10-K: Duolingo Soars: Record Revenue, User Growth, and Profit Surge

Sentiment:

Annual Report 26 February 2026 6:35 PM

Duolingo reports exceptional financial results for 2025, driven by robust user growth, increased subscriptions, and strategic AI investments.

Better than expectedTotal revenues increased by 39%, significantly exceeding prior year performance.Net income saw a substantial increase, albeit partially due to a one-time tax benefit, but underlying operating income also grew significantly.Key operating metrics such as MAUs (up 14%), DAUs (up 30%), and paid subscribers (up 28%) all demonstrated robust growth, indicating strong user acquisition and monetization.Adjusted EBITDA and Free Cash Flow both showed strong double-digit percentage increases, reflecting healthy operational performance and cash generation.

Summary

Total revenues increased by 39% to $1,037.6 million for the year ended December 31, 2025, up from $748.0 million in 2024.
Net income surged to $414.1 million in 2025, compared to $88.6 million in 2024, significantly boosted by a one-time $256.7 million income-tax benefit from the release of a valuation allowance on deferred tax assets.
Adjusted EBITDA grew by 59.4% to $305.9 million in 2025, from $191.9 million in 2024.
Monthly Active Users (MAUs) reached 133.1 million for the three months ended December 31, 2025, a 14% increase year-over-year.
Daily Active Users (DAUs) increased by 30% to 52.7 million for the three months ended December 31, 2025.
Paid subscribers grew by 28% to 12.2 million as of December 31, 2025.
Subscription bookings rose by 36% to $996.3 million, and total bookings increased by 33% to $1,158.4 million in 2025.
The company expanded its product offerings with the launch of a new Chess course in 2025, alongside existing Math and Music courses.
Duolingo acquired Music Learning Services Limited (NextBeat team) in July 2025 and Hobbes (animation and motion design studio) in July 2024 to strengthen in-house capabilities.

Sentiment

Score: 9

Explanation: StockSavvy.ai views this filing very positively, reflecting strong financial performance, impressive user growth, and strategic advancements in AI and product diversification. The authorized share repurchase program further enhances shareholder value, despite a slight dip in gross margin and increased operating expenses due to growth investments.

Positives

Achieved over $1 billion in annual revenue for the first time, marking a 39% year-over-year growth.
Subscription revenue increased by a strong 44% to $873.4 million, indicating successful monetization of the user base.
Significant growth in user engagement metrics, with MAUs up 14% to 133.1 million and DAUs up 30% to 52.7 million.
Paid subscriber base expanded by 28% to 12.2 million, demonstrating effective conversion of free users.
Adjusted EBITDA saw substantial growth of 59.4% to $305.9 million, reflecting improved operational efficiency.
Strong cash generation, with net cash provided by operating activities increasing by 36% to $387.8 million and free cash flow up 36.3% to $360.4 million.
Release of a $256.7 million valuation allowance on deferred tax assets resulted in a significant one-time income-tax benefit.
Successful expansion into new learning subjects like Math, Music, and Chess, diversifying the platform beyond language learning.
Continued investment in AI and machine learning technologies, powering new features like Roleplay, Explain My Answer, and Video Call, enhancing learning efficacy and content generation.
Board authorized a share repurchase program of up to $400 million, signaling confidence in future performance and commitment to shareholder returns.

Negatives

Gross margin slightly decreased to 72.2% in 2025 from 72.8% in 2024, primarily due to increased AI costs and a shift in revenue mix towards lower-margin advertising.
Operating expenses, particularly Research and Development and Sales and Marketing, increased significantly by 30% and 39% respectively, reflecting higher headcount, marketing spend, and technology costs.
Duolingo English Test revenue decreased to $42.0 million in 2025 from $45.6 million in 2024, indicating a slight decline in this segment.

