi-year build? Like how long does it take to get to those two products that will — that we could potentially see the products and then the impact that they would have? Thank you.

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Thank you, Mark. Okay. So your first question is about market saturation and competition. We’re worried about neither one of those. In terms of competition, if you look at language learning apps, we have about 85% of the daily active users of language learning apps in the world. And that number has remained pretty flat over a while. Basically, we’re just not particularly concerned about that.

In terms of market saturation, we’re — for example, we look at things like the percentage of daily active users in a given country compared to the size of the Internet base of that country. So for example, in the United States, 2% of all Internet users on a given day use Duolingo, so 2% penetration in the US for daily users. In the UK, that’s 3%. In Germany, that’s 4% and Germany is not the highest country we have. We actually think we can get much higher than that. But even if we only assume that every country got to 2%, which is the US penetration, we would more than double our daily active users. So I just don’t think we’re near saturation at all. And in general, we’re not seeing anything different. For example, we survey our churned users and the answers to the surveys of our churned users haven’t really changed in years. And the most common answer, by the way, when people stop using Duolingo about where they go is that they stop learning. And that has been true for a while. So that’s just not something we’re particularly concerned about.

In terms of the features, we mentioned in the shareholder letter, we mentioned speaking adventures. We’re very excited about that. What the feature is like it’s basically, it’s a little game where you have to do something, for example you may be told go buy a sandwich and give it to that person and then ask them for money or something like something that you have to do. So in that — you do a lot of things with just text, but every now and then in there, you have to speak to get the things that what you want. That’s going to come out, that’s going to be for all users, free and paid. That’s going to be scaled. I mean, we’re already testing it. That’s going to be scaled sometime midyear. So you probably see it in your app sometime between now and the middle of the year. We’re very excited about that.

In terms of more advanced content, that’s happening relatively soon. In a matter of a month or two, you will see significantly more advanced ones. So basically, all of our courses that teach the top nine languages that we teach, which by the way cover more than 90% of our daily active users will have content up to Duolingo score 129, which is a particularly important score because that’s the score that you need in order to get a knowledge job in that language. So we’re very excited about that and that’s coming now. Importantly to say, that content is going to go out there and we’re very happy about that. But that’s just the beginning. As soon as it goes out there, we can start improving this content the same way we improve everything. And so over the remainder of the year, you’re just going to see better and better versions of this more advanced content and we’re pretty excited about that.

Mark Mahaney — Analyst, Evercore

Okay. Thank you, Luis.

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Sure. Thank you, Mark.

Operator

We’ll take our next question from Justin Patterson with KeyBanc. Please unmute your video and audio and ask your question.

Justin Patterson

Great. Thank you very much. Luis, I was hoping you can talk a little bit more about just the social strategy. We haven’t really seen the same degree of virality through the — through TikTok that you used to be getting. So would love to hear about how you’re refining that and thinking of that as just a vector to grow daily usage. And then with respect to video call, I know you’ve made a lot of improvements within their designed to increase more words being spoken to make it easier to use. So I’d love to hear about just how that’s been going versus expectations and how you think moving this into the Super tier can really, really drive more engagement and eventually help contribute to that bookings reacceleration. Thank you.

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Yeah. Thank you, Justin. In terms of our social marketing strategy, I mean we have an excellent marketing team, really, I think the best-in the business. We — our videos are going viral and they’re getting millions of views. But I have to say the comparison point, particularly a year-ago. A year-ago, there were many weeks where we had the single most-watched video in all of TikTok. That was — that’s incredible. So while we’re still seeing virality in our videos, we’re not in a position where it’s the most-watched video in all of TikTok. There’s a number of reasons for that. One of them is just algorithms have changed enough that it’s harder to do that consistently. I mean that’s one reason. And in general, we’re going to continue with the strategy of really trying to get as much virality as possible that will — I’m pretty happy with the results so-far, but you are right that compared to a year-ago, it’s not quite the same.

