- Q3 revenue beat: $271.7M vs. ~$260.3M expected; FY25 revenue outlook lifted to $1.028–$1.032B.
- But Q4 bookings guide missed:$329.5–$335.5M vs. ~$343.6M consensus → stock tumbles ~20% after-hours and slides 20–25% premarket.
- Scale milestones:50M daily active users (+36% YoY DAU growth) and 11.5M paid subscribers (+34% YoY).
- AI economics: CEO says generative‑AI features are profitable; Q3 gross margin at 72.5% (above LSEG estimate).
Duolingo shares sank ~20% in after-hours trading Wednesday and extended losses into Thursday’s premarket, where they were seen down roughly 22%–26% as traders digested the softer Q4 bookings outlook despite strong Q3 results. Premarket indications on MarketWatch showed DUOL near $202 shortly before the bell, and other trackers cited lows around $194. [1]
The numbers driving today’s move
- Q3 revenue:$271.7M (≈+41% YoY) and above consensus. FY25 revenue guidance raised to $1.028–$1.032B. [2]
- Q4 bookings guidance:$329.5–$335.5M vs. ≈$343.6M expected (Visible Alpha), the key disappointment weighing on shares. [3]
- Profitability:Adjusted EBITDA ~$80M in Q3 (≈+68% YoY), per Barron’s summary of the release. [4]
- Users & subs:50M DAUs and 11.5M paid subscribers (≈+34% YoY). [5]
- Gross margin & AI: Q3 gross margin 72.5% (vs. 71.4% estimate). CEO Luis von Ahn said AI features are profitable and the company is shifting emphasis to teaching quality over near‑term monetization. [6]
Why it matters: Bookings are a forward‑looking demand signal for subscription businesses. The gap versus Street expectations overshadowed otherwise strong top‑line growth and expanding profitability, prompting a sharp reset in near‑term expectations.
Strategy & product color
Management highlighted continued conversion from free to paid tiers, including Super Duolingo and Duolingo Max (the AI‑enhanced plan). The company also credited outsized performance in China, where a summer Luckin Coffee partnership boosted brand visibility and funnels. [7]
On the product roadmap, leadership reiterated a near‑term tilt toward “teaching better”—improving learning efficacy and experience—even if that tempers monetization for a quarter or two. Investors will watch how this trade‑off influences bookings and subscriber ARPU into year‑end. [8]
Wall Street’s day‑after scorecard (Nov. 6)
Analysts moved quickly to recalibrate price targets and ratings:
- KeyBanc: Downgraded to Sector Weight (from Overweight), citing the softer bookings setup. [9]
- Needham: Buy maintained; PT cut to $300 (from $460). [10]
- Goldman Sachs: PT to $250 (from $425). [11]
- Morgan Stanley: PT to $300 (from $500), Overweight kept. [12]
- Wells Fargo: PT to $185, Underweight maintained. [13]
How to read the setup
Bull case, intact fundamentals: Triple‑digit million revenue beats, expanding EBITDA, and 50M DAUs underscore Duolingo’s scale and product‑led growth. AI‑powered features are not only sticky but already profitable, a rarity among consumer apps. [14]
Bear case, near‑term air pocket: The bookings miss resets Q4 expectations and stirs debate about whether initiatives (including AI and new learning flows) will convert into bookings as quickly as hoped. Several brokers trimmed targets or downgraded, signaling a digestion phase for the stock. [15]
Key watch‑items into Q4/FY close:
- Bookings trajectory & net adds: Does guidance prove conservative, or does conversion stay slower through holiday cohorts? [16]
- Monetization mix: Take‑rate/ARPU trends between Super and Max and the impact of teaching‑quality investments on near‑term revenue. [17]
- International flywheel: Whether the Luckin Coffee campaign‑driven awareness in China keeps translating into DAUs and paid conversions. [18]
By the numbers (Q3 FY25)
- Revenue:$271.7M (≈+41% YoY)
- Adjusted EBITDA:~$80M (≈+68% YoY)
- DAUs:>50M (≈+36% YoY)
- Paid subscribers:11.5M (≈+34% YoY)
- FY25 revenue guide:$1.028–$1.032B
- Q4 bookings guide:$329.5–$335.5M
Sources: company statement; Barron’s; Reuters. [19]
Editor’s note (disclosure)
This article is for information purposes only and does not constitute investment advice. Always do your own research or consult a licensed advisor.
Sources & further reading:
- Duolingo Q3 beat, AI profitability, guidance and after‑hours move. [20]
- Company press release: 50M DAUs, +41% YoY revenue. [21]
- Premarket slide context and levels. [22]
- Analyst actions: KeyBanc downgrade; Needham, Goldman, Morgan Stanley, Wells Fargo price‑target cuts. [23]
References
1. www.reuters.com, 2. www.reuters.com, 3. www.reuters.com, 4. www.barrons.com, 5. www.globenewswire.com, 6. www.reuters.com, 7. www.reuters.com, 8. www.reuters.com, 9. www.tipranks.com, 10. www.streetinsider.com, 11. www.streetinsider.com, 12. www.marketscreener.com, 13. www.streetinsider.com, 14. www.globenewswire.com, 15. www.reuters.com, 16. www.reuters.com, 17. www.reuters.com, 18. www.inc.com, 19. www.globenewswire.com, 20. www.reuters.com, 21. www.globenewswire.com, 22. www.marketwatch.com, 23. www.tipranks.com
