Earnings call transcript: Duolingo Q3 2026 revenue beats as users accelerate

Duolingo reported Q3 2026 results that surpassed revenue expectations while showing stronger user growth, prompting a significant after-hours rally. The adjusted earnings per share was $0.54, slightly below the anticipated $0.57, while revenue amounted to $309 million, exceeding the $303.04 million forecast. Daily active users increased by 29% year-over-year, up from 23% in the previous quarter, marking a second consecutive quarter of acceleration.

Revenue and bookings both outperformed expectations, with bookings occurring at the higher end of the previously announced range. Gross margin reached a record of around 73%, aided by reduced AI inference costs. Management emphasized that the company is transitioning towards monetization without compromising the free user experience.

The stock surged in the after-hours trading, indicating that investors were more focused on the company's growth momentum rather than the modest EPS shortfall. Duolingo attributed the quarter's success to robust performance across user growth, product development, and profitability. The company attributed much of its growth this year to its "Green Machine" optimization system, which conducts hundreds of A/B tests each week to enhance retention and engagement.

Additionally, broad-based growth, including a 29% increase in daily active users across the eight largest countries where it operates, contributed to the results. Management stated that the majority of the year's growth came from its internal optimization system and that categories like chess and math, which are still under-monetized, offer potential for future expansion.