In terms of video call improvements, I’m very happy with the results for video call improvements. Some — basically, if you look at the graph of words spoken per user on video call, that is just a monotonically increasing graph over-time. It just keeps getting better and better and better. And basically, we’re just a lot better at getting Lily that you’re talking to elicit more conversation. We’re — right now, we’re trying a new thing where we’re actually starting to tell you, hey, in your next response, ask a question or in your next response, use the word because or something and that actually really gets people going more-and-more. So I’m very happy with all these improvements. And I really do think that putting it — giving it to more users, what that will do is it will basically get more users to be promoters of Duolingo because we see that people that engage with video call post online and say things like, my god, I was skeptical that I could learn a language on Duolingo, but I’ve just been using Duolingo and using video call and somehow out-of-the blue, I am now able to have a conversation. So we’re very happy with that.

Justin Patterson

Thank you.

Operator

Our next question comes from Andrew Boone with Citizens JMP. Please unmute your video and audio and ask your question.

Andrew Boone — Analyst, Citizens JMP

Thanks so much for taking the question. I wanted to go back to the free user experience and improving it. And really the question is, how does that evolve into a monetization strategy over-time, right? So it sounds like one of the lessons was that you guys essentially over monetized your user base. So Luis, as we think about going through this transition, what happens on the other side in terms of the lesson that you guys now have as you guys come back and then start to monetize users later on.

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Andrew, this is an excellent question. Look, we got ourselves into an interesting situation where both Duolingo is undermonetized and over monetized at the same time. It’s under monetizing that, look, only about 10% of our monthly active users pay us. We wholeheartedly believe we can do much better than that. If you look at comps, if you look at — if you look at things like Spotify, for like half their users are paying them, give or take. In a lot of these premium businesses, we really think we can get much higher than 10%. However, the way we were increasing monetization was we found that the quickest way to increase monetization was basically by adding friction. The more we added friction, the more we got people to subscribe. And that — that’s okay, but I think that we got it to a point where it really became at odds with DAU growth. There are other ways to get people to subscribe.

For example, you can add more features or you can have features that are not exactly a friction, but things like selling customizations for avatars and things like that, that have worked really well for games and we are kind of half a game. So what we’re doing now is for the next year, we are — we’re use — we’re using this year to also find ways to monetize that get more people to subscribe, that is true, but that may not be doing so by adding friction. And we’re really confident that we can do that. It’s just slower because monetizing by adding friction like in it, if you told me next week I needed to make whatever $50,000 more a day, it was actually quite easy to do. You just double the ad load or whatever it was. But these other ways of monetizing are just going to take a little longer to do. But we’re very confident that we’re going to have some because only 10% of our active users pay us to subscribe.

Andrew Boone — Analyst, Citizens JMP

And then I wanted to ask about the chess disclosure. And this is really about utilizing multiple apps at the same time. So if I think about the 7 million users and I think about the core trend of core Duolingo through 2025, how do I think about multiple users using multiple apps, right? Do I just take the 53 million and I subtract seven to be able to think about where you are or what’s the right way to think about that? Thank you so much.

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Another great question. Yeah, so we said chess has gotten up to about 7 million daily active users in less than a year. We’re very proud of that. It’s an incredible growth. Now, the majority of these users, whenever we put a new subject out on Duolingo, it is a lot easier to get to our own users rather than to get to users outside of Duolingo because we have a direct line of communication to our own users. So the majority of these users, we’re not basically saying the exact number, but the majority of those users are users that were Duolingo users and now are using both languages and chess. That’s basically what the common thing that’s happening. So we’re — the way to see it is not that languages have not been growing. In fact, languages are growing at about the same pace as Duolingo because this is the largest course. It’s just that we are getting some new users for chess, but a lot of them are just doubling up from languages and chess. And what we are seeing is that over-time, more-and-more people are finding out that Duolingo has chess and then chess is starting to attract its own user base. And I think that’s what’s going to happen over-time. And that’s just — that just takes a little bit of time to do that, but that’s what’s happening.

Andrew Boone — Analyst, Citizens JMP

Thank you.

