Duolingo Bets on DAUs Over Profit

The strategic pivot comes as Duolingo's daily active user (DAU) growth decelerated throughout 2025. After several quarters of growth exceeding 40%, it slowed to 30% year-over-year in Q4 2025, prompting the shift in focus. The company now projects a more moderate 20% DAU growth for 2026. CEO Luis von Ahn stated the company found that adding "friction" to the free experience, like increased ads or subscription upsells, was the fastest way to boost revenue but came at the cost of user growth. Von Ahn has said Duolingo is both "under-monetized and over-monetized at the same time," noting that while only about 10% of monthly active users pay, aggressively pushing them was hindering expansion. To reaccelerate growth, Duolingo is investing over $50 million to improve the free user experience. This includes making advanced AI-powered features, which are becoming cheaper to operate, more widely available at no cost to attract and retain users. The company is intentionally sacrificing short-term monetization for long-term user scale and habit formation. The company has set an ambitious medium-term goal: to nearly double its user base from over 50 million at the end of 2025 to 100 million daily active users by 2028. This focus on the top of the funnel is expected to feed future growth engines, including the app's expansion into subjects like math, music, and chess. The trade-off is a forecasted slowdown in financial metrics for 2026. Duolingo guided for bookings growth of just 10% to 12%, a significant drop from the 24% in Q4 2025. Consequently, the adjusted EBITDA margin is expected to contract from nearly 30% to around 25%. This strategic shift has been met with investor skepticism, causing the stock to drop significantly after the Q4 earnings announcement. Despite the sell-off, the company announced a $400 million share buyback program, signaling confidence in its long-term vision.