Q2 2026 Duolingo Inc Earnings Call Transcript
Key Points
- DAU growth accelerated to 23% year-over-year in Q2, slightly ahead of expectations, with broad-based growth across all regions.
- User retention metrics, including Current User Retention (CUR), reached an all-time high, driven by a stickier product.
- The Streak Revival campaign successfully re-engaged over 15 million learners, who showed better retention than typical reengaged cohorts.
- AI cost savings from open-source models improved gross margin outlook to ~70% and raised adjusted EBITDA margin target to 26.5%.
- The company is expanding monetization opportunities without hurting user growth, such as longer free trials and a new ad-supported tier (Superlight).
- Full-year bookings growth guidance remains modest at ~11%, with Q3 bookings growth expected to decelerate to 9% year-over-year.
- Monetization of new users is delayed, as users do not convert to paying subscribers immediately, limiting near-term revenue upside.
- The potential Q4 DAU growth bonus plan (25%+ growth) is uncertain and not included in guidance, creating potential cash outflow risk.
- The future of the Max tier is uncertain, with the possibility of sunsetting it as video call is rolled out to Super subscribers, which could impact revenue.
- China's regulatory environment and the mandatory use of local AI models pose potential risks, though the company is managing them.
Good evening, everyone, and welcome to Duolingo's second-quarter earnings webcast. Today, after market close, we released this quarter's shareholder letter, a copy of which you can find on our IR website at investors.duolingo.com.
On today's call, we have Luis von Ahn, our Co-Founder and CEO; and Gillian Munson, our CFO. They'll begin with prepared remarks before we open the call for questions. (Event Instructions) And please note, this call is being recorded and all participants are currently in listen-only mode.
Before we begin, please note that we'll make forward-looking statements regarding future events and financial performance. These statements are subject to risks and uncertainties described in our SEC filings and are based on assumptions we believe to be reasonable as of today, and we undertake no obligation to update them. We'll also discuss both GAAP and non-GAAP financial measures. Reconciliations of the two can be found in our earnings materials, and we encourage you to review them when evaluating our performance.
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