DUOL 10-K & 10-Q changes, risk factors and insider trading

The size of our user base and our users’ level of engagement and paid conversion are critical to our success. Our financial performance has been and will continue to be significantly determined by our success in adding, keeping and engaging users of our products and converting them into paying subscribers who remain continuing paying subscribers. We expect that the size of our user base will fluctuate or decline in one or more markets from time to time. If people do not perceive our products to be useful, effective, reliable, and/or trustworthy, we may not be able to attract or keep users or otherwise maintain or increase the frequency and duration of their engagement or the percentage of users that are converted into or remain paying subscribers. There is no guarantee that we will not experience an erosion of our user or subscriber base or engagement levels. User engagement can be difficult to measure, particularly as we introduce new and different products and services. Any number of factors can negatively affect user stickiness, growth, engagement and conversion, including if:

•users feel that their experience is diminished as a result of the decisions we make with respect to the frequency, prominence, format, size and quality of internal or external ads that we display;

•users are no longer willing to pay for subscriptions or in-app purchases (“IAPs”) or we are unable to increase the price of our subscriptions or in-app purchasesIAPs;

From time to time, certain of these factors have negatively affected user stickiness, growth and engagement to varying degrees. If we are unable to maintain or increase our user base and user engagement, our revenue and financial results may be materially adversely affected. In addition, we may not experience rapid user growth or engagement in countries that have high mobile device penetration, but due to the lack of sufficient cellular based data networks, consumers rely heavily on Wi-Fi and may not access our products regularly throughout the day. Any decrease in user stickiness, growth or engagement is likely tomay have a material and adverse impact on our revenue, business, financial condition and results of operations. If our user growth rate slows or declines, we will become increasingly dependent on paid marketing to attract users and our ability to maintain or increase levels of user engagement and monetization in order to drive revenue growth.

The online language learning industry is highly competitive, with a consistent stream of new products and entrants. As a result, new products, entrants and business models are likely to continue to emerge, both in the U.S. and abroad. It is possible that a new product could gain rapid scale at the expense of existing brands through harnessing a new technology (such as generative AIartificial intelligence “GenAI”)), or a new or existing distribution channel, creating a new or different approach to connecting people or some other means. We compete for learners’ time, attention, and share of walletspend not only with other online and app-based language learning platforms, but also with offline forms of language learning. Because of the extensibility of the Duolingo platform beyond language learning,learning and the Company’s Chess, Math, and Music courses, we also compete with language learning assessment providers and literacy platforms and may compete with other kinds of online learning platforms and may compete with additional types of learning platforms in the future.

Many of the currentCurrent and potential competitors, both domestically and internationally, may have substantially greater financial, technical, sales, marketing and other resources than we do, as well as in some cases, lower costs. Some competitors offer more differentiated products (for example, online learning as well as physical classrooms and textbooks) that may allow them to more flexibly meet changing customer preferences. Some of our competitors may enjoy better competitive positions in certain geographical regions, user demographics or other key areas that we currently serve or may serve in the future, or in their ability to teach certain languages or to teach speakers of certain languages other languages. These advantages could enable these competitors to offer products that are more appealing to users and potential users than our products, to respond more quickly and/or cost-effectively than us to new or changing opportunities, new or emerging technologies or changes in customer requirements and preferences, or to offer lower prices than ours or to offer free language-learning products or services.

There are a number of free online language-learning opportunities to learn grammar, pronunciation, vocabulary (including specialties in areas such as medicine and business), reading and conversation by means of podcasts and mobile applications, audio courses and lessons, videos, games, chatbots, stories, news, digital textbooks, and through other means, which compete with our products. We estimate that there are thousands of free mobile applications for language learning; free products are provided in at least 50 languages by private companies, universities and government agencies. Low barriers to entry allow start-up companies with lower costs and less pressure for profitability to compete with us. Competitors that are focused more on user acquisition rather than profitability may be able to offer products at significantly lower prices or for free. As free online translation services and products, such as wearable devices that provide translation, improve and become more widely available and used, people may generally become less interested in language learning. If we cannot successfully attract users of these freeproducts productsand services and convert a sufficient portion of these free users into paying users, our business could be adversely affected. If freeother products and services become more engaging and competitive or gain widespread acceptance by the public, demand for our products could decline or we may have to lower our prices, which could adversely impact our revenue and other results.

Our ability to keep, increase, and engage our user base and to increase our revenue depends heavily on our ability to continue to evolve our existing brand and products and to create successful new brands and products. We may introduce significant changes to our existing brand and products, or acquire or introduce new and unproven brands, products and product extensions, including using technologies with which we have little or no prior development or operating experience or for which the regulatory environment is still unsettled. In addition, we often introduce a new product and delay its monetization until the product is more mature and the user base is better established. We have also invested, and expect to continue to invest, significant resources in growing our products to support increasing usage as well as new lines of business, new products, new product extensions and other initiatives to generate revenue. For example, in 2022, we launched our Math App, and in 2023 we launched our Music course,courses, and at that time integrated both intoin the Duolingo App.App However,in 2022 and 2023, respectively, however, neither of these has generated material revenue for us. More recently, we launched Duolingo MaxMax, which is powered by generativeGenAI AItechnology, technology.and our Chess course. There is no guarantee that investing in new lines of business, new products, new product features, new product extensions and other initiatives will succeed. If our new or enhanced brands, products, features or product extensions fail to engage users, we may fail to attract or keep users or to generate sufficient revenue, operating margin, or other value to justify our investments, and our business may be materially adversely affected.

We have had operating losses in the past and we may not be able to achievemaintain or maintainincrease profitability in the future.

We have recently achieved profitability, which we may be unable to sustain. Although our revenue has increased each quarter since the first quarter of 2018, thereThere can be no assurances that itwe will continue to do somaintain or thatincrease our margins will not decline over time.profitability. Our costs of revenues or operating expenses may continue to increase in the future as we increase our sales and marketing efforts and continue to invest in the development of products and services. These efforts may be costlier than we expectexpect, and we cannot guarantee that we will be able to increase our revenue to offset our operating expenses. OurIn addition, our revenue growth may slow or our revenue may decline for a number of other possible reasons, including reduced demand for our products or services, increased competition, a decrease in the growth or reduction in size of our overall market, strategic operational decisions in how we prioritize user engagement and long-term growth, or if we fail for any reason to capitalize on our growth opportunities. If we are unable to maintain or increase profitability in the future, it could materially adversely affect our business, financial condition and results of operations.

We have grown rapidly in recent years and have limited operating experience at our current scale of operations. If we are unable to manage our growth effectively, our brand, company culture and financial performance may suffer.

We have experienced rapid growth and demand for our services since inception. We have expanded our operations rapidly and have limited operating experience at our current size. As we have grown, we have increased our employee headcount and we expect headcount growth to continue for the foreseeable future. From December 31, 2018 to December 31, 2024, our headcount grew from approximately 140 employees to approximately 830 employees. Further, as we grow, our business becomes increasingly complex. To effectively manage and capitalize on our growth, we must continue to expand our sales and marketing, focus on innovative product and content development, upgrade our management information systems and other processes, and obtain more space for our expanding staff. Our continued growth could strain our existing resources, and we could experience ongoing operating difficulties in managing our business across numerous jurisdictions, including difficulties in hiring, training, and managing a diffuse and growing employee base. Failure to effectively scale with our growth could harm our brand, the quality of our products and services, our ability to retain and recruit personnel and to effectively focus on and pursue our corporate objectives, and our future success. Moreover, we have been, and may in the future be, subject to legacy claims or liabilities arising from our systems and controls, content or workforce in earlier periods of our rapid development.

