Duolingo Q3 Daily Active Users Up 29% Year-over-Year; Falling AI Inference Costs Prompt Retirement of Duolingo Max

On November 3, US time, Duolingo, Inc. (Nasdaq: DUOL) disclosed its third-quarter 2026 financial results. Bookings, revenue, and profitability all exceeded expectations.

According to the financial report, Duolingo's third-quarter 2026 revenue reached $309.0 million, up 14% year over year; Bookings were $316.1 million, up 12% year over year.

Affected by factors such as a high base, net income was $27.2 million, compared with $292.2 million in the same period last year, a decline of about 90.69%. Adjusted EBITDA was $78.7 million, compared with $80.0 million in the same period last year), a slight year-over-year decrease of only 1.6%. This shows that Duolingo's core business profitability remains solid.

Daily active users (DAU) accelerated growth for the second consecutive quarter, up 29% year over year, higher than 23% in the second quarter.

This momentum is expected to continue, with fourth-quarter DAU year-over-year growth similar to the third quarter, and fourth-quarter bookings slightly above the previous full-year outlook guidance.

In the shareholder letter, CEO Luis von Ahn mentioned that Duolingo's "Green Machine" compounds many small product changes into meaningful improvements through experimentation, and this process continued to drive strong user growth in the third quarter. Hundreds of experiments were run across various parts of the product (such as notifications and streaks), aimed at improving user retention and DAU.

At the product level, one major change for Duolingo is migrating Duolingo Max to Duolingo Super. Luis von Ahn explained that the sharp decline in AI costs made Max, originally a "high-end, expensive tier," no longer necessary; merging it into Super and upgrading it to a family plan is an optimal solution that "does not hurt revenue, pleases users, and benefits long-term growth."

Duolingo continued to increase brand marketing partnerships, collaborating with two games: the global multiplayer game Brawl Stars and the game Eggy Party, which is popular in China. The mascot Duo was prominently featured in both games, and players could earn rewards by learning on Duolingo. Together, these two partnerships brought Duolingo millions of new and returning users.

01

The proportion of speaking practice has doubled

In the shareholder letter, Luis von Ahn mentioned that speaking practice is one of Duolingo's biggest priorities this year, getting learners to practice speaking more. Speaking is an essential part of learning a language, but it is also the skill that is hardest to practice regularly. Since the beginning of the year, the proportion of exercises learners can answer by speaking has doubled.

As Duolingo continues to lower unit AI costs, it has also made progress in expanding the coverage of Video Call (the AI conversation practice feature). Last quarter, Duolingo began offering unlimited Video Call to new Super subscribers and is expected to make it available to all Super subscribers before the end of this year. This is an important step toward Duolingo's goal of "teaching better."

02

Increasing monetization next year, but with "strict guardrails"

In the shareholder letter, Luis von Ahn mentioned that every new learner expands the audience Duolingo can monetize in the future. Although improving teaching quality and user growth remain the top priorities, Duolingo is gradually placing more emphasis on monetization while maintaining the quality of the free experience.

Subscriptions remain the biggest monetization opportunity, and Duolingo believes the most sustainable way to grow subscriptions is to teach better. Duolingo is especially excited about Video Call's potential to help language learners make real progress in speaking, and it is focused on getting more people to use it and better understand its value.

Because unlimited Video Call will become part of Super, Duolingo decided to discontinue its highest subscription tier, Duolingo Max. This month, Duolingo Max will stop selling new Max subscriptions and will migrate existing Max individual subscribers to the Super Family plan at the same price, giving them the same feature set plus the added benefit of sharing the subscription with family or friends.

The impact of this adjustment on bookings should be small and has been reflected in the fourth-quarter guidance. Duolingo is still considering options for existing Max Family plan users but will address this in 2027.

At the same time, Duolingo is looking for new ways to both monetize and drive engagement. Junior's Toy Hunt in the third quarter is a good example. This was the first event built around the new Avatar Collections system, in which learners collect puzzle pieces to unlock avatar outfits. The event was one of the biggest experimental wins in getting learners to complete more lessons, showing that collection-based events can be a promising opportunity to grow in-app purchases over time. Duolingo plans to continue building this format of collection events on a regular cadence.

Junior's Toy Hunt was a limited-time collection event launched in September 2026. Players earn puzzle pieces by completing lessons, and collecting the specified combinations unlocks limited-edition avatar outfits (Avatar Suits). The event includes six basic outfits, and collecting all of them earns an additional bonus outfit.

Avatar Collections is a foundational feature framework launched by Duolingo: users collect special outfits through limited-time events to dress up their Duolingo avatars. Once obtained, these outfits belong permanently to the user and can be switched and displayed at any time.

Luis von Ahn explicitly listed collection-based events as one of the new monetization methods found this year that does not conflict with DAU growth, saying they can effectively drive course completions and in-app purchases.

