Duolingo (DUOL) Stock Forecast & Price Target

Duolingo Inc. reported an impressive financial performance, with adjusted EBITDA rising to $80.0 million, reflecting a year-over-year increase of $32.5 million largely due to revenue outperformance. The company achieved total revenue growth of 41.1% year-over-year and exceeded subscriber estimates with 11.5 million paid subscribers, driven by a strong conversion from free to paid plans. Additionally, Duolingo raised its FY25 revenue guidance to between $1,027.5 million and $1,031.5 million, supported by solid subscription bookings growth of 36.3% year-over-year and an acceleration in revenue per subscriber, which increased by 8.9% year-over-year.

Duolingo Inc. experienced a decline in gross margins, reporting a decrease from 72.9% to 72.5% year-over-year, contributing to concerns regarding its profitability trajectory. The company has revised its revenue forecasts for 2026 and 2027 downward by 3% and 7%, respectively, to account for slower growth in bookings and a more gradual margin expansion, thus impacting EBITDA projections by 9% and 14%. Additionally, the guidance for fourth-quarter bookings and adjusted EBITDA fell short of market expectations, further indicating potential challenges amidst rising costs associated with generative AI and hosting services.