Shares of Duolingo, Inc. (NASDAQ:DUOL) traded down 9.3% to $122.68 in premarket trading on Thursday, August 6, 2026, following the release of its second-quarter earnings. While the company beat revenue expectations for the quarter, its third-quarter revenue forecast came in below analyst estimates, sparking a sell-off.
The company reported that daily active users (DAUs) surged 23% year-over-year to 58.7 million, while total bookings grew only 8% to $289.1 million. This divergence between engagement and monetization has raised concerns among investors about the company's ability to convert its growing user base into revenue.
In the second quarter, Duolingo's revenue rose 18% to $298.5 million, beating the average analyst estimate by $2.9 million. Adjusted EBITDA came in at $77.3 million, topping the company's May guidance by 8.9%. However, paid subscribers totaled 12.7 million, slightly below consensus expectations.
The company's monetization metrics painted a mixed picture. While DAUs as a percentage of monthly active users improved to 41.7% from 37.2% a year earlier, bookings per average daily user declined 12.3% to $4.93. Subscription bookings per paying subscriber also fell 5.5% to $19.71.
CFO Gillian Munson addressed the strategic shift, stating, "We're enabling our teams to do more to grow DAU and not be as primarily focused on monetization in this moment." The company remains committed to its goal of reaching 100 million daily active users.
Duolingo's user retention hit an all-time high of 84%, up roughly one percentage point, and the company expects daily user growth to exceed 20% for the remainder of the year. The June Streak Revival campaign successfully brought back 15.4 million learners, with nearly 8 million of those not having an active streak previously.
Despite the engagement strength, the company's third-quarter revenue guidance of approximately $302 million fell short of the $304 million consensus, a 0.7% miss. For the full year, Duolingo raised its revenue outlook by just $2 million to $1.207 billion, while adjusted EBITDA guidance increased to $320 million, up 3.2% from May's outlook.
The market's reaction reflects a broader debate about the company's growth strategy. With the stock trading at $122.68, the implied equity value drop of around $590 million is nearly 59 times the $10 million increase in annual adjusted EBITDA guidance. Analysts remain cautious, with the consensus rating at Hold and an average price target of $114.20, below the current indicated price.
Risks highlighted by the company include the potential for the Streak Revival effect to be short-lived, stock-based compensation projected to reach nearly 15% of revenue, and currency fluctuations that could impact second-half bookings by approximately $4 million for every 1% move in the dollar.
As regular trading opens at 9:30 EDT, investors will be watching whether the premarket selling persists. The divergence between user growth and bookings will likely remain a key focus for analysts and shareholders in the coming quarters.