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Thank you.

Operator

Our next question comes from Alexander Sklar with Raymond James. Please unmute your video and audio and ask your question.

Alexander Sklar — Analyst, Raymond James

Great. Thank you. Luis or Gillian, I don’t know who wants to take this one, but on the bookings outlook, just given some of the unknowns you spoke to with Bryan’s question earlier on how video call tests are going to play-out on Super, what is the bookings outlook factor in terms of conversion rate of Super relative to what you’ve experienced in the past? And how much time or data, Luis, do you think you need to know if the decision is a successful one based on some of the historical testing?

Gillian Munson — Chief Financial Officer

So if you look at the bookings, the main thing to think about right now is, if you take — start from Q4 bookings growth of about 24% and then look over to the guide, we think about half of that is the user deceleration continuation that Luis talked about. And then the other half of that is us monetizing more carefully and thinking about taking away some friction for our users. So that’s how we’re thinking about positioning that.

In terms of exactly how all the monetization is going to play-out, as you know, we — AB test like crazy around here. And so there’s a lot to be learned, as Luis explained over the course of this year. What we’re really trying to do with the guidance is give ourselves the room from a position of really good financial strength to go do that work because we think it gives us the opportunity to reach for the higher price.

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Yeah. And in terms of how long you know, it will take until we know this is working. It’s going to take a little while. I mean, we need to make a lot of product changes, et-cetera, each of which take a while and then we also need to see user reactions, et cetera. So it’s going to take a little while. As Gillian said, we’re putting in something modest towards the end-of-the year to see that some things are working there.

Alexander Sklar — Analyst, Raymond James

Okay. And then maybe just a quick follow-up. Anything factored in terms of pricing changes within the different packages in the outlook?

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

I mean we’re — what we’re going to do this year is we’re going to be experimenting like pretty much every year, although probably more so with prices quite a bit. That means higher prices, lower prices, we’re always AB testing. So we’re going to be doing that. But we’re not — this is not something that we’re really putting in — we’re putting in the results of all the combined experiments in the outlook. But I don’t know if I can tell you for a fact that the price of Super will be higher because we have video call or not. I don’t know the results of the AB tests.

Alexander Sklar — Analyst, Raymond James

All right. Thank you both.

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Yeah, thank you.

Operator

Our next question comes from Wyatt Swanson with D.A. Davidson. Please unmute your video and audio and ask your questions.

Wyatt Swanson — Analyst, D.A. Davidson

Hey, guys. Thanks. Thanks for the question. I just — I’ve just got one thinking about like the medium-term goal of reaching the 100 million DAUs. Does that assume like marketing stays elevated and monetization stays on the back-burner for the entire duration? I think you’ve kind of answered it, but just sort of thinking through as you sort of ramped monetization over the past year and you’ve started seeing DAU start to decel. So like how do you think about that balance over the medium-term? Should we see monetization slowly start to ramp-up in these alternate forms that you’re kind of exploring?

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Yeah. I can answer and I can also let Gillian have at it. But in general, we — our marketing is still extremely efficient. I mean, it’s really still a small fraction of our revenue that we spend in marketing. It — I assume that every year, the total number of marketing dollars that we spend will continue going up. However, I’m hoping that past this year, we are going to get some efficiencies. It’s hard to say exactly what will happen past this year. It’s not like we’re guiding, but I assume that we’re going to get some efficiencies past this year. And then in terms of monetization, like Gillian was saying before, just almost any way you look at it with 100 million daily active users, this is just a much larger business. I do believe — again, hard to put in numbers exactly to give you a model or anything for past 2026, but I do believe that you’re going to see other things really start ramping up. I’m very excited about direct ad sales. We’re seeing just a good uptake on that. And I’m also very excited about in-app purchases, in particular with our avatars. There’s a lot of love for our avatars and for our playful brand and we think we can do quite a bit there.