Because we have a limited history operating our business at its current scale, it is difficult to evaluate our current business and future prospects, including our ability to plan for and model future growth. Our limited operating experience at this scale, combined with the rapidly-evolving nature of the market in which we operate, substantial uncertainty concerning how these markets may develop, and other economic factors beyond our control, reduces our ability to accurately forecast quarterly or annual revenue. Failure to manage our future growth effectively could have a material adverse effect on our business, financial condition, and operating results.

Our costs are continuingcontinue to grow,increase, and some of our investments have the effect of reducing our operating margin and profitability. If our investments are not successful, our business and financial performance could be harmed.

Errors or inaccuracies in our metrics or data could also result in incorrectmisinformed business decisions and inefficiencies. For instance, if a significant understatement or overstatement of active users were to occur, we may expend resources to implement unnecessary business measures or fail to take required actions to attract a sufficient number of users to satisfy our growth strategies. Our efforts to address technical issues in our ability to record such data and improve our accuracy may not always be successful, and given the complexity of the systems involved and the rapidly changing nature of mobile devices and systems, we expect these issues to continue, particularly if we continue to expand in parts of the world where mobile data systems and connections are less stable. If our operational metrics are not accurate representations of our business, or if investors do not perceive these metrics to be accurate, or if we discover material inaccuracies with respect to these figures, our reputation may be significantly harmed, our stock price could decline, we may be subject to stockholder litigation, and our business, financial condition, and results of operations could be materially adversely affected.

A platform provider may also change its fee structure, addimpose additional fees associated with access to andor use of its platform, alter howadvertising wepractices, are able to advertise on the platform, changemodify how theuser personal information of its usersdata is made available to application developers on the platform,developers, limit the use of personal information for advertising or attribution purposes, or restrict how users can share information with their friends on the platform or across platforms. InSuch Aprilchanges 2021could Applematerially releasedaffect anhow updatewe market and monetize our products, measure the effectiveness of iOSour thatadvertising, requiresor itsreach and engage users, on an app-by-app basis, to explicitly opt-in to the use of identifier-for-advertising, a device identifier assigned by Apple to each of its devices and usedcould by advertisers to attribute app installs to advertising campaigns, target users through user acquisition, and deliver targeted ads. This led to a reduction in the use of identifiers, andcreate a more challenging environment for publishers and advertisers on iOSthese devices.platforms.

Our technology infrastructure is critical to the performance of our products and to user satisfaction, as well as our corporate functions. Our products and company systems run on a complex distributed system, or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated by third-parties that we do not control and which would require significant time and expense to replace. We expect this dependence on third-parties to continue. We have suffered interruptions in service in the past, including when releasing new software versions or bug fixes, and if any such interruption were significant and/or prolonged it could adversely affect our business, financial condition, results of operations or reputation.

Any failure, disruption or interference with our use of hosted cloud computing services and systems provided by third-parties, like AWS or Google Cloud, could adversely impact our business, financial condition or results of operations. For example, on DecemberOctober 7,20, 2021,2025, an outage of the us-east-1 region of the AWS platform caused Duolingo to go offline for over 512 hours. To the extent we do not effectively respond to any such interruptions, upgrade our systems as needed and continually develop our technology and network architecture to accommodate traffic, our business, financial condition or results of operations could be adversely affected. Furthermore, our disaster recovery systems and those of third-parties with which we do business may not function as intended or may fail to adequately protect our critical business information in the event of a significant business interruption, which may cause interruption in service of our products, security breaches or the loss of data or functionality, leading to a negative effect on our business, financial condition or results of operations.

In addition, internet-connected devices and operating systems controlled by third parties increasingly contain features that allow device users to disable functionality that allows for the delivery of advertising on their devices or reduce the ability to provide personalized or targeted advertising, which results in less valuable ads. Device and browser manufacturers may include or expand these features as part of their standard device specifications. For example, when Apple announced that UDID, a standard device identifier used in some applications, was being superseded and would no longer be supported, application developers were required to update their apps to utilize alternative device identifiers such as universally unique identifier, or, more recently, identifier-for-advertising, which simplifies the process for Apple users to opt out of behavioral targeting. Furthermore, laws and regulations may also make it more difficult to deliver personalized or targeted advertising or impose requirements that result in more users making elections to block our ability to deliver targeted ads. For example, many U.S. states have enacted laws allowing their residents to opt out of the use of their Personal Data for targeted advertising. If users do not elect to participate in functionality that supports the delivery of targeted advertising on their devices, our ability to deliver effective advertising campaigns could suffer, which could cause our business, financial condition, or results of operations to suffer. While the described changes did not result in material adverse impacts to us, theThe impact of similar potential future operating systems changes or potential future regulation on targeted advertising is highly uncertain.

If we are not able to maintain the value and reputation of our brand, our ability to expand our base of users may be impaired, and our business and financial results may be harmed.

We believe that our brand has significantly contributed to our word of mouth virality, which has in turn contributed to the success of our business. We also believe that maintaining, protecting and enhancing our brand is critical to expanding our base of users and, if we fail to do so, our business, financial condition and results of operations could be materially adversely affected. We believe that the importance of brand recognition will continue to increase, given the growing number of language learning applications, or “apps,”applications and the low barriers to entry for companies offering language learning products and services. Many of our new users are referred by existing users or are acquired by content created by unrelated third parties about our products, services and brand. Maintaining our brand will depend largely on our ability to continue to provide useful, reliable, trustworthy and innovative products, which we may not do successfully.

We have increased our marketing expenditures over time in order to attract and keep users and sustain our growth. For the yearyears ended December 31, 20242025 and 2023,2024, our Sales and marketing expenses were $90.5$125.7 million and $75.8$90.5 million, respectively. Evolving consumer behavior can affect the availability of profitable marketing opportunities. For example, as consumers communicate less via email and more via text messaging, messaging apps and other virtual means, the reach of email campaigns designed to attract new and repeat users (and keep current users) for our products is adversely impacted. To continue to reach potential users and grow our businesses, we must identify and devote our overall marketing activities and expenditures to new and evolving advertising channels, such as mobile and online video and social media platforms as well as targeted campaigns in which we communicate directly with potential, former and current users via new virtual means. For example, in 2024, we expanded our activities in channels such as YouTube Shorts. Generally, the opportunities in and sophistication of newer advertising channels are relatively undeveloped and unproven, and there can be no assurance that we will be able to continue to appropriately manage and fine-tune our marketing efforts in response to these and other trends in the advertising industry. Furthermore, these newer advertising channels often change rapidly, including changes in policies and algorithms, and can be subject to disruptions for reasons beyond our control (for exampleexample, the potential U.S. governmental restrictions or limitations on the TikTok platform). Any failure to successfully and cost-effectively manage our marketing efforts on, or disruptions to, social media platforms that we have come to depend on for marketing, including due to legislation, regulation, or directives (including executive orders), could materially adversely affect our business, financial condition and results of operations.

In addition, we engage in influencer-led campaigns as a part of our marketing strategy. An increase in the use of social media for marketing may cause an increase in the burden on us to monitor compliance of such materials, and increase the risk that such materials could contain problematic product or marketing claims in violation of applicable regulations. For example, in some cases, the FTC has sought enforcement action where an endorsement has failed to clearly and conspicuously disclose a financial relationship or material connection between an influencer and an advertiser. While we ask our influencers to comply with the FTC regulations and our guidelines, we do not regularly monitor what our influencesinfluencers post, and if we were held responsible for the content of their posts, we could be forced to alter our practices, which could have material adverse effect on our business, financial condition, and results of operations.