On the Q3 earnings call, Luis von Ahn explicitly stated that this year is a special year, with the whole company focused on accelerating user growth and setting a company-wide bonus for it; next year, while continuing to prioritize user growth, the company will significantly increase monetization experiments.

But he also drew a red line: "We have a strict guardrail internally at the company that we will not degrade the free user experience. The good news is that we spent this year figuring out how to monetize without degrading the free user experience, and I think we've just found a lot of effective levers."

According to the introduction, the monetization levers identified include: longer free trials (currently offered only to some users, to be expanded), in-app purchases such as Avatar Suits, and monetization of the chess course—chess has just reached 10 million daily active users, and Luis von Ahn called it "completely under-monetized, and right now we're just picking the low-hanging fruit."

The math course is growing at roughly the same rate as the language courses, but slower than chess. Luis von Ahn joked that "people prefer playing chess to learning math."

On the advertising side, Duolingo's Q3 was flat overall but grew well at the end of the quarter. Management mentioned that the company is shifting from low-quality ad networks to high-quality direct sales, has set up a direct sales team, and is bullish long-term.

03

AI causes experiment volume to surge; non-engineers can also launch A/B tests

A major feature of Duolingo's product development is that it runs extensive A/B tests before launching new features or making fine adjustments to products, and AI has now accelerated this process. Management revealed that to drive monetization, A/B testing will be even more intensive next year.

On the Q3 earnings call, Luis von Ahn described AI as the core accelerator of the company's improvement engine. He revealed that the number of A/B tests the company ran in the past month grew about 90% year over year, while headcount grew only 10%. "A large part of that—not all of it, but a large part—is because of AI. The promise of AI coding took some time to really translate into speed gains, but we're seeing it now."

The more critical organizational change is that AI tools have enabled non-engineers to independently complete full product changes. "A product manager or designer can now go all the way from idea to being in the app, and they can now do it themselves without needing help from engineers." Luis von Ahn said the number of experiments next year will be a "whole-number multiple" of this year's.

On the cost side, the sharp decline in AI inference costs has made premium features accessible to more users. The AI inference cost per Video Call has dropped from about $0.30 initially to well below $0.01, mainly thanks to the shift to open-source/open-weight models. This directly drove the company to discontinue its top subscription tier Duolingo Max and fold Video Call into the Super tier, expanding reachable users by about 10x.

Luis von Ahn also laid out the long-term vision for AI teaching: Duolingo is currently "better than a classroom, but not as good as a one-on-one human tutor," but human tutors don't improve, while Duolingo improves every year. "We believe that in the coming years we can reach the level of a one-on-one human tutor. But it won't look like a one-on-one human tutor—ultimately it will still feel gamified, because the most important failure mode is people giving up."

04

User growth: mainly product improvements, with game partnerships as a supplement

On the Q3 earnings call, Luis von Ahn emphasized that most of this year's user growth came from product improvements rather than external partnerships. "The vast majority of our active user growth came from improved retention, because the product got better." This quarter's game partnerships with Brawl Stars and Eggy Party did bring in users, and retention performed well, but "I really want to emphasize that we believe most of it came from app improvements, which is why we think this will continue."

Growth was broad-based, with DAU growth accelerating in eight of the top ten markets, and subscription bookings achieving double-digit year-over-year growth in most regions. Duolingo CFO Gillian Munson said: "We feel very good about the breadth of growth in both DAU and monetization across our business."

05

Paid marketing becomes "this year's big win"

Duolingo has long been known for organic brand spread and viral social media operations, and its paid acquisition spending has historically been limited in scale and not highly sophisticated. This year the situation has clearly changed: paid marketing now accounts for about 60% of the company's non-compensation marketing spend, corresponding to just over $100 million, and it is overall profitable—meaning the lifetime value (LTV) of users brought in is higher than the customer acquisition cost (CAC).

CFO Gillian Munson said the company is profitable on this spending and believes there is still room to improve the LTV-to-CAC ratio. CEO Luis von Ahn put it bluntly: "We've actually gotten smart about performance marketing, and I'm very happy about that."

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06

Looking ahead

Q4 is expected to see bookings grow 13% year over year, revenue grow 14%, adjusted EBITDA margin of 26.1%, and adjusted EBITDA of about $84 million (roughly flat year over year). For the full year, bookings are expected to grow 12%, revenue 18%, and adjusted EBITDA margin 26.5%.

Q3 operating expenses included an $11 million bonus accrual to reward the team for re-accelerating user growth; the second part of the bonus has been included in Q4 guidance and is expected to be paid in full in early 2027.

In the shareholder letter, Luis von Ahn said: "Our user growth this year across every region of the world and every subject we teach reinforces our belief that there is still a huge opportunity ahead of us. Our goal is to eventually reach a billion learners and, over time, build a much larger business. The more people we can teach, the bigger this opportunity becomes."

This article comes from the WeChat public account "Duozhiwang" (ID: duozhiwang), author: Wang Shang, published by 36Kr with authorization.