Shareholder Letter: Q3 2025

Duolingo reported robust Q3 2025 performance, with revenue climbing 41% YoY to $271.7 million and daily active users expanding 36% to 50.5 million. Paid-subscriber growth of 34% brought the total to 11.5 million, representing a 9.0% penetration of the last-12-month active user base. Adjusted EBITDA reached $80 million, a 29.5% margin, bolstered by a one-time tax benefit and operating leverage that offset rising artificial-intelligence expenses. Management projects fiscal-year bookings of 33% YoY and revenue growth near 38%, targeting an adjusted EBITDA margin of 29.0%.

The company explains that its core operating metrics—MAUs, DAUs, paid subscribers, and subscription/total bookings—are derived from an internally developed analytics platform that has not undergone third-party validation. Methodological updates can affect year-to-year comparability, and Duolingo cautions that other industry peers may calculate these figures differently, potentially limiting direct comparisons.

Free-cash-flow reconciliation shows a shift in definition from Q1 2025 onward. For the quarter ended September 30, FCF rose from $51.2 million (26.6% of revenue) in 2024 to $77.4 million (28.5%) in 2025, driven by higher operating cash and increased capital expenditures. A one-time $222.7 million tax benefit from releasing a valuation allowance is noted, and FCF excludes discretionary cash uses.

Overall, Duolingo demonstrates strong top-line momentum and improving profitability while acknowledging methodological caveats that may affect metric comparability across the industry.