Negative commentary regarding us, our products or influencers, and other third parties who are affiliated with us may also be posted on social media platforms and may be adverse to our reputation or business. Influencers with whom we maintain relationships could engage in behavior or use their platforms to communicate directly with our customers in a manner that reflects poorly on our brand and may be attributed to us or otherwise adversely affect us. It is not possible to prevent such behavior, and the precautions we take to detect this activity may not be effective in all cases. The harm may be immediate, without affording us an opportunity for redress or correction. See “—Unfavorable media coverage could materially adversely affect our business, brand image or reputation.”

We believe that a critical contributor to our success has been our commitment to make free language learning available worldwide in an effort to help people throughout the world improve their economic outcomes. The mission of Duolingo is a significant part of our business strategy and who we are as a company. We believe that Duolingo users value our commitment to our mission. However, because we hold ourselves to such high standards, and because we believe our users have come to have high expectations of us, we may be more severely affected by negative reports or publicity if we fail, or are perceived to have failed, to live up to Duolingo’s mission. For example, maintaining a free version of the app that is both effective and enjoyable is central to Duolingo’s mission. As a result, our brand and reputation may be negatively affected byAny actions we take that are viewed as contrary to that mission, suchincluding aspaid-only features that are only available to paid subscribers or changes to the free offeringoffering, that are viewed as undermining howits fun or effectiveeffectiveness themay, freetherefore, offering is. In these or other circumstances, the damage toharm our reputationbrand and reputation. These effects may be greatermore significant or lasting for us than tofor other companies that do not sharehave similara valuesmission-based with us, and it may take us longer to recover from such an incident and gain back the trust of our users.brand.

We have made and in the future may make decisions regarding our business and products in accordance with Duolingo’s mission and values that may reduce our short- or medium-term operating results if we believe those decisions are consistent with the mission and will improveresult thein longer-term benefits, such as maintaining or improving aggregate user experience.experience Ourin commitmentkeeping towith Duolingo’sour missionmission. However, this may not result in improvedthe long-term value and financial performance andwe valueanticipate, overeither the long term and our decisions may not be consistent with the expectations of investors. In addition, any longer-term benefits may not materialize withinon the time frame we expect or at all, whichparticularly coulddue harmto ourthe business, revenueuncertainty and financialvariables results.inherent in longer-term expectations.

Unfavorable publicity or media reportsreports, including in social media platforms, regarding us, our privacy practices, our social media activities, data security compromises or breaches, product changes, product or service quality or features, litigation or regulatory activity or regarding the actions of our partners, our users, our employees or other companies in our industry, could materially adversely affect our brand image or reputation, regardless of the veracity of such publicity or media reports. If we fail to protect our brand image or reputation, we may experience material adverse effects to the size, demographics, engagement, and loyalty of our user base, resulting in decreased revenue, fewer app installs (or increased app uninstalls), or slower user growth rates. For example, in April 2025, the Company publicly released a memo regarding the use of AI in its operations, which may have contributed to unfavorable publicity, adverse impacts on the Company’s brand and social media presence, and a deceleration in user growth. Damage to our brand or reputation could also adversely affect educational institutions’ willingness to accept the Duolingo English Test, which in turn could slow the growth of, or reduce, our revenue from the Duolingo English Test. In addition, if securities analysts or investors perceive any media coverage of us to be negative, the price of our Class A common stock may be materially adversely affected. Any of the foregoing could materially adversely affect our business, financial condition and results of operations.

We currently depend on the continued services and performance of our key personnel, including Luis von Ahn and Severin Hacker. If one or more of our executive officers or key employees were unable or unwilling to continue their employment with us, we might not be able to replace them easily, in a timely manner, or at all. The risk that competitors or other companies may poach our talent increases as we continue to build our brands and become more well-known. Our key personnel have been, and may continue to be, subject to poaching efforts by our competitors and other internet and high-growth companies, including well-capitalized players in the social media and consumer internet space. The loss of key personnel, including members of management as well as key engineering, product development, design and marketing personnel, could disrupt our operations and have a material adverse effect on our business. The success of our brand also depends on the commitment of our key personnel to our mission. To the extent that any of our key personnel act in a way that does not align with our mission, our reputation could be materially adversely affected. See “—Our employees, consultants and third party providers could engage in misconduct that materially adversely affects us.”

Our future success will depend upon our continued ability to identify, hire, develop, motivate, and retain highly skilled individuals across the globe, with the continued contributions of our senior management being especially critical to our success. Competition for well-qualified, highly skilled employees in our industry is intenseintense, and our continued ability to compete effectively depends, in part, upon our ability to attract and retain new employees. The programs we have established to attract new employees and provide incentives to retain existing employees, particularly our senior management, may result in additional expenses and may not have the desired effect. For example, there has been increasing scrutiny on certain human capital initiatives and activism by groups, both those seeking to promote and constrain such initiatives, which may require us to incur costs, subject us to litigation or activismactivism, or result in adverse impacts on employee recruitment, engagement, and retention. We cannot guarantee that we will be able to attract new employees or retain the services of our senior management or any other key employees in the future. Additionally, we believe that our culture and core values have been, and will continue to be, a key contributor to our success and our ability to foster the innovation, creativity and teamwork we believe we need to support our operations. If we fail to effectively manage our hiring needs and successfully integrate our new hires, or if we fail to effectively manage remote work arrangements, our efficiency and ability to meet our forecasts and our ability to maintain our culture, employee morale, productivity and retention could suffer, and our business, financial condition and results of operations could be materially adversely affected.

For example, a country’s decision to cap or reduce immigration, particularly international student immigration, could reduce the number of Duolingo English Tests that are taken for the purpose of immigration to that country. Likewise, if trends in international education shift away from English-speaking destination countries, such as the U.S., where the Duolingo English Test is accepted, we may see a reduction in the number of Duolingo English Tests taken. See “—We operate in various international markets, including certain markets in which we have limited experience. As a result, we face additional risks in connection with certain of our international operations.”

Similarly, we continually seek to expand the number of schools, governments, and other institutions that accept the Duolingo English Test, including through direct engagement, government tenders, and other channels. If we are unable to do so, it may have a material adverse effect on our ability to grow the number of tests taken through the Duolingo English Test. Certain schools, governments, and other institutions have in the past rescinded their acceptance of the Duolingo English Test, and if there is an increase in the number of institutions to do so, it may adversely affect our business and financial results. For example, loss of confidence in the Duolingo English Test’s validity, security, or other characteristics could lead to a reduction in the number of accepting institutions, which could in turn reduce the appeal of the Duolingo English Test to test takers and adversely affect our revenues and results of operations. See “—Unfavorable media coverage could materially adversely affect our business, brand image or reputation.”.

Both our mobile learning application and the Duolingo English Test are available all over the world, and we have operations in various international markets. Operating internationally, particularly in countries in which we have limited experience, exposes us to a number of additional risks, including:

•operational and compliance challenges caused by distance, languagelanguage, legal and cultural differences;

•low usage and/or penetration of internet-connected consumer electronic devices;

Security breaches of our IT Systems, improper or unauthorized access to or disclosure of our Confidential Information, other hacking and social engineering or phishing attacks on our IT Systems or service, or other cyber incidents could disrupt our services or compromise Confidential Information related to our business and expose us to liability, which could harm our reputation and materially adversely affect our business.

Our products and services and the operation of our business involve the collection, storage, processing, and transmission of data, including personal data related to users and others, as well as proprietary information belonging to our business (collectively, “Confidential Information”). We rely on computer systems, hardware, software, technology infrastructure and online sites and networks for both internal and external operations that are critical to our business (collectively, “IT Systems”). We own and manage some of these IT Systems but also rely on third parties for a range of IT Systems and related products and services.

