Duolingo, Inc. Q3 FY2025 earnings call

Luis von Ahn noted a strong Q3 with over 50 million daily active users. The company is guiding to nearly 1.2 billion in bookings for 2025 with 33% growth and an adjusted EBITDA margin of 29%. They emphasize AI's potential to transform education and are investing in long-term initiatives. Key operational highlights include the rapid growth of the chess course, product improvements like guided video calls, and expansion of language content for top languages to reach Duolingo score 130 (where one can get a job in the language). Matt Skaruppa mentioned focusing on maximizing platform LTV and balancing investments for long-term growth while maintaining strong financial performance.

Guided to nearly 1.2 billion in bookings for 2025 with 33% growth and 29% adjusted EBITDA margin. Expect deceleration in DAUs from Q3 but stabilization. September and October had 30% year-over-year DAU growth. Not guiding Q4 DAUs specifically, but noted September and October growth comping a strong prior year quarter.

Geopolitical risks in China related to testing Max. Potential impact of social media changes on DAU growth. Competitive landscape concerns such as people questioning the need to learn languages with Duolingo when using AI tools like ChatGPT, and concerns about simultaneous language translation affecting language learning interest.

Q: Bryan Smilek asked about underlying drivers of DAU growth in 4Q and engagement, and how close Duolingo is to getting back on track with marketing in the U.S.

A: Luis von Ahn said Q3 had 36% YOY DAU growth, with factors like the locking partnership in Asia and product improvements. Social media unhinged posts affected DAU growth but have resumed, expecting positive impact on DAUs.

Q: Wyatt Swanson inquired about the chess course's progress, engagement vs core language courses, and PVP rollout.

A: Luis von Ahn stated the chess course is the fastest-growing, retention slightly higher than language learning, PVP rolling out on iOS with Android soon.

Q: Ralph Schackart asked why the shift to prioritize growth over near-term profitability and the duration of the pivot.

A: Luis von Ahn said the AI opportunity makes long-term growth crucial, and Matthew Skaruppa added they've navigated trade-offs before and this is a relatively small financial impact with a huge opportunity.

Q: Alexander Sklar followed up on video call metrics and timeline for changes.

A: Luis von Ahn said they moved the average number of words spoken per session metric, with guided video calls (bilingual) being tested for beginner users soon.

Q: Ygal Arounian asked about AI accelerating road map for language learning modules and other subjects.

A: Luis von Ahn said AI accelerates content expansion for top 9 languages to reach Duolingo score 130, and using AI for math content, but not working on other subjects currently.

Q: Mark Mahaney asked about price actions, reactions, and deceleration in bookings.

A: Luis von Ahn said Q4 deceleration is due to shifting to long-term initiatives, testing prices, and Matthew Skaruppa added ARPU growth from Max and testing promo strategies.

Q: Ryan MacDonald asked about targeting demographics and measuring success of changes.

A: Luis von Ahn said targeting masses, measuring user growth and learning outcomes, with improvements in teaching translating to user growth over time.

Q: Andrew Boone asked about advanced English learners and family plan adoption.

A: Luis von Ahn said advanced English learner growth is steady, and Matthew Skaruppa noted family plan adoption at 29% of subscribers.

Q: Justin Patterson asked about learnings from energy and reacceleration.

A: Luis von Ahn said energy met expectations, both product and marketing important, and Matthew Skaruppa added marketing success in the U.S.

Q: Shweta Khajuria asked about China engagement and Max renewal rates.

A: Luis von Ahn said China is fast-growing with high engagement, Max being tested, and Matthew Skaruppa noted Max renewals early but Q4 has a sizable cohort.

Q: Hanyi Cai asked about potential growth regions and Duolingo score relation to user metrics.

A: Luis von Ahn said Asia is the fastest-growing region, and the Duolingo score is aimed to be a proficiency standard, with progress in linking to job purposes and educational institutions.