$DUOL Duolingo Q1 2026 Earnings Conference Call

Thanks Debbie and thank you all for joining. Q1 was about execution. We said we were going to prioritize teaching better and changes aimed at growing users and that's exactly what we did. DAUs grew 21% year-over-year, right in line with what we expected as we make this strategic shift. I want to spend a few minutes on what we shipped this quarter related to language learning because teaching better is the foundation of everything we're building toward. Speaking practice has historically been the hardest thing to do well on a mobile app. This quarter, we made it a bigger part of the experience for free users and paid subscribers. We introduced spoken tokens which let learners speak their answers to almost any exercise. We started rolling out speaking adventures which put learners in real world conversational scenarios. And we launched flashcards which help learners build fast recall by saying words aloud. And for our paid subscribers, video call keeps getting better. Over the past year, we've more than doubled the average number of words spoken per user in that feature. We also reached a major milestone on content. We now offer courses up to professional proficiency, which is B2 on the CEFR scale across all our nine most learned languages. And we got there fast. In Q1 alone, we published 20,500 course units. To put that in context, that's more than 10 times what we were shipping per quarter just two years ago. AI has fundamentally changed what's possible for us, and I believe we're just scratching the surface. The product is better than it has ever been, and I couldn't be more excited about what's ahead. And with that, I'll turn it over to Jillian.

Yeah, thanks for the question. So, DAU growth, this is very important to us for of course this is the most important thing we're trying to do this year. We're growing in every single region as we have been for several years. But of course some regions are growing faster than others. Asia in particular is the fastest growing region. And in terms of the growth drivers, they remain pretty similar. I mean word of mouth has historically been the main growth driver for us. Most of our users come to Duolingo through word of mouth. We have some amount of marketing, some amount of performance marketing that we're doing. We've increased that budget a little bit but it's not massive when compared to other apps our size. But generally I think it's been pretty similar to the growth drivers. And the last thing that I'll say is historically the other place where DAU increases is just a lot of increases in retention to the product and that's basically the work of just making the product stickier and that has gone really well. We've been making a lot of changes to the product some of which are small, some of which are larger that just make retention higher. The way you would see that is just an increase in our DA to MAU ratio which keeps increasing pretty much every quarter and it increased again this quarter.

Yeah, everything we said in the last call remains. I mean we expect that it's going to stay at around 20% throughout the year. Now there will be some slight ups and downs depending on the comps from last year etc. But it's around 20% for the rest of the year. Nothing has changed from the last time we spoke.

Hi Ross.

Yeah, thanks for the question. Okay, so in terms of the free tier, I mean we've done a few things. We basically made it so that the free tier is better than it was two months ago. Of course, some of these changes take time. It's only been two months since the last earnings call, so it's not like we've done a thousand changes, but we have made the free tier better. There's just more things that are available to free users. And we're very happy with that. We think that over time that's going to really increase word of mouth. In terms of getting inspiration from mobile games, we've always gotten a lot of inspiration from mobile games and the idea ultimately what we're trying to do with Duolingo is make a thing that is as good at teaching as a one-on-one human tutor but it's also as fun as a mobile game. That's what we're trying to do. And we keep doing that. I mean, if you look over the last quarter, some of the things that we've worked on, very soon you'll see really cool avatar costumes. That's directly coming from mobile games. I think users are going to love that. We're doing a number of changes in terms of how we show rewards to users. For example, we're showing them as cards now, and that feels really collectible. So, we're doing things like that. Another thing that is not exactly for mobile games but that is important and it is also important to mention for the free tier. One of the things that we mentioned last time is that we want to work on monetization tactics that are not at odds with the free tier. And we have been finding some really good ones this quarter and one of them that is good is longer free trials. Historically Duolingo has given a 7-day free trial and that has worked well for us. We're finding that giving longer free trials is really good in that not only does it give us more bookings, that's good, but also it's good for the user. They feel good. They're like, 'Ooh, I have a one month free,' for example. So, that's something else that we're finding that we're pretty happy with.

Yeah. I mean so in terms of growth the main thing we work on here is daily active user growth. That's the main thing we have worked on for the longest of times and monthly active user growth. There's just no team that's looking at that. We do report it but it's just no team that's looking at that. Now related to MAU growth is top of funnel and that we do work on. The reality is that top of funnel has been flat for certainly for this quarter and we would like to accelerate it and we are working on that. There's a lot of stuff with marketing that I think will be really good particularly in underpenetrated regions. I think that's one thing and then the other one is just making changes to the product to make it teach better and be better for free users. That should accelerate word of mouth. Again, the main thing that has been responsible for top of funnel historically has been word of mouth. And word of mouth is this interesting thing that is beautiful because it's free, but we don't have that much control over it in terms of being able to measure it the same way that we can measure retention. So we're doing things that we think are going to be really good for word of mouth, but we don't have the granularity of control that we have for things like retention.