TheOur IT Systems that store and process such Confidential Information, includingas well as the information systems of third parties,parties on which we rely, are susceptible to increasing threats of continually evolving cybersecurity risks. In particular, our industry is prone to cyber-attacks by third parties seeking unauthorized access to Confidential Information or to disrupt our ability to provide services. We face an ever-increasing number of threats to our IT Systems and Confidential Information from a broad range of threat actors, including foreign governments, criminals, competitors, computer hackers, cyber terrorists and politically motivated groups or individuals, and we have previously experienced various attempts to access our IT Systems and Confidential Information. These threats include physical or electronic break-ins, security breaches from inadvertent or intentional actions by our employees, contractors, consultants, and/or other third parties with otherwise legitimate access to our systems, website or facilities, or from cyber-attacks by malicious third parties which could disrupt our IT Systems or impact our Confidential Information.

Such security breaches or disruptions have occurred on our IT Systems in the past and will occur on our IT Systems in the future. While to date no incidents have had a material impact on our operations or financial results, we cannot guarantee that material incidents will not occur in the future. The risks related to a security breach or disruption, including through ransomware, a distributed denial-of-service (“DDoS”) attack, computer malware, viruses, social engineering (predominantly spear phishing attacks), AI model prompt injections, AI model inversion, and general hacking, have become more prevalent in our industry and have generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased. We also regularly encounter attempts to create false or undesirable user accounts and ads or take other actions on our platform for objectionable ends. As a result of our prominence, the size of our user base, the volume of Confidential Information on our systems, the reach and popularity of our social media accounts, and the evolving nature of our products and services (including our efforts involving new and emerging technologies), we may be a particularly attractive target for such attacks, including from highly sophisticated, state-sponsored, or otherwise well-funded criminal actors.

In addition, some of our partners may receive or store Confidential Information provided by us or by our users through mobile or web applications integrated with our applications and we use third-party service providers to store, transmit and otherwise process certain Confidential Information on our behalf. If these third parties fail to adopt or adhere to adequate data security practices, or in the event of a breach of their networks, our Confidential Information (including our users’ data) may be improperly accessed, used, or disclosed, which could subject us to legal liability. We cannot control such third parties and cannot guarantee that a security breach will not occur on their systems. Although we may have contractual protectionsprovisions designed to provide protection with our third-party service providers, contractors and consultants, any actual or perceived security breach could harm our reputation and brand, expose us to potential liability or require us to expend significant resources on data security and in responding to any such actual or perceived breach. Any contractual protections we may have from our third-party service providers, contractors or consultants may not be sufficient to adequately protect us from any such liabilities and losses, and we may be unable to enforce any such contractual protections. Any adverse impact to the availability, integrity or confidentiality of our IT Systems or Confidential Information can result in legal claims or proceedings (such as class actions), regulatory investigations and enforcement actions, fines and penalties, negative reputational impacts that cause us to lose existing or future customers, and/or significant incident response, system restoration or remediation and future compliance costs. Any or all of the foregoing could materially adversely affect our business, results of operations, and financial condition.

Finally, the ability to access payment-related information on a real-time basis without having to proactively reach out to the consumer each time we process an auto-renewal payment or a payment for the purchase of a premium feature on any of our products is critical to our success and a seamless experience for our users. The passage or adoption of any legislation or regulation affecting the ability of service providers to periodically charge consumers for, among other things, recurring subscription payments may materially adversely affect our business, financial condition and results of operations. We are subject to legislation and regulation regarding the foregoing, such as California’s Automatic Renewal Law, and further legislation and regulation, or changes to existing legislation or regulation governing subscription payments and the automatic renewal of subscriptions, are being considered in many states in the US.U.S. While we monitor and attempt to comply with these legal developments, we have been in the past, and may be in the future, subject to claims under such legislation or regulation.

In order for us to succeed, our IT Systems and infrastructure must perform well on a consistent basis. Our products and systems rely on software and hardware that are highly technical and complex, and depend on the ability of such software and hardware to store, retrieve, process and manage immense amounts of data. We have in the past experienced, and we may from time to time in the future experience, system interruptions that make some or all of our IT Systems or data (including Confidential Information) temporarily unavailable and prevent our products from functioning properly for our users; any such interruption could arise for any number of reasons, including software bugs and human errors. Further, our IT Systems and infrastructure are vulnerable to damage from fire, power loss, hardware and operating software errors, cyber-attacks, technical limitations, telecommunications failures, acts of God and similar events. Not all of our IT Systems and infrastructure, including the backup systems we have for certain aspects of our operations, are fully redundant. Our plans and system backups, including our formal disaster recovery plan, do not account for all possible eventualities and our property and business interruption insurance coverage may not be adequate to compensate us fully for any losses that we may suffer. Any interruptions or outages, regardless of the cause, could negatively impact our users’ experiences with our products, tarnish our brands’ reputations and decrease demand for our products, any or all of which could materially adversely affect our business, financial condition and results of operations. Moreover, even if detected, the resolution of such interruptions may take a long time, during which customers may not be able to access, or may have limited access to, the service. See “—Security breaches of our IT Systems, improper or unauthorized access to or disclosure of our Confidential Information, other hacking and social engineering or phishing attacks on our IT Systems or service, or other cyber incidents could disrupt our services or compromise Confidential Information related to our business and expose us to liability, which could harm our reputation and materially adversely affect our business.”

We also continually work to expand and enhance the efficiency and scalability of our technology and network systems to improve the experience of our users, accommodate substantial increases in the volume of traffic to our various products, ensureprovide for acceptable load times for our products and keep up with changes in technology and user preferences. Any failure to do so in a timely and cost-effective manner could materially adversely affect our users’ experience with our various products and thereby negatively impact the demand for our products, and could increase our costs, either of which could materially adversely affect our business, financial condition and results of operations.

We have in the past and may in the future seek potential acquisition candidates to add complementary companies, products or technologies. For example, in OctoberJuly 2022,2025, we completed the acquisition forof the assetsteam behind NextBeat through the purchase of GunnerMusic MadeLearning LLCServices (“Gunner”),Limited, a whollyU.K.-based owned entity of PNG Holdings LLC, a design and animation studio based in Detroit, Michigan,entity, and in July 2024, we completed the acquisition of Hobbes, an animation and motion design studio based in Detroit, Michigan. The identification of suitable acquisition candidates can be difficult, time-consuming and costly, and we may not be able to successfully complete identified acquisitions. We may also experience operational and financial risks in connection with historical and future acquisitions if we are unable to:

•properly value prospective acquisitions, especially those with limited operating historiesacquisitions;

•successfullyfully identify potential risks and realizeliabilities potentialassociated synergies amongwith acquired and existing businesses; or

•retain or hire senior management and other key personnel at acquired businesses; andbusinesses.

•successfully manage acquisition-related strain on our management, operations and financial resources and those of the various brands in our portfolio Furthermore, we may not be successful in addressing other challenges encountered in connection with our acquisitions. The anticipated benefits of one or more of our acquisitions may not be realized or the value of goodwill and other intangible assets acquired could be impacted by one or more continuing unfavorable events or trends, which could result in significant impairment charges. The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations.

Our reporting currency and our functional currency is the U.S. dollar, our operating expenses are denominated in the currencies of the countries in which our operations are located, which are primarily in the U.S., ChinaChina, Germany, and Germany.the United Kingdom. Our consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. In addition, certain of our payment providers translate our payments from local currency into USD at time of settlement, which means that during periods of a strengthening U.S. dollar, our international receipts could be reduced. In addition, as foreign currency exchange rates fluctuate, the translation of our international receipts into U.S. dollars affects the period-over-period comparability of our operating results and can result in foreign currency exchange gains and losses. We have not entered into any hedging arrangements with respect to foreign currency risk or other derivative financial instruments,instruments. althoughTo the extent we may choose to do so in the future.future, Thethe use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates and may introduce additional risks if we are unable to structure effective hedges with such instruments.

