Chapter 1: What is the main topic discussed in this episode?
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Shares of Duolingo are tanking today. The stock, in fact, right now down about 17%. It did, though, hit its lowest intraday since February of 2023, now down more than 80% since May of 2025, and about 22% of the float is short. So there's some real negative sentiment on the name.
Shares sliding after the company said its drive to gain subscribers would mean slower earnings growth and narrower profit margins in the short term. Tim, you keep reminding us that there's A lot going on with the company, some transformations here.
Yeah, the company said it would step up investment in AI and sacrifice some degree of monetization in order to accelerate user growth and engagement. The goal, double the current number of daily active users to 100 million in 2028. Great to be talking again with a member of the Duolingo C-suite. Back with us, Luis Von Ahn, co-founder, chairman.
President and CEO of Duolingo, he joins us from New York. Luis, always good to see you. We're going to talk about the quarter and the outlook in a minute, but I want to start big picture with AI because, I mean, you've been thinking and researching AI for decades at this point. You were a recipient of a MacArthur Genius Foundation grant back in the year 2006 for working on AI.
This is nothing new to you, what's happening right now. But answer the question for investors, is AI a threat to your business?
Well, first of all, thank you for having me. I think that we're in a unique point in time where because of AI, we're going to be able to teach significantly better. And Duolingo is by a wide margin the largest app in education in the world. And I think because of that, we're going to be able to really take advantage of this of AI boom to be able to teach significantly better.
And our sense is that within the next few years, we're going to have an app that teaches as well as a one-on-one tutor, but also is as fun as a mobile game. And if we're really able to do that, I think there's just so much more that we can capture. So that's what we're doing. We're really shooting for that.
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Chapter 2: What recent challenges has Duolingo faced in the stock market?
So jumping on the AI bandwagon, I mean, I guess what investors want to know is what is Duolingo's advantage over potential new AI learning apps?
Well, at the moment, we're not particularly concerned with competition in terms of other education apps. For example, for language learning, we have about 85 percent of the market share of all daily active users of people who are learning a language. So we have huge scale. What differentiates us is that because of that scale,
We just have more data into how people learn than anybody else, and we can use that to train our own specific models. So we just have the advantage of scale of being able to watch literally billions of exercises every day by people who are learning different things.
But as you know, this is going and this is moving pretty quickly, the AI impact, it seems. And to be fair, you are right. Like, we'll see. Many say this is, you know, we're kind of early in on this process and the impact. But what does Duolingo offer that can't easily be replicated by a large language model? And how do you kind of view that competitive landscape evolving?
There's a number of things. For one, with Duolingo, what we do is we try to build a habit of learning. For example, 15 million of our daily active users have a streak of longer than 365 days, meaning they have been using Duolingo for a year or longer and haven't missed a day. We're really trying to build a habit for that. This is why Duolingo is part game, part education.
I think that's just the right thing. It just turns out the hardest thing about learning something by yourself is staying motivated. Actually, the content to learn has been there for a long time. For example, you've been able to learn a language by just reading a book for hundreds of years. That has been there.
It's just what we do differently is we motivate people to continue doing it, and that's hard to get right.
So what are investors not getting right in your view? Carol mentioned some of the stock moves and now down at a point that you haven't seen since February of 2023. What are investors missing here?
I think it's a matter of timing. You know, on our end, we are trying to build a company for the very long term. We're trying to do something that, you know, for example, in our shareholder letter, we said that we're shooting to have double the daily active users that we have now. I mean, at the moment, we have a little north of 50 million daily active users worldwide.
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Chapter 3: How is Duolingo leveraging AI for user engagement?
But we're saying that that's going to take some time. And so we're concentrated in the long term. And, you know, what we're doing is we're trading off this year's, you know, financial metrics for a much larger thing in the long term.
Yeah, go ahead. Well, I get that. Right. You know, companies have to invest in order to provide growth going forward.
Chapter 4: What is Duolingo's strategy for doubling daily active users?
And I think it's fair to say that we understand why investors I mean, they're not loving Your forecast for first quarter adjusted EBITDA, that's missing the mark from what the street was expecting. 2026 revenue, also that forecast missing. Same story for 2026 adjusted EBITDA overall. So you talk about building this.
to double your daily active users to 100 million how much will how long will that build actually take and what kind of visibility do you have on that to kind of maybe reassure investors that this isn't something that takes longer while the ai world continues to challenge established players
Yeah, I mean, the way we're seeing it is we're going to spend this year really working on three things, really. Teaching better, improving the free user experience, and also expanding to other subjects. I mean, by now, we already teach math, music, and chess. And we've been growing quite a bit. About 15% of our active users are learning things that are other than languages.
Our chess course has grown quite significantly. So these are the three things that we're working on, and we're going to be working on that for the rest of the year. And we're expecting that towards the end of the year, we're going to see some improvements in our year-over-year growth rate. We're still growing. I mean, we've had five years of really phenomenal growth. We IPO-ed in 2021.
Since then, we've more than 5x-ed our active users, so we expect that we'll continue growing pretty strongly.
Luis, is the idea in making changes to the free tier, is it to get more people who don't use Duolingo now to use the free tier, or is it to get those free-tier users to upgrade to a paid tier?
Historically, what we have done is we have tried to, you know, the way we generate value on Duolingo is there's two parts to it. One is how many active users we have. That's kind of like the size of the pie that has grown quite significantly. And then there's how many of these people are paying us because we have this model. That's like the fraction of the pie that are payers.
Historically, we have worked on both. We have worked on growing the pie and also growing the fraction of the pie that is paying, which is why our bookings have grown really significantly over the last five years. This year, we're mainly concentrating on just growing the pie. That is the number of people that are actively using Duolingo because it is our belief that
Because of the moment that we're in, we really want to have as many people as possible actually learning something meaningful in Duolingo. And once we're able to do that, I mean, one of the main advantages that we have, certainly against new entrants, is scale. There's no other education app that has the scale that we have.
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