Gillian Munson — Chief Financial Officer

Yeah. And as you think about the margins of the business, one of the reasons I’m so excited about where we’re at is that we’ve shown that this business can have tremendous scale even at the size we’re at today, and we think we can be a lot bigger. There’s nothing that we can see in the business that says we can’t scale it going forward. We’re making an investment right now and descaling some to make that happen. But really, we don’t think we need to hire double the number of people, twice the amount of marketing. We think that this business can scale really beautifully. It’s one of the nicest things about the business model that we have the opportunity to do what we’re doing from a position of strength, profitability. We will continue to generate tremendous EBITDA and free cash flow even as we invest and we see no reason why we couldn’t scale-up as we reenter monetization in a bit more of a smarter way from here.

Wyatt Swanson — Analyst, D.A. Davidson

Got it. Got it. That’s fair. And could you maybe answer us like what the ads business will look like going forward? You’ve talked about like doubling the ad load maybe causing additional friction and users potentially turning off. So like are ads, it almost made it sound like ads were almost coming off of the platform and it wasn’t going to be like as big of a monetization channel.

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

We are — what we are unlikely to do is increase ad load. At the moment, you see an ad at the end of a lesson that is unlikely to go up. Certainly not this year because that really goes counter to everything that I’m saying. However, we are doing a lot better of a job at displaying better ads. I mean, historically, we just have not spent a lot of effort on ads historically. So for example, we use just these network ads that are kind of the lowest common denominator network ads. We are now doing direct deals. What that does is it does two things for our business. Number one, it significantly increases the quality of the ad. So rather than getting ads for like games that you’ve never heard of, you’re going to get ads from like Disney or something, significantly higher-quality ads. And then the amount of money we make per ad is significantly higher when we do that. So I think that’s kind of how it’s going to be. We’re experimenting with some stuff that is really cool, but I don’t know if we’ll make it work. I’ll tell you my dream has always been to be able to give you ads in the language that you’re learning and we are trying that. So if you’re learning Spanish, part of the ad is going to be in Spanish. What I love about that is that the users want that. And so — and that’s also good in the end for the advertiser because the user is actually paying a lot of attention. So I’m hoping we’ll be able to try that. I don’t know which of these things will work. But in general, I just think ad load will not be higher, but we’ll make a lot more money per ad.

Wyatt Swanson — Analyst, D.A. Davidson

Got it. Thank you guys.

Operator

Our next question comes from Nathan Feather with Morgan Stanley. Please unmute your line and ask your questions.

Nathan Feather — Analyst, Morgan Stanley

Hey, good evening, everyone. Two on my end. First, there’s been a lot of concern in the market about the improvement in AI translation tools and the general rise of all-purpose chatbots. I guess, what gives you conviction that the user deceleration we saw in 2025 was not due to those factors? And then second, just of the changes you’ve made so-far to improve the user experience, are you seeing anything in the data that gives you conviction that these changes are going to stabilize user growth through the year? And are you already seeing that or when might you expect to reach that stabilization point?

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Okay. Thank you for the question. So AI translation isn’t — people talk about it, but it is not something that we are worried internally about. AI translation has been essentially perfect among the large languages for like more than 10 years. I mean, between Spanish and English, it’s essentially been perfect. Our users use Duolingo for two main reasons. One as a hobby, they actually want to learn and those people, whether they say our translation or doesn’t matter, it’s a hobby for them and then the other group of people is learning English. They want to learn English and they actually want to learn English.

We know also that — we ask users why they leave Duolingo. We have these churned user surveys. This does not come up. I mean, like I said, the main reason that people leave Duolingo’s because they got busy. What we know what that means. It just means they are doing more social media, like that’s basically what that means. So we’re just not — that’s not something we’re particularly concerned about.

In terms of, data about — are we seeing any data that is making us believe that user growth is accelerating, et cetera. So-far, we have done a few things to make the app, the free experience better. For example, we gave a feature that was in Duolingo Max called Explain My Answer, it’s not free for everybody. So we’ve done stuff like that and we are seeing quite a bit of uptick on the features and we are seeing that users love it. But we have not yet seen an acceleration in DAUs that we think is like, oh, my god, we’re done. Now to be fair, we did not expect this. I think this is why we’re saying that you should expect seeing some modest results towards the end-of-the year.