I don't, I understand why you say that you may perceive a change, but internally there's no change in terms of fun. I mean, we are humongous believers that the hardest thing about learning something by yourself is staying motivated. This really is the secret sauce of Duolingo and what has gotten us so far is that we know that we have to motivate our users to learn something. Because there's a very big difference between what people say and what people do. People may say they want to learn something but ultimately, they'll do what's most fun. So we spend a lot of effort trying to make it fun. We think that making voice and speaking be more prominent in the app does not decrease fun and in fact our metrics suggest that it does not. It can be a pretty fun experience. So we're going to continue doing that. Now one thing that is important to understand about fun, all the things that get shown on the screen are beautiful animations etc. It just turns out that humans are very visual creatures. So, you will see us continue having a lot of the very beautiful animations and kind of more game-like things even though there's voice in there. You're just still going to see all the graphics and everything to keep Duolingo as fun as possible. But yeah, our teams dedicated to making the app more fun are really firing in all cylinders. And you'll see a bunch of stuff really in the next couple of days. For example, you'll see this really awesome feature which is avatar costumes. I think it's a lot of fun. My favorite one, I dress up in, if you look at my account on Duolingo, I don't know if your app can see it yet, but I'm dressed up as a hot dog and I love it.

Yes, a great question. I mean, we're very excited about AI. In general, if you go to the highest level, what we're trying to do here is we're trying to make a thing that is as good at teaching as a one-on-one human tutor and as fun as a mobile game. The teaching part, AI, is what's going to get us there. We are really doing, for example, like we said, our video call feature that practices conversation has gotten significantly better over the last year. The conversations are way more fluid and that's making it so that users are basically saying twice as many words on average as they were a year ago. So that's a pretty major improvement. Similarly like you mentioned content, the amount of content that we were able to put out, learning content that we were able to put out in the last quarter has dwarfed basically everything that we've ever done in the past. We put out 20,500 units of content and that's in one quarter. And that's more than we were putting out in an entire, that's about what we put out the entire year last year. And by the way, last year we were already using AI. So we're just getting better and better at using it. And the other thing that I think we're working on a lot of things. For example, models really picking what exercise to give to you. We've always had a model that picks what exercise to give to each user, but we're working on significantly more personalization. Because that's exactly what a one-on-one human tutor does. It basically personalizes very close to you. So, we're very excited about that.

Yeah thanks for that question because it helps us clarify. So what we said last time was that we wanted to add video call to our medium tier Super Duolingo. It's important for us to do that because video call is such a good feature in terms of teaching and we just want significantly more people to have access to it because if they do they'll learn better, they'll tell their friends etc. So we really believe this is the right thing to do. We've started doing that. So at the moment we have a number of experiments giving video call to Super subscribers particularly to new users. New Super subscribers are getting video call. We have not scaled this to all our existing user base etc. So at the moment there's no change for Max. I don't know what's going to happen with Max. There's a lot of possibilities and it remains, again, there's just only been two months since we last spoke, so we just haven't run all the different experiments, but there's some possibilities of what it could be. It could be that we lower the price of Max. It could be that we do something where we give Max subscribers unlimited video call versus subscribers non-unlimited. There's a number of things that it could be, but at the moment in terms of metrics, we're not seeing a big difference except for the fact that new users, a cohort of new users at the moment is not even seeing Max. They're only seeing Super. And that's just one of the many experiments that we're running.

Yeah, thanks Nathan for the question. So yes, one thing that is exciting about, we've been working honestly for years to try to have the top nine languages have content all the way to Duolingo Score 129, which we now have it internally. I kept on going around like, 'Oh, we're almost done. We're almost done.' And somebody said something that stuck with me a lot said, 'No, no, no. That's just the beginning.' Because when we finally have all this content and now we do we really are in a much better spot to be able to make this content significantly get better based on how the users are performing. So we're starting really to do that and yes we have seen that changes in content certainly changes in content quality but also in the type of contents that you show have interesting impacts on retention particularly new user retention. So we are doing a lot of experiments to see for example just what we teach you in the first unit matters a lot, do we teach you greetings that is one thing do we teach you just the words for mom and dad that's another possibility and it actually is not as simple as it's always better to teach you greetings it's not as simple as that it's a little more complicated than that but generally these things do have an impact in retention and so we're very excited about that and we're also likely going to move to something where we have all this content. This is awesome, but we may even start generating content just for you. Based on everything that we know about you, we may just be able to generate content just for you. Maybe not the immediate next exercise, but like two exercises from now based on everything we've just generated that sentence just for you or that piece of content. So, we really are getting to that point and that's very exciting. In terms of other subjects, each subject has its unique challenges and unique things. So for sure AI is helping us be able to add new subjects faster and chess is a great example. I mean, we were able to add chess in about 9 months. But each subject has its own types of contents that you need to add. So, for example, adding math was relatively easy

