Shares of Duolingo (NASDAQ: DUOL) fell sharply, dropping as much as 8.7% on Tuesday, as investors focused on weaker-than-expected user growth despite a strong first-quarter revenue performance.
The stock has declined 43% this year, with losses widening to 79% over the past 12 months.
The sell-off underscores growing investor concern that the company’s growth strategy may be weighing on near-term engagement metrics.
Revenue beats expectations, but user metrics disappoint
Duolingo reported first-quarter revenue of $292.0 million, up 27% year over year and ahead of Wall Street expectations of $289 million.
Total bookings rose 14% to $308.5 million, supported by strong subscription growth.
Subscription revenue climbed 31% to $250.9 million, while advertising revenue increased 15% to $20.6 million.
Adjusted EBITDA came in at $83.4 million, also exceeding expectations of $74 million.
However, key user metrics fell short of estimates.
Daily active users rose 21% to 56.5 million but missed analyst forecasts of 56.7 million.
Monthly active users reached 137.8 million, below expectations of 145 million.
The shortfall in engagement metrics appears to have overshadowed the otherwise solid financial performance.
Growth strategy weighs on engagement
CEO Luis von Ahn emphasized the company’s long-term focus on expanding its user base, even at the expense of short-term monetization.
“It’s still too early to see the impact in our metrics, but our results so far are in line with what we expected,” he wrote in a shareholder letter.
“We believe that a larger user base will make Duolingo a significantly more valuable company, so we are prioritizing teaching better and growing our audience,” he added.
The company has acknowledged that some of its previous monetization strategies may have slowed user growth.
Von Ahn noted that adding friction—such as increased ad load or subscription prompts—may have contributed to decelerating engagement.
Jefferies said initiatives aimed at boosting engagement, including longer free trials and improved subscription perks, have yet to translate into stronger user activity or spending.
Slower growth in the US, a key monetization market, has also raised red flags.
AI investment and long-term outlook remain key focus
Duolingo continues to invest heavily in artificial intelligence as part of its product strategy.
The company said it created 20,500 course units in the first quarter, up significantly from 7,100 units per quarter in 2025.
The platform now offers lessons up to professional proficiency across its nine most popular languages.
Von Ahn said lessons now incorporate more AI-generated content and expanded speaking practice, along with gamified features such as customizable avatars inspired by video games.
He said in the earnings call that company aims to make the learning as effective as from a real teacher while making it engaging like a mobile game.
Looking ahead, Duolingo expects second-quarter revenue of $295.5 million and adjusted EBITDA of $71.0 million.
For full-year 2026, it projects revenue of $1.21 billion and bookings growth of 10.5% to $1.28 billion, while raising its EBITDA outlook to $310 million.
Despite these projections, analysts remain cautious.
Morgan Stanley maintained an Equal-Weight rating while cutting its price target, and BofA Securities raised its target modestly while keeping a Neutral stance.
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