Nathan Feather — Analyst, Morgan Stanley

Okay. Thank you.

Operator

Our next question comes from Ryan MacDonald with Needham. Please unmute your video and audio and ask your questions.

Ryan MacDonald — Analyst, Needham

Luis, I wanted to ask about sort of Duolingo Max to start. Fourth-quarter, I think was your first sort of large cohort or lapping the first large cohort of Max subscribers. And was curious what you were seeing from a retention and renewal perspective and how much that’s guiding sort of the strategy to bring video call back into Super? And then if we’re going to — when this sort of transition happens, Gillian, when should we start to see, I guess, the impact of subscribers moving from Max down to Super with video call being the feature and what assumptions are you making for that in the guidance?

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Yeah. In terms of Max, none of the Max numbers are making us do anything with video call. The Max numbers are actually quite good. We’re happy with the Max numbers. We are taking what I call an offensive move with Max. I just believe that the cost of video call has gone down enough that it just kind of doesn’t make sense for us to just have it in Max when we can offer it in much cheaper packages. We’re not quite there where we can offer it for free, but at some point, we may be able to and I want to offer it for free because I actually think that it is in our best interest to have the largest possible user base that we can figure out how to monetize in any way rather than just keeping this for a tiny little bit of the user base. So that’s just our philosophy. So the entire decision for trying to put video call in Super comes more from we think that this is the right thing for our users rather than any numbers with Max. We’re pretty happy with the numbers with Max actually. And then Gillian, I don’t know if you wanted to answer that second part. You’re — we cannot hear you. You’re muted or I cannot hear you.

Well, I — sorry, your question, I kind of forgot what your question was because I was like, that’s for Gillian, I forgot it. What was your question? I’ll kind of try to answer that.

Ryan MacDonald — Analyst, Needham

Yeah. As you think about the guidance for fiscal ’26, I guess what assumptions, if any, are you making sort of building in for when video call rolls out to Super for sort of, I guess you could call it sort of ARPU trend changes of maybe downsells from Max down to Super from that?

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Yeah. You know what — I’ll tell you probably what — I know what Gillian would have said in here. Look, we ourselves don’t really know exactly what is going to happen with this AB test where we start giving video call to Super. We don’t know that ourselves, but we’re going to AB test it. Everything we put in our guidance some bounds, what we think that will actually — this is what we think in all and there are some bounds. We’ll stay within those bounds and we have different ways of staying within those bounds. So for example, if we see that putting video call in Super really destroys our Max business or something, which is like really terrible, then we’ll start doing something like metering video call and Super, like you only get access to one per day versus in Max unlimited, something like that. Again, I’m talking about things in the future because I — and so I just don’t know exactly what’s going to happen, but we’re going to stay within the balance of what we have in the guide. I don’t know, Gillian, if you are — if we can hear you now or not. No, unfortunately.

Ryan MacDonald — Analyst, Needham

Not quite. Okay. Maybe, Luis, just one more quick one for you. You talked about sort of math and thinking that that’s an opportunity to build and sort of have one of the best math tutoring apps in the world. As that gets developed, would you look at sort of new channels in terms of how to distribute that? Like I think in the past, Duolingo for schools is a way to sort of open up that population on the language side. Is that a potential viable channel as you think about areas where you could get this DAU growth from something like math?

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Yeah. Math is an interesting subject. On the one-side, they’re really — I don’t know of another subject other than languages that has as much of a market. I mean math, there’s a billion people learning math. So that’s awesome. Now, they’re different than languages in the sense that these billion people generally don’t want to learn math, whereas the language people actually want to do that. And these people are mostly in schools. In fact, they’re mostly in K-12 schools. That’s where they are. So that is definitely where we’re going to get to now. There’s multiple ways to imagine how to do that. Our first step is to just make this product. We’re almost there. I mean, if you look at the internal versions of our math course, they are incredibly good.