Risks

Failure to retain and grow users, or sustain their engagement and conversion to paying subscribers, could significantly harm revenue and financial results.
The online language learning industry is highly competitive with low switching costs, and innovation by competitors (including those using generative AI) may disrupt the business.
Changes to existing products or the introduction of new products could fail to attract or retain users or generate sufficient revenue and profits.
Inability to achieve or maintain profitability in the future, despite past and current profitability.
Challenges in effectively managing rapid growth, which could impact brand, company culture, and financial performance.
Increasing costs and investments may reduce operating margin and profitability if they are not successful.
Quarterly operating results and other operating metrics may fluctuate, making them difficult to predict.
User metrics and other operating metrics are subject to inherent measurement challenges, and inaccuracies could negatively affect reputation and business.
Reliance on a limited number of third-party platforms (Apple App Store, Google Play Store) for distribution and payment collection poses risks if terms change or relationships deteriorate.
Reliance on third-party hosting and cloud computing providers (AWS, Google Cloud) means any failure or disruption could adversely impact operations.
Failure to maintain the value and reputation of the brand could impair user base expansion.
Inability to attract and retain users through cost-effective marketing efforts, including social media and influencers, could materially adversely affect the business.
Subject to complex and evolving U.S. and international laws and regulations, particularly concerning privacy, data protection, and AI, which could lead to claims, penalties, or increased costs.
Development, implementation, and use of AI and machine learning technologies may not be successful, could lead to reputational harm, or face adverse regulatory developments.
Potential for intellectual property-related litigation and challenges in adequately obtaining, protecting, and maintaining intellectual property rights.
The dual class structure of common stock concentrates voting control with a limited number of affiliated stockholders, limiting influence of other shareholders.
Future issuance and sales of common stock could cause the market price to drop significantly.
No intention to pay dividends for the foreseeable future, meaning gains depend solely on stock price appreciation.
Anti-takeover provisions in corporate documents and Delaware law could impair acquisition attempts.
Claims for indemnification by directors and officers may reduce available funds.
Exclusive forum provisions could limit stockholders' ability to obtain a favorable judicial forum.
Failure to maintain effective internal control over financial reporting could adversely affect business and stock price.
Estimates or judgments relating to critical accounting policies may prove incorrect, impacting operating results.
Changes in accounting principles or their application could result in unfavorable accounting charges.
Income tax expense and effective tax rate may fluctuate due to changes in tax laws, operating results, and realizability of deferred tax assets.
Risks associated with scrutiny of environmental, social, sustainability, and related corporate responsibility (ESG) matters.

Future Outlook

Duolingo anticipates continued growth in its user base and monetization efforts, driven by product innovation, particularly in AI and machine learning technologies. The company expects to expand its platform beyond language learning into additional subjects and aims to maintain its mission of providing high-quality education universally. Future capital requirements will depend on subscription growth, timing of cash receipts, marketing investments, and R&D for new products. The company believes existing cash and cash equivalents, short-term investments, and cash flow from operations will be sufficient for at least the next 12 months.

Management Comments

Our flagship app has organically become the world's most popular way to learn languages and the top-grossing Education app in the App Stores, offering over 250 total language courses to over 130 million monthly active users for the three months ended December 31, 2025.
We believe that everyone, regardless of how wealthy they are, should have access to high quality education.
We believe that the hardest part of learning something new is staying motivated, so we build gamification features into our platform to motivate our learners, and we run thousands of A/B tests to optimize each feature for maximum engagement.
We believe rapid advances in Artificial Intelligence (AI) will fundamentally change the way people learn. As a technology company and global education platform, we believe we are well positioned to play a leading role in this innovation.
Our obsession with user experience has yielded affinity and loyalty in our learners, which in turn has helped us cultivate millions of brand advocates who tell their friends and families about our products.
We believe that our existing cash and cash equivalents, short-term investments and cash flow from operations will be sufficient to support working capital and capital expenditure requirements, and any future share repurchases, for at least the next 12 months.

Industry Context

StockSavvy.ai notes that Duolingo operates within a rapidly evolving EdTech landscape, characterized by increasing demand for engaging, mobile-first learning experiences and the transformative impact of AI. The global consumer spend on language learning is projected to reach $123 billion by 2027, indicating a substantial market opportunity. Duolingo's strategic focus on gamification and AI-powered features aligns with industry trends seeking to enhance user engagement and learning efficacy. The company faces intense competition from other online language learning platforms, free alternatives, and larger technology companies, necessitating continuous innovation and effective marketing to maintain its leading market position.