There are inherent climate-related risks wherever business is conducted. We and our third-party vendors have operations located in areas that have experienced, and are projected to continue to experience, various natural disasters and meteorological phenomena (such as droughts, hurricanes, heatwaves, wildfires, storms, and flooding, among others) or other catastrophic events that may disrupt our operations or those of third parties upon whom we rely, require us to incur additional operating or capital expenditures, or otherwise adversely impact our business, financial condition, or results of operations. Climate change may increase the frequency and/or intensity of such events or contribute to various chronic changes in the physical environment, such as sea-level rise or changes in ambient temperature or precipitation patterns, any of which may also adversely impact our or our third-parties’ operations.

The promulgation of new laws or regulations, or the new interpretation of existing laws and regulations, in each case, that restrict or otherwise unfavorably impact our business, or our ability to provide or the manner in which we provide our services, could require us to change certain aspects of our business and operations to ensurefacilitate compliance, which could decrease demand for services, reduce revenues, increase costs and subject us to additional liabilities.

Our flagship app has organically become the world’s most popular way to learn languages and the top-grossing Education app in the App Stores, offering courses in over 40250 languagestotal language courses to over 100130 million monthly active users for the three months ended December 31, 2024.2025. We believe that we have become the preeminent online destination for language learning due to our beautifully designed products, exceptional user engagement, and demonstrated learning efficacy.

We use a freemium business model that relies on a premium subscription offering,offerings, advertising, and in-app-purchases (IAPs) to produce revenue. We believe the following key attributes of our freemium subscription business model are core to our success.

•Free Users: Since nonethe majority of our learning content is not behind a paywall, anyone can download the Duolingo App, use it for as long as they like, and complete any of our courses free of charge. Our users are composed of both new and reengaged users, which we draw from a large market of learners. We also work to keep existing users engaged in the product. This has allowed us to scale to more than 100130 million MAUs for the three months ended December 31, 2024.2025. TheseWe have seen these millions of learners provide two benefits to our business model:

◦They become advocates for Duolingo and providesupport our growth through positive word-of-mouth publicity for our product, which enables our growth and has allowed us to make very selectiveselective, efficient, and efficienttargeted marketing investments.

◦Our users complete overnearly one2 billion exercises every day, generating large amounts of data that powers our high-volume A/B testing and novel AI techniques. We use this data and the insights that come from it to continually improve both engagement and efficacy.

•Paid Subscriber Conversion: AsWe convert free users to paid subscribers over time. We see stronger conversion from users that recently joined or reengage with the platform, but also see learners tend towho use our product for months or even years before they decide to subscribe,subscribe. weThis allows us to enjoy economic benefits from users well into their tenure on the platform. As of December 31, 2024,2025, subscribers made up 8.8%9.2% of our average MAUs over the last twelve months as compared to 8.3%8.8% of our average MAUs during the year ended December 31, 2023.2024.

Our subscription offerings as of the date of this filing are called Super Duolingo and Duolingo Max. Super Duolingo offers learners additional features to enhance their learning experience. Duolingo Max gives learners access to the existing features of Super Duolingo in addition to incremental features and exercisesexercises, poweredsuch byas generativeVideo AI technology.Call.

We also offer in-app purchases, (“IAPs”) which consist of learners purchasing one-time benefits within the app, such as “Streak Freezes” and “Timer Boosts.”

We had approximately 116.7133.1 million and 88.4116.7 million MAUs for the three months ended December 31, 20242025 and 2023,2024, respectively, representing an increase of 32%14% from the prior year period. We grew MAUs through a combination of product initiatives designedand tomarketing. makeProduct improvements, such as making the app more social and engaging, through marketing, and through improving our courses, all of which we believe helped us attract new users, retain existing users, and reengage the millions of former usersusers, whowhile returnmarketing toexpanded our Duolingo App.reach.

We had approximately 40.552.7 million and 26.940.5 million DAUs for the three months ended December 31, 20242025 and 2023,2024, respectively, representing an increase of 51%30% from the prior year period.period, driven largely by an increase in retention of current users supported by modest growth of new and reengaged users. The DAU / MAU ratio, which we believe is an indicator of user engagement, increased to 34.7%39.6% from 30.4%34.7% a year ago. We grew DAUs through many of the same marketingproduct and productmarketing initiatives as we grew MAUs, suchwith asa makingfocus theon productincreasing engagement and encouraging more funfrequent and engaging.use.

As of December 31, 20242025 and 2023,2024, we had approximately 9.512.2 million and 6.69.5 million paid subscribers, respectively, representing an increase of 43%28% from the prior year period. We grew paid subscribers through product initiatives designed to make Duolingoour subscription offerings more appealing, which we believe helped us attract new subscribers and retain existing subscribers.

Subscription Bookings and Total Bookings. Subscription bookings represent the amounts we receive from a purchase of any Duolingo subscription offering. Total bookings include subscription bookings, income from advertising networks for advertisements served to our users, purchases of the Duolingo English Test, and in-app purchases of virtual goods.goods ("IAPs"). We believe bookings provide an indication of trends in our operating results, including cash flows, that are not necessarily reflected in our revenues because we recognize subscription revenues ratably over the lifetime of a subscription, the majority of which is generally from one toare twelve months.months in duration.

For the years ended December 31, 20242025 and 2023,2024, we generated $730.7$996.3 million and $495.5$730.7 million of subscription bookings, respectively, representing an increase of $235.2$265.5 million,million or 47%36%. from the prior year period. We grew subscriptionSubscription bookings increased, driven by sellinggrowth morein both first-time and renewal subscriptions.

For the years ended December 31, 20242025 and 2023,2024, we generated $870.6$1,158.4 million and $622.2$870.6 million total bookings, respectively, representing an increase of $248.4 million,$287.8 or 40%33% from the prior year period. We grew total bookings primarily through growth in subscription bookings as noted above.

We use certain non-GAAP financial measures to supplement our Consolidated Financial Statements, which are presented in accordance with GAAP. These non-GAAP financial measures include Adjusted EBITDA, free cash flow and constant currency.currency measures. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. By excluding certain items that may not be indicative of our recurring core operating results, we believe that Adjusted EBITDA, free cash flow and constant currency provide meaningful supplemental information regarding our performance. The effect of currency exchange rates on our business is an important factor in understanding period to period comparisons. We use non-GAAP constant currency measures and non-GAAP percentage change in constant currency measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Accordingly, we believe these non-GAAP financial measures are useful to investors and others because they allow for additional information with respect to financial measures used by management in its financial and operational decision-making and they may be used by our institutional investors and the analyst community to help them analyze the health of our business. However, there are a number of limitations related to the use of non-GAAP financial measures, and these non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, our financial results prepared in accordance with GAAP. Other companies, including companies in our industry, may calculate these non-GAAP financial measures differently or not at all, which reduces their usefulness as comparative measures.

Adjusted EBITDA. Adjusted EBITDA is defined as net income excluding interest income, income taxes, depreciation and amortization, stock-based compensation expenses related to equity awards, transaction costs related to acquisitions, acquisition earn-out costs, gain on sale of capitalized software, loss on disposal of leasehold improvementscosts and impairment of capitalized software. Beginning in the third quarter of 2025, we updated our definition of Adjusted EBITDA to include integration costs related to acquisitions. We did not incur integration costs in periods prior to 2025. Adjusted EBITDA is used by management to evaluate the financial performance of our business and we present Adjusted EBITDA because we believe it is helpful in highlighting trends in our operating results and that it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. The following table presents a reconciliation of our net income, the most directly comparable financial measure presented in accordance with GAAP, to Adjusted EBITDA.

