Duolingo Q4 FY25 earnings call DUOL

Luis von Ahn emphasized a strategic shift for 2026, prioritizing the growth of the active learner base (the 'size of the pie') over immediate monetization. This decision is driven by the deceleration of DAU growth throughout 2025 and into 2026, and a strong conviction in the transformative potential of AI in education. The company aims to reach 100 million daily active users by 2028, believing this will create a more resilient brand and a significantly larger business.

AI is seen as a fundamental game-changer, enabling Duolingo to teach significantly better by personalizing learning, addressing user difficulties, and improving conversational practice. The company plans to leverage AI to offer a one-on-one tutor quality experience that is as engaging as a mobile game. This includes features like 'video call with Lily' and developing Duolingo Math to be the 'best tutor app for math,' targeting a global market of 1 billion math learners.

The plan for 2026 focuses on three main categories: teaching languages better, improving the free user experience by reducing friction, and investing in new growth engines like math, music, and chess. Chess has already achieved 7 million daily active users in less than a year, demonstrating the potential of new subjects. These investments are expected to drive DAU acceleration towards the 2028 target.

Management acknowledged that past monetization efforts, while effective, sometimes involved adding friction that hindered DAU growth. The company is now exploring alternative monetization strategies, such as adding more valuable features and in-app purchases (e.g., avatar customizations), that do not rely on friction. While these methods may be slower to implement, the goal is to increase the payer base beyond the current ~10% of monthly active users without compromising user growth.

Key product initiatives include 'speaking adventures,' a game-like feature integrating speaking practice, expected to roll out mid-year for all users. Additionally, more advanced content for the top 9 languages, covering over 90% of DAUs, will be available in a month or two, reaching a Duolingo score of 129, which is relevant for knowledge jobs. These are expected to enhance learning and engagement and will be continuously improved throughout the year.

Management expressed no concerns about market saturation, citing low penetration rates (e.g., 2% of US internet users daily use Duolingo) and significant growth potential even if all countries reached US penetration levels. Competition is also not a major concern, as Duolingo holds an 85% market share in language learning apps, and new entrants struggle to compete with its free product and large distribution without resorting to paywalls that limit their scale.