By Nate Wolf

Companies don't often see their shares plummet when they grow revenue by more than 40% and expand their profit margins, but that's exactly what was happening to Duolingo on Thursday.

The language-learning platform posted adjusted Ebitda, or earnings before interest, taxes, depreciation, and amortization, of $80 million for the third quarter, up 68% from last year and ahead of analysts' calls for $72 million. Revenue was a quarterly record $271.7 million, up 41% from a year ago and above Wall Street's call for $260 million.

Duolingo's fourth-quarter guidance disappointed shareholders, however. The company forecast Ebitda of $75.4 million to $78.8 million, lower than the $80.4 million analysts had expected coming into the print. The weak guidance reflects a shift toward user experience and long-term user growth at the expense of near-term monetization.

Duolingo shares dropped 25% to $194.50 in premarket trading Thursday. The stock, which had a blistering start to the year, was down 20% this year and 50% since the start of June as of Wednesday's close.

Not everyone on Wall Street sees Duolingo's strategic move as a problem. The change in focus creates more uncertainty over the next year, said Raymond James analyst Alexander Sklar in a research note Thursday, but it also demonstrates the company's growth ambitions are "far grander than what most likely were underwriting." The firm reiterated a Market Perform rating for the stock.

That said, the shift indicates that Duolingo's past product initiatives focused on improving user growth and conversion haven't worked out, said Justin Patterson of KeyBanc Capital Markets. The firm lowered its earnings estimates for 2026 and 2027 and downgraded Duolingo stock to Sector Weight from Overweight.

"It might take several quarters to see more meaningful financial benefits," Patterson wrote.

Write to Nate Wolf at nate.wolf@barrons.com

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November 06, 2025 08:28 ET (13:28 GMT)

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