(23)Represents costsacquisition incurredtransaction related to acquisitions,costs, including legal and accounting fees, and integration costs, both of which are included in General and administration expense within our Consolidated Statements of Operations and Comprehensive Income (Loss).as shown below. Integration costs began in the third quarter of 2025 in connection with the July 2025 acquisition.

(34)Represents costs incurred related to the earn-out payments on acquisitions, which is included within General and administrative expense within our Consolidated Statements of Operations and Comprehensive Income (Loss).Income.

(65)Represents impairment of capitalized software, which is included within Research and development expense within our Consolidated Statements of Operations and Comprehensive Income (Loss).Income.

For the years ended December 31, 20242025 and 2023,2024, we generated net income of $88.6$414.1 million and $16.1$88.6 million, respectively, representing an increase of $72.5$325.5 million. Net income for 2025 included a one-time income-tax benefit, net of a return-to-provision adjustment reflecting refinements to our tax calculation methodology, of $256.7 million. The increase in net incomeincome, excluding the impact from the valuation allowance, as compared to the comparative period was primarily due to arevenue combinationgrowth, ofpartially ouroffset growthby inhigher revenueoperating expenses, driven primarily by headcount growth, increased marketing spending, and interestsoftware incomeand intechnology additioncosts, toincluding aAI reduction in operating expenses as a percentage of revenue as compared to the prior year period.costs.

For the years ended December 31, 20242025 and 2023,2024, we generated $274.9Adjusted EBITDA of $305.9 million and $144.3$191.9 million of free cash flow,million, respectively, representing an increase of $130.7$113.9 million. TheAdjusted increaseEBITDA inincreased freeas cash flow was mainly attributablecompared to the increasecomparative periods for the reasons noted above in net cashincome, providedadjusted byfor operatingincreases activities.in stock-based compensation expenses, acquisition costs and depreciation and amortization.

Constant Currency. The effect of currency exchange rates on our business is an important factor in understanding period to period comparisons. We use non-GAAP percentage change in constant currency revenues and bookings, which exclude the impact of fluctuations in foreign currency exchange rates, for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe this information is useful to investors to facilitate comparisons and better identify trends in our business. The impact of changes in foreign currency may vary significantly from period to period, and such changes generally are outside of the control of our management. We calculate constant currency revenues by usingtranslating current period foreign currency revenues and translating them to constant currency using prior year comparable periodprior-year exchange rates forapplied consistently over the entirefull periodrevenue ofrecognition related bookings.period. We calculate constant currency bookings by using current period foreign currency bookings and translating them to constant currency using prior year comparable period exchange rates. The constant currency percentage change for revenues and bookings is calculated by dividing the difference between the constant currency amount and the prior year comparable period amount by the prior year comparable period amount.

We generate revenues primarily from the sale of subscriptions. The term-length of our subscription agreements are primarily monthly or annual, with the family plan offered as an annual subscription. We also generate revenue from advertising, the in-app sale of virtual goods, and the Duolingo English Test,Test. asWe wellmay asrun experiments that result in a different mix of revenue from Duo’sthese Taquería.levers in the future.

Cost of revenues predominantly consists of third-party payment processing fees charged by various distribution channels in addition to hosting fees and generativeArtificial Intelligence (“AI”) costs. To a much lesser extent, cost of revenues includes customer support costs, such as contractor fees, wages and stock-based compensation for certain employees working in customer support. It also includes the amortization of revenue generating capitalized software, and depreciation of certain property and equipment.

We intend to continue to invest additional resources in our infrastructure to expand the capabilities of our platform and ensure thatallow our users areto realizingrealize the full benefit of our products. The level, timing, and relative investment in these areas could affect our cost of revenues in the future.

Research and Development. We invest heavily in research and development to create new products and product features that are intended to help us grow our user base, engage our users, monetize our users, and teach our users. This, in turn, drivescan additionalimpact the growth in, and better lifetime value of, our paid subscribers, as well as increased advertising revenue from impressions from our free users. Expenses are primarily made up of costs incurred for the development of new and improved products and features in our applications during the preliminary product development stage. Such expenses include employee-related compensation, including stock-based compensation, of engineers, designers, and product managers, in addition to materials, travel and direct costs associated with the design, required testing of our platform and depreciation of certain property and equipment. We expect engineers, designers, and product managers to represent a significant portion of our employees for the foreseeable future. We typically capitalize a small portion of research and development costs once the product has reached application development phase, mostly consisting of wages, each period into capitalized software when the work is specific to launching a new product, or making major upgrades to our existing products or platforms. We regularly test product improvements with our users. Many of these tests start by making small changes in the product that affect small numbers of users. As the tests evolve, they can require increasing investment and can impact more users. This process of constant testing is how we implement many of our new products and improvements to our platform and, in total, require large investments and involve substantial time and risks to develop and launch. Some of these products and product improvements may not be well received or may take a long time for users to adopt. As a result, the benefitsimpact ofresulting from our research and development investments may be difficult to forecast.

Interest income consists of income earned on our cash and money market funds included in cash and cash equivalents and income earned and net accretion on our marketable securities.

Other income (expense) income,, net

Other income (expense) income,, net consists primarily of foreign currency exchange gains and losses.

Provision for incomeIncome taxes

The provision for incomeIncome taxes representsrepresent the income tax provisionimpact associated with our operations based onunder the tax laws of the jurisdictions in which we operate. In addition to the U.S., we also operate in foreign jurisdictions that have different statutory rates. Our effective tax rates will vary depending on the relative proportion of foreign to domestic income, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws.

The following table sets forth the components of our Consolidated Statements of Operations and Comprehensive Income for each of the periods presented as a percentage of revenue.revenue:

Revenues increased by $216.9$289.6 million, or 41%,39%, to $1,037.6 million during the year ended December 31, 2025, from revenues of $748.0 million during the year ended December 31, 2024, from revenues of $531.1 million during the year ended December 31, 2023.2024. The main drivers of the increaseincreases were:

•Subscription revenue increased by $202.8$265.9 million, or 50%,44%, to $607.5$873.4 million during the year ended December 31, 2024,2025, primarily due to an increase in the average number of paid subscribers during the period;

•Other revenue increased by $14.1$23.7 million, or 11%,17%, to $140.5$164.1 million during the year ended December 31, 2024,2025, drivenprimarily bydue to increased advertising revenuerevenue, ofresulting $5.0from million and In-App Purchases of $4.0 million, both of which were primarily driven by thean increase in DAUs.DAUs, Additionally,which otherresulted revenuein increased byadvertisements $4.4 million from Duolingo English Test revenue, which was driven by increases in the average revenue per test.served.

(1) Other revenue is comprised mainly of Advertising, Duolingo English Test, and In-App Purchases.IAPs.

Cost of Revenues and Gross Margin. Total gross margin decreased slightly to 72.8%72.2% from 73.2%72.8% during the years ended December 31, 20242025 and 2023.2024. ThisThe decrease was dueprimarily attributable to lowerboth advertisinga decline in subscription gross margin, partiallyreflecting offsetincreased byAI ancosts increaseused in subscriptionfeatures like Video Call, and a shift in revenue asmix atoward percentageadvertising, ofwhich totalcarries revenue.lower margins than subscriptions.

•Increased net personnel costs of $39.5$59.6 million, driven primarily by the growth in headcount.headcount, Total gross personnel costsincluding increased bystock-based $37.9compensation million, of which $15.6 million of the increase wasexpenses related to stock-basedequity compensation expense. Additionally, there was an increaseawards of $1.6$29.4 million dueand toacquisition arelated reductioncosts inof wages$2.6 recorded as capitalized software as compared to the prior yearmillion;

•Increased web services and technology costs of $3.3$8.8 million, which includes an increase of GenAI costs of $3.6 million; and

Research and development continues to be our largest operating expense as we test and experiment with new products and product features and look to improve existing ones to drive engagement and efficacy. Increased engagement and efficacy, we believe, help drive organic growth in MAUs and DAUs, growth in, and better retention of, paid subscribers, as well as increased advertising opportunities with free users.