Once that happens, there’s a big question about go-to-market. At the moment, our hypothesis is that the easier way to get started. That may not be the ultimate thing that we do, but the easier way to get started is to think of it as a supplemental thing for schools. So rather than get deals with school districts and stuff like that, think of it more as a competitor to Kumon. That is, we believe the better way to get started because there’s a very large number of people that do have some sort of help outside, et-cetera. By the way, what we like about this and you’re not going to see this year, but what we like about this over the long-term is that the propensity to pay not from the kids but from the parents for math is very-high. So we’ll probably be able to do something there.

Ryan MacDonald — Analyst, Needham

Awesome. Appreciate the color. Thanks, Luis.

Gillian Munson — Chief Financial Officer

Can you hear me now, Luis?

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Yes.

Gillian Munson — Chief Financial Officer

Okay, good.

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Gillian is back. I’m glad. Otherwise, they would have started asking questions about acronyms that I don’t know and we’re in trouble.

Gillian Munson — Chief Financial Officer

Some nice people just snuck around my computer. We’re better now. Thank you guys.

Operator

We’ll take our next question from Shweta Khajuria with Wolfe Research. Please turn-on your video and ask your question.

Shweta Khajuria

Hello?

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Hi, Shweta.

Shweta Khajuria

Hi, Luis. Thank you for taking my questions. I was going to ask Gillian very specific three questions while she was muted. Just to test her mic. No, actually, I have two questions. One is on retention and the other is on AI. So on retention rates, as we think about you investing in math and music and chess and perhaps there are some cross-platform benefits. How do we think about churn and/or retention rates over-time as you invest in the product. My understanding is that it has remained largely stable, but is there a reason to think that it actually improves markedly and what that can do to your platform? And then the second is on AI. So you addressed this in terms of competition where you have a market lead versus anyone else in the market right now. But what AI could potentially do is accelerate the path to creating new competitors that don’t even exist today. So could you talk to potential risk of an of a competitor emerging because AI is making it easier to create certain products?

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Yeah, sure. In terms of retention, I’ll let Gillian say more stuff, but generally, our retention, especially for payer attention is pretty stable. It’s very healthy and very stable. There’s some chance it may go up. I don’t think we’re modeling that. I’ll let Gillian know because I don’t actually know if we’re modeling that or not, but there’s some chance it may go up over-time because one thing we do know is that multi-subject users have higher retention. And the other thing that is true is that over-time, more-and-more users are learning multiple subjects just because we offer more subjects. So there’s some chance that it may go up. But I don’t think — so far, this is — you shouldn’t really believe me on this because it has remained pretty flat. I don’t know, Gillian, if you want to add to that, then I can go to the new competitors on AI.

Gillian Munson — Chief Financial Officer

I mean, retention, it looks pretty flat over a fairly long period of time and we look at it in aggregate and we look at it via cohorts. I think the perspective we have is that it can stay where it is. That said, I think you’re pointing out something really, really important. All the work we’re doing to make the product great so that word-of-mouth and top of the funnel and all that stuff keeps — keeping the size of the pool bigger that also helps current customers too, right? They get those features too. So I think it’s a possibility, but we haven’t modeled anything significant on that front on.

Shweta Khajuria

Okay.

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Yeah. And in terms of your question about, can a new competitor show up because AI allows the building of something faster. So it is true that with AI, you can build stuff faster. And I assume that that will be more true over-time. That is an assumption that we have. The good news is that, that also applies to us. So we can also build stuff faster. So that is good. The other thing to say is there’s a little bit of a misunderstanding, I think in the market about how easy it is to recreate a very sophisticated app like Duolingo. The reality is that if I were to write-down just a spec of Duolingo just and I’m not talking about recreating it in a programming language like write it down in English, it would take me years because there are a million corner cases of things that we do that we’re really smart about how — what we do for the user to get them to be more engaged or teach better, et-cetera. So it’s — I’m not particularly worried about somebody just magically pressing a button and an app appearing that is just better than Duolingo. On top of that, it’s pretty hard. The reason Duolingo so far has not really gotten competition at a large-scale. Again, we have like 85% of the daily active users of language learning apps in the world is because it’s pretty hard to compete with our free product in the sense that we have really huge distribution. And a new entrant, when they come in, they need to figure out how to grow. What they usually do is they try performance marketing to try to grow fast. But because our free product is so good, they usually cannot make their performance marketing work if they are to have a free product. So what then they do is they put a paywall on it. And then that just really caps them. So it’s just — it’s just been really hard for entrants. I mean we see — look, the reality is that over the span of Duolingo, we have probably seen, I don’t know, 400 apps come up and try to compete with us and I’m making that number up, it’s hundreds and we just don’t see them grow again because we have a very large distribution.

