10-Q · May 4, 2026
Duolingo, Inc. reported Q1 2026 revenue of $291.97 million, exceeding estimates by $3.4 million, but EPS was $0.89, falling short of estimates of $1.53. The company experienced significant growth in daily active users…
Earnings analysis · 10-Q
DUOL earnings analysis
Filed November 3, 2026 · Our reading of the company's report
The latest report
Duolingo delivered solid operating growth, with revenue up 14% to $309.0 million, DAUs up 29% to 64.9 million, and subscription bookings up 16% to $278.4 million. Gross margin expanded to 72.9% and liquidity remained…
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Duolingo delivered solid operating growth, with revenue up 14% to $309.0 million, DAUs up 29% to 64.9 million, and subscription bookings up 16% to $278.4 million. Gross margin expanded to 72.9% and liquidity remained strong, but operating margin compressed to approximately 7.8% as R&D and other operating costs grew faster than revenue, leaving quarterly free cash flow down to $75.3 million. Net income declined 91% primarily because the prior-year period benefited from a one-time $222.7 million tax benefit. The 10-Q disclosed no material changes to previously reported risk factors and provided no numeric forward guidance.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
What stood out
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Revenue growth remained strong
Revenue increased 14% year over year to $309.0 million, including subscription revenue growth of 18% to $270.0 million. Revenue also rose from $298 million in Q2 2026, an increase of approximately 3.7%.
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User growth accelerated
DAUs increased 29% year over year to 64.9 million, while paid subscribers rose 14% to 13.1 million. Management attributed user gains to product improvements, marketing, and better retention of current users.
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Gross margin expanded
Gross margin improved to 72.9% from 72.5% a year earlier and from 72.6% in Q2 2026. Management attributed the year-over-year improvement primarily to lower feature-based AI costs.
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Cash generation remained robust
Operating cash flow increased 6% year over year to $89.4 million, while free cash flow was $75.3 million. For the first nine months, operating cash flow was $328.5 million and free cash flow was $301.8 million.
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Strong liquidity and deferred revenue
Liquidity was substantial at September 30, 2026, with $1.240 billion of cash and cash equivalents and $134.3 million of short-term investments. Deferred revenue was $513.6 million and was expected to be recognized within the next 12 months.
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Bookings growth accelerated
Subscription bookings increased 16% year over year to $278.4 million and total bookings increased 12% to $316.1 million, driven by growth in subscription volume and pricing.
What to watch
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Profitability compressed
Operating margin declined to approximately 7.8% from 12.9% a year earlier and 11.4% in Q2 2026. Operating expenses rose 24% year over year to $200.9 million, outpacing the 14% revenue increase.
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Investment spending is rising
Research and development expense increased 30% year over year to $107.7 million, including $3.2 million of higher software and third-party AI costs. Sales and marketing expense also increased 20% to $42.2 million.
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Higher capex reduced quarterly FCF
Free cash flow declined to $75.3 million from $77.4 million a year earlier despite higher operating cash flow, because purchases of property and equipment increased to $11.0 million from $4.9 million and capitalized software and intangible purchases rose to $3.1 million from $2.0 million.
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Non-subscription revenue weakened
In-app purchases declined 38% year over year to $6.9 million, contributing to an 8% decline in other revenue to $39.0 million. This indicates continued concentration of growth in subscriptions.
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Tax comparison distorts earnings trend
Net income fell 91% year over year to $27.2 million from $292.2 million, while the current-period tax provision was $8.4 million versus a $245.7 million tax benefit in the prior-year period. The prior-year benefit included a one-time $222.7 million valuation-allowance release.
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Buybacks consume liquidity flexibility
The company repurchased $76.7 million of stock during the first nine months and had $323.3 million remaining under its $400 million authorization at September 30, 2026. Management also identified uncertainty around consumer spending, inflation and foreign-exchange rates as factors that could affect future capital needs.
Management's outlook
The 10-Q provides no quantitative revenue or EPS guidance and does not state a change versus the prior outlook. Management said existing cash, short-term investments and operating cash flow should support working capital, capital expenditures and potential share repurchases for at least the next 12 months.
Earlier filings 4
10-K · February 27, 2026
The 2025 Form 10-K emphasizes Duolingo’s scale and product roadmap: the company reports more than 130 million monthly active users, a 9% paid‑subscriber penetration, and continued expansion beyond languages (Math,…
10-Q · May 2, 2025
Duolingo delivered a beat on both top and bottom lines for the quarter: revenue of $230,743,000 and diluted EPS of $0.72, above prior-year results and consensus. Operating profitability improved to 10.2% and the company…
10-Q · November 7, 2024
Duolingo reported Q3 revenue of $192,594 (vs. $137,624 in Q3 2023), a 39.9% year-over-year increase, with gross profit of $140,414 and a slight gross‑margin compression to ~72.9%. The company returned to operating…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.