Shares of Duolingo Inc tumbled 26% on Thursday after the language-learning platform issued softer-than-expected fourth-quarter guidance, despite reporting record revenue and user growth.
The company posted third-quarter revenue of $271.7 million, up 41% from a year earlier, and achieved an all-time high of 50.5 million daily active users.
Monthly active users reached 135 million, and paid subscribers rose 34% to 11.5 million. Total bookings grew 33% to $281.9 million.
However, for the fourth quarter, the company projects sales of $275 million and EBITDA of $77 million, slightly below analyst estimates.
Founder and CEO Luis von Ahn said the company is deliberately prioritizing long-term growth over short-term profits. The CEO told shareholders the firm has decided to shift the balance towards longer-term initiatives, prioritizing user growth over monetization.
Other highlights included the launch of Duolingo Chess, which added one million users in its first 30 days—the fastest growth in the product’s history. The company’s subscriber penetration rate has also risen consistently over the past five years.
Duolingo reported GAAP earnings per share of $5.95, well above analyst expectations of $0.76, and adjusted EBITDA of $80 million, a 68% year-over-year increase. Gross profit rose 40% to $196.9 million, and free cash flow reached $77.4 million.
Net income included a one-time $222.7 million tax benefit.