Duolingo Inc. (NASDAQ:DUOL) reported first-quarter results that topped analyst expectations, but its shares fell more than 12% in premarket trading on Tuesday after the company issued weaker-than-expected full-year revenue guidance and flagged declining margins.
The language-learning group posted adjusted earnings per share of $0.89, surpassing the consensus estimate of $0.76 by $0.13. Revenue came in at $292 million, marking a 27% year-on-year increase and exceeding forecasts of $288.98 million. However, Duolingo projected full-year 2026 revenue of $1.205 billion, slightly below the $1.21 billion expected by analysts. For the second quarter, revenue is forecast at $295.5 million, modestly ahead of the $294.2 million consensus.
Margins Expected to Narrow
The company indicated that gross margin is likely to decline to around 69.0% by the fourth quarter, compared with 73.0% in the first quarter, as usage of AI-driven features expands. Adjusted EBITDA margin is projected at 25.7% for the full year, with a second-quarter margin of 24.0%.
User Growth Remains Strong
Daily active users increased 21% year-on-year to 56.5 million, while paid subscribers also rose 21% to 12.5 million by the end of the quarter. Duolingo generated $147.8 million in free cash flow, representing a margin of 50.6%.
“The Duolingo story remains in a bit of a limbo period in 1H26, but we are eagerly waiting to get more constructive once we get closer to the “all clear” moment,” Barclays analysts led by Ross Sandler said in a note.
In a separate report, analysts at Morgan Stanley commented, “~6 months into DUOL’s increased focus on user growth, it has not yet been able to meaningfully inflect DAUs. Although DUOL is launching more shots-on-goal, its unclear what & when could drive a turnaround.”
They added that the post-earnings sell-off is “a reflection of offsides sentiment into earnings.”
Outlook and Strategy
Duolingo expects bookings to grow 10.5% for the full year 2026, with second-quarter bookings growth projected at 5.8% amid tougher year-on-year comparisons. Since February, the company has repurchased roughly 514,000 shares, offsetting more than 100% of expected 2025 dilution.
“In Q1, we made progress on the strategy we laid out last quarter,” said Luis von Ahn, Co-Founder and CEO. “We’ve made speaking a core part of the learning experience, and we’ve added more features and content to continue to support learners.”