Comparison to Industry Standards

Duolingo learners who completed five sections achieved proficiency comparable to five university semesters of language education, demonstrating strong efficacy against traditional methods.
Duolingo learners' speaking skills were found to match those of university students, and English learners outperformed students in traditional classroom settings on standardized language proficiency tests, indicating superior instructional quality.
The Duolingo English Test is accepted by over 6,100 education programs globally, including 24 of the top 25 U.S. undergraduate programs ranked by international enrollment, and all Ivy League, MIT, and Stanford, positioning it as a highly recognized and competitive assessment tool compared to traditional, more expensive tests.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Chief Financial Officer	Matthew Skaruppa	Gillian Munson	2026-01-09	Matthew Skaruppa resigned, and Gillian Munson was appointed.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Dual-Class Stock Structure	The dual class structure of common stock concentrates voting control with a limited number of affiliated stockholders (76.3% of voting power as of December 31, 2025), limiting the ability of other stockholders to influence corporate matters.	NA	Limits influence of Class A common stockholders on corporate decisions, including director elections and major transactions, potentially deterring unsolicited acquisition proposals.
Board Structure	A classified board of directors with three-year staggered terms, where directors can only be removed for cause, and the board has the exclusive right to set its size and fill vacancies.	NA	Delays the ability of stockholders to change the majority membership of the board, reinforcing existing control.
Stockholder Voting Rights	No cumulative voting in the election of directors, and high approval thresholds (66 2/3% or 80% of Class B shares) required for certain amendments to organizational documents.	NA	Limits the ability of minority stockholders to elect director candidates and makes it more difficult for stockholders to amend key corporate documents.
Preferred Stock Issuance	The board of directors is authorized to issue one or more classes or series of preferred stock without stockholder approval, with terms that could adversely impact the voting power or value of Class A common stock.	NA	Provides the board with a tool to dilute ownership of a hostile acquirer or affect the residual value of common stock.
Bylaw Amendments	The board of directors can alter bylaws without stockholder approval; stockholders require an affirmative vote of at least 66 2/3% of voting power to adopt, amend, or repeal bylaws.	NA	Grants significant power to the board in shaping corporate governance rules, making it harder for stockholders to initiate changes.
Stockholder Action by Written Consent	Stockholders can act by written consent only as long as holders of Class B common stock hold at least 50% of the voting power.	NA	Restricts the ability of Class A common stockholders to take action without a meeting, especially if Class B voting power falls below 50%.
Special Meetings	A special meeting of stockholders may be called only by an officer pursuant to a board resolution or by the chairperson of the board.	NA	Limits stockholders' ability to call special meetings, potentially delaying urgent matters or activist initiatives.
Exclusive Forum Provisions	The Court of Chancery of the State of Delaware is the exclusive forum for certain disputes, and federal district courts for Securities Act claims.	NA	Aims to provide consistency in legal interpretations but may limit stockholders' choice of judicial forum for disputes.
Cybersecurity Governance	The Board considers cybersecurity risk, assisted by the Audit Committee which reviews the program quarterly. Management oversees through an Information Security Management System Governance Council, chaired by the Information Security Management Leader.	NA	Establishes a structured approach to cybersecurity risk management and oversight, aiming to protect critical systems and information.

Legal Proceedings

The company is not currently party to any material legal proceedings.

Related Party Transactions

Incurred approximately $680,000 in expenses with a vendor where certain Board members and executive officers also serve on the vendor's board of directors during 2025. Approximately $831,000 remained payable to this vendor as of December 31, 2025.

Stakeholder Impact

Shareholders: Strong financial performance and a share repurchase program are positive, but the dual-class structure limits voting influence for Class A holders, and no dividends are expected.
Users: Benefit from continued product innovation, expansion into new subjects (Math, Music, Chess), and AI-powered features enhancing learning efficacy and engagement. Free access remains a core offering.
Employees: Headcount growth indicates expansion, but increasing scrutiny on human capital initiatives and potential for poaching by competitors are noted risks.
Educational Institutions: Continued acceptance of the Duolingo English Test by over 6,100 programs, including top universities, reinforces its value for international admissions.
Customers (Paid Subscribers): Receive enhanced learning experiences through Super Duolingo and Duolingo Max, with new AI features.

Next Steps

Continue to expand product offerings beyond language learning into additional subjects like Math, Music, and Chess.
Further invest in AI and machine learning technologies to enhance learning experiences and content generation.
Manage and optimize marketing efforts to attract and retain users cost-effectively.
Execute the authorized $400 million share repurchase program to return capital to stockholders and manage dilution.
Monitor and adapt to evolving U.S. and international laws and regulations, particularly concerning privacy, data protection, and AI.