The Company's risk factors are described in Part I, Item 1A, "Risk Factors" of the Annual Report on Form 10-K. These factors could materially adversely affect our business, financial condition, and results of operations, and could cause our actual results to differ materially from our historical results or the results contemplated by any forward-looking statements contained in this Quarterly Report on Form 10-Q. There have been no material changes from the risk factors previously disclosed under the heading “Risk Factors” in the Annual Report on Form 10-K, other than what is set forth immediately below.10-K.

Our flagship app has become the world’s most popular way to learn languages and the top-grossing Education app in the App Stores, offering over 250 total language courses to over 5558 million daily active users for the three months ended MarchJune 31,30, 2026. We believe that we have become the preeminent online destination for language learning due to our beautifully designed products, exceptional user engagement, and demonstrated learning efficacy.

_______________ (1) We primarily evaluate user engagement using DAUs, with MAUs as a supplementary metric. MAUs were 130.2140.6 million and 137.8128.3 million asfor ofthe Marchthree 31,months 2025ended June 30, 2026 and 2026,2025, respectively.

Daily active users (DAUs). DAUs are defined as unique users who engage with our Duolingo App or the learning section of our website each calendar day. DAUs are reported for a measurement period by taking the average of the DAUs for each day in that measurement period. The measurement period for DAUs is the three months ended MarchJune 31,30, 2026 and the same period in the prior year where applicable, and the analysis of results is based on those periods. DAUs are a measure of the consistent engagement of our global user community on Duolingo.

We had approximately 56.558.7 million and 46.647.7 million DAUs for the three months ended MarchJune 31,30, 2026 and 2025, respectively, representing an increase of 21%23% from the prior year period, driven largely by an increase in retention of current users. We grew DAUs through a combination of product initiatives and marketing. Product improvements, such as making the app more social and engaging, helped attract new users, retain existing users, and reengage former users, while marketing expanded our reach.

As of MarchJune 31,30, 2026 and 2025, we had approximately 12.512.7 million and 10.310.9 million paid subscribers, respectively, representing an increase of 21%17% from the prior year period. We grew paid subscribers through product initiatives designed to make our subscription offerings more appealing, which helped attract new subscribers and retain existing subscribers.

For the three months ended MarchJune 31,30, 2026 and 2025, we generated $268.1$250.3 million and $232.2$227.3 million of subscription bookings, respectively, representing an increase of $35.9$23.1 million or 15%,10%, driven by growth in both first-timevolume and renewalprice subscriptions.of subscriptions sold. For the six months ended June 30, 2026 and 2025, we generated $518.4 million and $459.4 million of subscription bookings, respectively, representing an increase of $58.9 million or 13%, driven by growth in volume and price of subscriptions sold.

For the three months ended MarchJune 31,30, 2026 and 2025, we generated $308.5$289.1 million and $271.6$268.0 million total bookings, respectively, representing an increase of $36.8$21.0 million or 14%8% from the prior year period. For the six months ended June 30, 2026 and 2025, we generated $597.5 million and $539.7 million total bookings, respectively, representing an increase of $57.9 million or 11% from the prior year period. We grew total bookings primarily through growth in subscription bookings as noted above.bookings.

Monthly active users (MAUs). MAUs are defined as unique users who engage with our Duolingo App or the learning section of our website each month. MAUs are reported for a measurement period by taking the average of the MAUs for each calendar month in that measurement period. The measurement period for MAUs is the three months ended MarchJune 31,30, 2026 and the same period in the prior year where applicable, and the analysis of results is based on those periods. MAUs are a supplemental measure and help illustrate the size of our global active user community on Duolingo.

We had approximately 137.8140.6 million and 130.2128.3 million MAUs for the three months ended MarchJune 31,30, 2026 and 2025, respectively, representing an increase of 6%10% from the prior year period. We grew MAUs through the same product and marketing initiatives as DAUs.

We use certain non-GAAP financial measures to supplement our reported financial results, which are presented in accordance with GAAP. These non-GAAP financial measures include Adjusted EBITDA, free cash flow and constant currencyconstant-currency measures. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. By excluding certain items that may not be indicative of our recurring core operating results, we believe that Adjusted EBITDA, free cash flow and constant currencyconstant-currency provide meaningful supplemental information regarding our performance. The effect of currency exchange rates on our business is an important factor in understanding period to periodperiod-to-period comparisons. We use non-GAAP constant currencyconstant-currency measures and non-GAAP percentage change in constant currencyconstant-currency measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Accordingly, we believe these non-GAAP financial measures are useful to investors and others because they allow for additional information with respect to financial measures used by management in its financial and operational decision-making and they may be used by our institutional investors and the analyst community to help them analyze the health of our business. However, there are a number of limitations related to the use of non-GAAP financial measures, and these non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, our financial results prepared in accordance with GAAP. Other companies, including companies in our industry, may calculate these non-GAAP financial measures differently or not at all, which reduces their usefulness as comparative measures.

Adjusted EBITDA. Adjusted EBITDA is defined as net income excluding interest income, income taxes, depreciation and amortization, stock-based compensation expenses related to equity awards, including employer payroll taxes related to equity transactions, acquisition transaction and integration costs, acquisition earn-out costs.costs, and impairment of capitalized software. Adjusted EBITDA is used by management to evaluate the financial performance of our business and we present Adjusted EBITDA because we believe it is helpful in highlighting trends in our operating results and that it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. The following table presents a reconciliation of our net income, the most directly comparable financial measure presented in accordance with GAAP, to Adjusted EBITDA.

(1)In addition to stock-based compensation expense of $34.6$38.2 million and $31.0$34.6 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $72.9 million and $65.6 million for the six months ended June 30, 2026 and 2025, respectively, this includes costs incurred related to taxes paid on equity transactions as follows:

(2)Represents costs incurred related to the earn-out payments on acquisitions, which isare included withinin General and administrativeadministration expense within our Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income.

For the three months ended MarchJune 31,30, 2026 and 2025, we generated net income of $43.5$33.2 million and $35.1$44.8 million, respectively representing a decrease of $11.6 million. For the six months ended June 30, 2026 and 2025, we generated net income of $76.6 million and $79.9 million, respectively, representing ana increasedecrease of $8.3$3.3 million. The increasedecrease in net income,income for the three months ended June 30, 2026, as compared to the comparative prior period was primarily due to operating expenses increasing slightly faster than revenue during the period. The increase in net income for the six months ended June 30, 2026, as compared to the comparative prior period was primarily due to revenue growth of 27%, coupled with a 30% increase in gross profit, reflecting an expansion inand gross margin and favorable operating leverageexpansion during the period.

For the three months ended MarchJune 31,30, 2026 and 2025, we generated Adjusted EBITDA of $83.4$77.3 million and $62.8$78.7 million, respectively, representing a decrease of $1.4 million. For the six months ended June 30, 2026 and 2025, we generated Adjusted EBITDA of $160.7 million and $141.5 million, respectively, representing an increase of $20.6$19.3 million. Adjusted EBITDA increasedchanged as compared to the comparative periods for the reasons noted above in net income.

For the three months ended MarchJune 31,30, 2026 and 2025, we generated $150.8$88.3 million and $105.6$90.7 million of net cash provided by operating activities, respectively, representing a decrease of $2.4 million. The decrease was primarily due to changes in working capital during the period. For the six months ended June 30, 2026 and 2025, we generated $239.0 million and $196.3 million of net cash provided by operating activities, respectively, representing an increase of $45.1$42.7 million. The increase was primarily due to higher operating income and changes in working capital.

