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.