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Duolingo's stock experienced a notable decline of nearly 15% after the company unveiled its financial results for the fourth quarter of 2025. Despite reporting figures that exceeded market predictions for revenue and earnings, the language-learning application's projections for the upcoming quarter and the full fiscal year failed to meet analyst forecasts, leading to a bearish reaction from investors.

For the final quarter of 2025, Duolingo announced revenues of $282.9 million, marking a 35% increase compared to the previous year and slightly surpassing the $275.9 million anticipated by financial experts. The company also reported earnings per share of $0.91, outperforming the estimated $0.78. Furthermore, adjusted EBITDA reached $84.35 million, exceeding the $78.24 million consensus, with an operating margin of 15.4%, a substantial improvement from 6.6% in the same period last year.

The platform demonstrated impressive user growth, with monthly active users reaching 133.1 million, an increase of 16.4 million from the prior year. Daily active users saw a 30% surge, totaling 52.7 million, and the number of paid subscribers grew by 28% year-over-year, hitting 12.2 million. Duolingo's free cash flow margin also improved to 33.1% from 28.5% in the preceding quarter, with net income for Q4 standing at $42 million.

Luis von Ahn, CEO of Duolingo, commented on the robust performance, stating that the company concluded 2025 with considerable momentum, surpassing 50 million daily active users and achieving over $1 billion in bookings for the first time in its history.

However, the positive quarterly results were overshadowed by the company's cautious outlook. Duolingo's revenue guidance for the first quarter of 2026 was set at $288.5 million at the midpoint, falling short of analysts' expectations of $291.2 million. The full-year adjusted EBITDA forecast was even more conservative, projected at $302 million, significantly below the anticipated $385 million.

The discrepancy between the strong past performance and the more conservative future projections is the primary reason for the market's negative response. Investors often prioritize future growth potential, and Duolingo's subdued guidance signaled a possible slowdown, prompting the sharp decline in its share price. This reaction underscores the market's sensitivity to forward-looking statements, even when current performance is stellar.