For the three months ended MarchJune 31,30, 2026 and 2025, we generated $147.8$78.6 million and $103.0$86.3 million of free cash flow, respectively, representing a decrease of $7.7 million. Free cash flow decreased in line with operating cash flow, reflecting the same underlying drivers of cash provided by operating activities and by higher capital investments as we expand our office footprints. For the six months ended June 30, 2026 and 2025, we generated $226.4 million and $189.3 million of free cash flow, respectively, representing an increase of $44.8$37.1 million. Free cash flow increased in line with operating cash flow, reflecting the same underlying drivers of cash provided by operating activities, partially offset by higher capital investments.

Constant Currency.Constant-Currency. The effect of currency exchange rates on our business is an important factor in understanding period to periodperiod-to-period comparisons. We use non-GAAP percentage change in constant currencyconstant-currency revenues and bookings, which exclude the impact of fluctuations in foreign currency exchange rates, for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe this information is useful to investors to facilitate comparisons and better identify trends in our business. The impact of changes in foreign currency may vary significantly from period to period, and such changes generally are outside of the control of our management. We calculate constant currencyconstant-currency revenues by translating current period foreign currency revenues using prior-year exchange rates applied consistently over the full revenue recognition period. We calculate constant currencyconstant-currency bookings by using current period foreign currency bookings and translating them to constant currency using prior yearprior-year comparable period exchange rates. The constant currencyconstant-currency percentage change for revenues and bookings is calculated by dividing the difference between the constant currencyconstant-currency amount and the prior yearprior-year comparable period amount by the prior yearprior-year comparable period amount.

The following table provides the changes in bookings and revenues on a reported basis and constant currencyconstant-currency basis:

Cost of revenues predominantly consists of third-party payment processing fees charged by various distribution channels in addition to hosting fees and third-party AI costs. To a much lesser extent, cost of revenues includes customer support costs, such as contractor fees, wages and stock-based compensation for certain employees working in customer support. It also includes the amortization of revenue generating capitalized software, and depreciation of certain property and equipment.

Comparison of the three and six months ended MarchJune 31,30, 2026 and 2025

Revenues increased by $61.2$46.2 million, or 27%,18% to $292.0$298.5 million during the three months ended MarchJune 31,30, 2026, from revenues of $230.7$252.3 million during the three months ended MarchJune 31,30, 2025. TheRevenues mainincreased driversby $107.4 million, or 22%, to $590.4 million during the six months ended June 30, 2026, from revenues of $483.0 million during the increasessix were:months ended June 30, 2025.

Cost of Revenues and Gross Margin. Total gross margin increased to 73.0%72.6% from 71.1%72.4% during the three months ended MarchJune 31,30, 2026 and 2025, and total gross margin increased to 72.8% from 71.8% during the six months ended June 30, 2026 and 2025. The increase was primarily attributable to an increase in subscription gross margin, reflecting continued reductions in per-unit third-party AI costs and improved efficiency across our features, including Video Call, partially offset by higher hosting costs.

Research and Development. Research and development expense increased by $12.6$18.5 million, or 18%,25%, to $83.0$92.2 million during the three months ended MarchJune 31,30, 2026 from $70.4$73.7 million during the three months ended MarchJune 31,30, 2025. The increase was mainlyprimarily due to higher net personnel costs of $9.8$13.8 million, driven primarily by the growth in headcount, including increased stock-based compensation expenses related to equity awards of $3.9$5.0 million, and increased software and third-party AI costs of $2.2$3.3 million.

SalesResearch and Marketing. Sales and marketingdevelopment expense increased by $12.6$31.1 million, or 47%,22%, to $39.2$175.2 million during the threesix months ended MarchJune 31,30, 2026 from $26.7$144.1 million during the threesix months ended MarchJune 31,30, 2025. ThisThe increase was mainlyprimarily due to higher net personnel costs of $23.6 million, driven primarily by the growth in headcount, including increased directstock-based marketingcompensation expenses related to equity awards of $10.6$8.9 million, and increased software and third-party AI costs of $5.5 million.

GeneralSales and Administrative.Marketing. GeneralSales and administrativemarketing expense increased by $2.9$10.4 million, or 7%,35%, to $46.3$40.0 million during the three months ended MarchJune 31,30, 2026 from $43.5$29.6 million during the three months ended MarchJune 31,30, 2025. This increase was mainly due to increased facilitiesadvertising and office expensescosts of $2.8$8.6 million.

Interest income increased by $1.4$0.4 million, or 13%,4%, to $11.8 million during the three months ended MarchJune 31,30, 2026,2026 from $10.4$11.4 million during the three months ended MarchJune 31,30, 20252025. Interest income increased by $1.8 million, or 8%, to $23.6 million during the six months ended June 30, 2026, from $21.8 million during the six months ended June 30, 2025. Both period increases were due to higher average interest-bearing balances partially offset by lower interest rates.

The income tax provision was $12.1$12.2 million and $24.3 million during the three and six months ended MarchJune 31,30, 2026, comparedrespectively, toand a$1.7 benefitmillion ofand $0.1$1.5 million during the three and six months ended MarchJune 31,30, 2025, respectively. This increase was primarily due to discrete tax expense related to stock-based compensation activity in the current period compared to benefits in the prior year period.

As of MarchJune 31,30, 2026, we had $1,138.6$1,181 million in cash and cash equivalents and $113.0$133 million of short-term investments. Our cash and cash equivalents primarily consist of bank deposits and money market funds. Our short-term investments consist mainly of corporate debt securities, U.S. Treasury securities and commercial paper.

During the threesix months ended MarchJune 31,30, 2026, the Company repurchased a total of 262,324694,630 shares of the Company’s Class A common stock through open market purchases at an average per share price of $98.45$101.15 for a total of $25.8$70.3 million.

A substantial source of our cash from operations comes from deferred revenue, which is included in the liabilities section of our Unaudited Condensed Consolidated Balance Sheet. Deferred revenues consist of the unearned portion of customer billings, primarily related to subscription offerings, which is recognized as revenue in accordance with our revenue recognition policy. As of MarchJune 31,30, 2026, we had deferred revenues of $513.3$505.1 million, which is recorded as a current liability and expected to be recognized as revenue in the next 12 months, provided all other revenue recognition criteria have been met.

Cash provided by operating activities increased by $45.1$42.7 million, or 43%,22%, to $150.8$239.0 million for the threesix months ended MarchJune 31,30, 2026 from $105.6$196.3 million for the threesix months ended MarchJune 31,30, 2025. This increase was primarily driven by higher operating income and changes in working capital.

Cash used for investing activities increaseddecreased by $6.2$4.4 million to $16.7$8.5 million for the threesix months ended MarchJune 31,30, 2026, from $10.5$12.8 million for the threesix months ended MarchJune 31,30, 2025. This increasedecrease was primarily drivendue byto higher net purchasesmaturities of investments of $10.0 million during the six months ended June 30, 2026, partially offset by a $5.6 million increase in 2026capital of $5.8 million.expenditures.

Cash used for financing activities for the threesix months ended MarchJune 31,30, 2026 was due to repurchases of common stock of $24.3$69.6 million in addition to taxes paid on the net-share settlements of share-based compensation awards of $9.4$18.8 million. These amounts were partially offset by proceeds from exercises of stock options of $1.9$2.3 million. Cash provided by financing activities for the threesix months ended MarchJune 31,30, 2025 was due to proceeds from exercises of stock options of $3.1$7.0 million.

See Note 1, “Description of the Business and Basis of Presentation,” and Note 2, “Summary of Significant Accounting Policies,” in the notes to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item I1 of this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.