Shweta Khajuria

Okay. That’s helpful. Thanks, Luis. Thanks, Gillian.

Gillian Munson — Chief Financial Officer

Thank you.

Operator

We’ll take our next question from Eric Sheridan with Goldman Sachs. Please unmute your line and ask your question.

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Eric, hello.

Eric Sheridan

Hi, everyone. Thanks so much for taking the questions. Maybe building on Shweta’s question and asking it a little bit differently. When you think about the AI landscape, what is the scope by which you think you need to sort of be a leader in AI learning in the four walls of your application in your experience as opposed to possibly cooperating with LLM agents and being an application layer to their platform if more consumer behavior goes in that direction from an aggregation standpoint. I’d love to get your sort of philosophical view on that. And maybe the second question would be, you guys were probably one of the leading examples of a mobile-first company with Web 2.0, how should we think about the duration and the need to invest to reposition the company to be AI native in its tech stack over the next couple of years? Thanks so much.

Luis von Ahn — Co-founder, Chief Executive Officer & Chairman

Yeah. So good question about does it make sense for us to continue in our own app versus something like an LLM? I’ll tell you what we do. Just historically, there have been a number of new platforms that have happened since we launched Duolingo. For example, smartwatches came out. Also smart speakers came out like Alexa. In all cases, we had a lot of people asking us questions and certainly the companies that were building these things telling us this is the next big thing, everybody is going to be in their watch, you should be in your — in the watch.

In the past, we made the mistake of early-on making an app for the watch or whatever, and only to realize later that apps for watches are not really a thing other than exercise apps for watches. So the way we see it is, if it is the case that consumer behavior changes quite a bit so that nobody has their own app and then everybody is over there, we will definitely do something about it, obviously. What I’ll say though is that our app in particular, I mean, there are many other apps, et-cetera, but you can think of our app a lot like a game. I mean, it really matters that we are not tech space. It just turns out that people really, really like doing things like playing Candy Crush or doing Duolingo in-part because of the animations, et cetera. So if you’re just asking, are we going to be a thing in a chatbot, I just don’t think you can get the engagement that we can get inside like a text-based chatbot.

Now, again, I just don’t know what the future is going to look like, but this is — at the moment, we feel pretty confident that the right investments are to continue making a beautiful experience that is very visual, because that’s just what keeps people engaged. And in terms of AI native, I mean, we’ve always — ultimately, we are a technology company, where we have been really trying to adopt AI and technology as fast as possible. In fact, we’ve probably gotten in trouble for adopting AI fast, for example by writing stupid memos that I wrote one time. So that’s — also I think we’re just — you’re going to see us always take the next step with things like AI.

Operator

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 — Co-founder, Chief Executive Officer & Chairman

Well, thank you, everyone. These were excellent questions and I just want to say that we’re very excited about 2026. It is probably not exactly what investors expected. But if you are thinking about Duolingo as a long-term company, which obviously I am because that’s kind of what I want, this is really the right investment to do. The second thing that I’ll say is that Gillian started her job 3.5 days ago. So it is incredible the amount of knowledge that she has about our finances, which already surpasses mine. So thank you, Gillian, for that. And thank you everyone.

Gillian Munson — Chief Financial Officer

I am so delighted to be here. Thank you, everyone.