If what you're trying to do is add math in the way that ChatGPT would show it, which is a wall of text. But if you want to add math with diagrams and user interaction, etc., that is harder. AI is making it easier, but it's still a lot harder. You're not just querying an AI to just give you some content. It's a lot harder to do it with all the diagrams. So I guess my answer to that is yes, it is making it easier to add more subjects. It is not yet trivial to add new subjects. At the moment, we're pretty happy with the subjects that we have, particularly we're very excited about math. You saw we started this call with a video for math. We really finally got to the point where our math course really has pretty much all the content between grades 2 and 12, and it can actually explain things when you get things wrong. So we're very excited about that.

Thank you. GameStop wants to buy eBay. We may want to do that, too. I'm kidding.

I'm going to leave that last comment alone, Louise, a little bit. We're not buying eBay, just so you know.

Yeah. In terms of certainly in terms of performance marketing, I mean this matters I think most for English learners in terms of trying to find users that are going to come into the platform. English learners are the ones that are most interested in more advanced content. And some of our performance marketing, some of the main places where we use it is in underpenetrated markets in particular Asia. And one of the things that is interesting about Asia is in a number of large Asian markets we can do profitable performance marketing. Performance marketing at Duolingo has been this interesting thing that because our free version is so good, it has not been easy for us to do profitable performance marketing because what happens we acquire people and then they're super happy as free users. But we are finding that we can do that particularly for example in China we're able to acquire profitably and these are English learners so in that respect these are a bit related but I would say the main thing with performance marketing for us is that we just historically have underinvested in performance marketing and we are getting just a lot more professional about it in certainly this year and I think you'll see the results of that in the next few months. We're pretty excited about that just because we're finally building the infrastructure to have the right attribution to send users to the right place after you acquire them, etc. That a company our size should have probably built years ago, but we kind of just ignored it. So, we're pretty excited about that.

Yeah, I mean the main thing that I'll say there is that we are running some tests on kind of what the right price should be for Super with video call. I cannot tell you all the results because we started this work a couple of months ago and it takes some time, you have to build the AB test and you have to run the AB test for a few weeks to get the results etc. So it's just really been 8 weeks since we started this work. So I just don't have a lot of results. But what I can tell you is that people are willing to pay more for Super with video call, that we know. How much more, I'll be able to tell you more in a quarter or two.

Yeah, it's a great question because it really allows me to emphasize something that I've said before and you use the word paradox which is kind of what we feel. We are at the same time undermonetized and overmonetized. It is a weird thing. The reality is that roughly 12% of our monthly active users are paying subscribers. We think that number should be much higher. I mean, if you look at comps of other premium models, they're much higher than that. Spotify is close to 50%. So, we really think there's a lot of room there. We should be able to get more people. At the same time, I think certain types of monetization we probably overdid in the sense that we probably were making the free user experience have too much friction. And at the crux of it was that most of our monetization tactics were kind of at odds with DAU growth. Not all of them, but many of them were at odds with DAU growth, which were like if you make the free user experience have more friction. What happens is that some more people subscribe, that's good. That makes you money, but also some more people leave. And what we need to do and what we are doing which I'm very excited about is finding ways to monetize that don't put DAU growth at odds with monetization. Those ways exist and we're very happy with. I mentioned one already which is longer free trials. We've been historically at Duolingo. This is not something we've experimented with a lot, the length of our free trial. But if you look at other subscription businesses that are scaled, they have pretty different free trials, usually much longer than the one we have, you see one month, you'll sometimes even see three month free trials. So, you're going to see us experiment with that. And we are definitely seeing certainly the one month experiment we already see. We are seeing that it both increases revenue which is good but also is not at odds with daily active users because when you give somebody, when you say instead of a 7-day free trial it's a one month free trial that doesn't drive any user away. They're like oh that seems like a good thing. So we're doing the work that we're doing is finding ways to monetize that are not at odds with the growth. They exist and they're just not as quick as basically adding friction to the free user experience and that's what we're experimenting with this year. So what Jillian said is exactly right. The idea is that we have this year to be able to experiment with this. We'll probably experiment with a 3-month free trial. And by the way experimenting with a three-month free trial is something that we said before. Well, that is something that we could have never done if we didn't have a year like this one because in a 3-month free trial, what happens is that your bookings get delayed by a whole quarter. And so you're saying, oh, showing up to without being able to say we're going to operate with these guidelines, which is what we did for this. Just saying, oh, sorry, all our bookings are going to come next quarter. They didn't come this quarter is it was a little weird, but this is why we're operating this way.