Key Dates

Date	Description
2011-08-18	Duolingo, Inc. was formed.
2012-06-19	The Duolingo App was launched to the general public.
2016-01-01	Duolingo English Test was launched.
2017-01-01	Paid subscription launched.
2020-11-01	Began granting Restricted Stock Units (RSUs).
2021-01-01	Duolingo Retirement Plan (401k) became effective.
2021-06-01	Granted 1.8 million performance-based RSUs (Founder Awards) to founders.
2021-07-26	Adopted the 2021 Incentive Award Plan and 2021 Employee Stock Purchase Plan (ESPP).
2021-07-28	First day Class A common stock began trading on Nasdaq.
2021-07-30	Initial Public Offering (IPO) anniversary, relevant for Founder Awards vesting.
2021-01-01	Launched family plan for Super Duolingo.
2022-01-01	Launched a Math course in the Duolingo App.
2023-01-01	Launched a Music course in the Duolingo App.
2023-01-01	Launched Duolingo Max, a premium subscription tier powered by GenAI technology.
2023-12-01	Signed a sublease for New York office space.
2024-01-01	EU's Pillar 2 global corporate minimum tax rate of 15% went into effect.
2024-02-01	Signed a lease for office space in Seattle, Washington.
2024-03-01	Entered into First and Second Amendments to the Office Lease Agreement for Pittsburgh headquarters, increasing leased square footage.
2024-05-01	Signed a lease for office space in Beijing, China.
2024-07-01	Completed the acquisition of Hobbes, an animation and motion design studio.
2024-08-01	EU Artificial Intelligence Act (EU AI Act) entered into force.
2025-01-01	Launched a new Chess course in the Duolingo App.
2025-01-01	Adopted ASU 2023-09, Income Taxes (Topic 740), on a prospective basis.
2025-04-01	Company publicly released a memo regarding the use of AI in its operations, which may have contributed to unfavorable publicity.
2025-05-01	Entered into the Third Amendment to the Office Lease Agreement for Pittsburgh headquarters, granting access to expansion space.
2025-07-01	Completed the acquisition of Music Learning Services Limited (NextBeat team).
2025-07-04	The One Big Beautiful Bill Act was signed into law, allowing immediate expensing of domestic R&D expenses.
2025-10-20	An outage of the us-east-1 region of the AWS platform caused Duolingo to go offline for over 12 hours.
2025-12-11	William "Bing" Gordon, a director, modified his Rule 10b5-1 sales plan, extending its expiration date to December 31, 2026.
2025-12-11	Trump administration's Ensuring a National Policy Framework for Artificial Intelligence Executive Order signed.
2025-12-31	Fiscal year ended.
2026-01-01	Number of Class A shares available under the 2021 Plan increased by 2,331 shares.
2026-01-05	OECD released a side-by-side package generally establishing an exemption for U.S.-based multinational companies from the 15% global minimum tax.
2026-01-09	Matthew Skaruppa resigned as Chief Financial Officer, and Gillian Munson was appointed as the new Chief Financial Officer.
2026-02-25	40,594,239 shares of Class A common stock and 6,356,052 shares of Class B common stock were outstanding.
2026-02-26	Date of the Annual Report on Form 10-K filing.
2026-08-02	Expected application date for the majority of substantive requirements of the EU AI Act.
2027-12-02	Proposed extended application date for the majority of substantive requirements of the EU AI Act.

Recommendation

strong buy

Duolingo's 2025 annual report demonstrates exceptional growth across all critical metrics, including a 39% increase in total revenue, a 44% surge in subscription revenue, and significant expansion in MAUs (14%) and DAUs (30%). The 28% growth in paid subscribers underscores successful monetization. While net income was boosted by a one-time tax benefit, the underlying operational performance, reflected in a 59.4% Adjusted EBITDA increase and strong free cash flow, is robust. Strategic investments in AI and diversification into new learning subjects like Chess position the company for continued innovation and market leadership. The authorized $400 million share repurchase program further signals management's confidence and commitment to shareholder value. Despite competitive pressures and regulatory risks, Duolingo's strong fundamentals, expanding ecosystem, and clear growth trajectory make it a compelling 'strong buy' for long-term investors.

Keywords

Language Learning, EdTech, Mobile Learning, AI in Education, Subscription Model, Gamification, Duolingo English Test, Financial Results, User Growth, Profitability, SEC Filing, 10-K, DUOL

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