Yeah, it's a great question. So, you are right. We AB test a lot. We concurrently are running hundreds of AB tests at all times. And that has been our product philosophy and that is how Duolingo has gotten better over time because we just are able to increase as soon as we set our minds on a given metric. If you just give us a few months, usually we're able to increase that metric. We just run a lot of AB tests. We are finding that the number of AB tests that we can run is increasing. We believe that that is because of AI usage particularly in our engineering or product organization. The increase is not humongous but it's kind of the first time we've seen an increase on a per capita basis in years. So we do think that that is helping. I don't know where this is going to end but it is an interesting thing because if you look last year for example and you were to read Twitter, Twitter would have had you think that you can program anything you want in 5 seconds and it's done and why shouldn't you be running 10,000 AB tests at once with a single engineer. That is an exaggeration. That is just not the case. And up until very recently, we and companies that are scale like us had not seen a real increase in velocity like overall, but we're starting to see that increase. It's still moderate, but we're starting to see that increase. So, I'm assuming that you're going to continue seeing that increase. Now, I don't think we're going to be able to run 10 times as many AB tests per capita like per engineer. But it is increasing and that's something that we're very happy with.

Yeah. So DAUs are growing in the US and they're growing in pretty much every country but it is true that in the US they're growing less than in many international markets. In particular Asia is the fastest growing market that we have that whole region. In terms of how that affects monetization we're not, that doesn't seem to affect it that much. It just turns out that yes the US monetizes well but it just turns out that a lot of countries monetize relatively well. A good example is China. China monetizes about as well as Western Europe. So like about as well as France, which is not as high as the US, but pretty high. And given that the growth rate in China, I don't know the latest numbers, but it's pretty significant. So I just don't think that the fact that the growth in the US is very low just means that our bookings growth is implied to be really low. But I would say that growth in the US, my hope is that by making the product teach better and also have higher word of mouth that we are and also investing some in marketing in the US which historically we had not invested in actual paid marketing in the US. My hope is that all of those things combined will allow us to have higher year-over-year growth in the US than what we currently have.

Yeah. We spend a lot of, I mean the main reason why our content is not growing even faster is because we're trying to make sure that it is very very high quality. We do a number of things. Certainly we do evaluations of our content both with AI and with humans to try to make sure that the content is very high quality and then after that we try to test it with our own users in small amounts to see if it's high quality and if it is we actually increase the number of people that we give it to. So we're trying to be very careful to make sure that the content is high quality. It is a good point because the reality is that as amazing as AI is, if you are not careful about the quality, you can get a lot of slop and we're trying very hard for that not to happen. So the quality of our content I think certainly over the last couple of quarters has actually increased. And the way we know that is we basically do spot checks and we kind of rate the quality of all the content and we know that over the last two quarters the quality has actually increased.

Yeah.

Yeah. I mean I would say the bottleneck for performance marketing for us has been first of all building the infrastructure for it to be again like a much more serious performance marketing machine. That is something we are doing at the moment. That's one thing but there's another one and it is not the quality of the teaching. It is mainly the problem with how good our free tier is. One of the problems we've had depending on the region and depending on what we advertise for etc has been being able to acquire a user and now they're here and actually getting them to subscribe as opposed to acquiring a user now they're here and they're very happy users of our free product. And so that's been the main bottleneck and that's the thing that we need to get over. At the moment in some geographies we have profitable performance marketing but in many geographies we do not.

Oh, I wouldn't say that. I mean, Duolingo has been around for 15 years. It has never stayed the same and it never will. So I don't think that's, well that's not going to change but I don't think that's been the problem.

Yeah. Thank you. I mean, you noticed the brand partnerships. We have had incredible brand partnerships in China. I think some of that is just that our IP and our brand in China are very strong and that commands some of the largest brands wanting to partner with us. For example, we very soon have a partnership with McDonald's in China. And so the very large brands wanting to partner with us, they come to us to do that. I think there's that part. There's also the part that I think brands in China, brands like Luckin Coffee for example are just a lot more open to partnerships than for example brands in the western world. You just don't see for example Starbucks changing all their stores every two weeks with a new brand whereas that's kind of what Luckin does. So there's some learnings certainly that team is, our partnerships team in China and our marketing team in China are very high performing. So there's some learnings of things that we can do in other places particularly in Asia. But I would say some of that also has to do with the fact that it's the China market. I will say the other thing that I'll say is that China's not just growing fast because of the great partnerships. I mean the great, I think it's kind of the other way around. I think the great partnerships are coming in part because we are growing fast and we because we're seen as a very cool brand. I mean the reality in China is that there's just a humongous appetite for English learning that just keeps growing and growing and that's the main reason why China is growing.

Thank you. Thanks, operator. I'd just like to thank everyone for joining us and we look forward to seeing you on the next call.