Episode Details

Duolingo, Inc. (DUOL) Q2 2026 — Q2 2026 (3 months ended June 30, 2026): revenue $298.5M, UP 18.3%, vs a $295.6M consensus. GAAP diluted EPS $0.66 vs a $0.604 bar - a 9.3% BEAT (Duolingo publishes NO adjusted EPS, so GAAP IS the bar). But total bookings - the cash actually collected - grew only 7.9% to $289.1M, 6% in constant currency. For the first time in Duolingo's public life REVENUE EXCEEDED BOOKINGS, by $9.4M. Guidance was RAISED on every line: FY bookings $1,285M, revenue $1,207M, adjusted EBITDA $320M, gross margin 71.6%. Duolingo grew revenue 18.3%, beat on earnings, beat its own gross margin guide by 160bps, and RAISED every guidance line it gives - and the stock fell 9.4% the next session, having been down 17.2% intraday. Then it took almost all of it back. Here is what the headline did not say. Duolingo collects subscription cash up front (bookings) and recognises it as revenue over the following twelve months. Bookings grew 7.9%, not 18.3%. And this is the FIRST quarter in the company's public life where revenue was BIGGER than bookings - by $9.4M. The 18% headline is now being paid for out of a deferred balance that has stopped building. THE CALL: HOLD (3/5, FAIR VALUE $140 vs THE $130.90 CLOSE - 21% ABOVE WALL STREET, AND STILL NOT ENOUGH ROOM TO BUY) — base-case value ~$140.0 vs ~$130.9 today. KEY METRICS: - CALL: HOLD 3/5, fair value $140 vs the $130.90 Aug 7 close = 7.0% upside. Bull $224, bear $106. Buy under $112. EV $5.22B = 4.1x 2026 guided bookings of $1,285M and 16.3x guided adjusted EBITDA of $320M - 30.7x charging ~$150M of stock pay. 46x 2026E GAAP EPS of $2.82. Net cash $1.42B = $27.94/share, 21% of the price. - Street: Hold. 23 analysts (7 buy / 14 hold / 2 sell), average target $115.63, low $80, high $150 - BELOW the price. Post-print: Morgan Stanley and JPMorgan both RAISED to $125; Scotiabank cut to $120; BofA downgraded to Underperform, $93. We are 21% ABOVE the Street and still say HOLD. What to watch: UP: revenue $298.5M, +18.3%; GAAP diluted EPS $0.66 vs a $0.604 bar, a 9.3% beat; gross margin 72.6% vs a ~71.0% guide and 20bps ABOVE last year, so the AI-cost compression the bears expected did NOT arrive; DAUs +23% to 58.7M and ACCELERATING two points sequentially; MAUs +9.6% to 140.6M; current user retention at an all-time high of 84%; 15.4M lapsed learners revived in one June campaign; every guidance line raised, adjusted EBITDA up $10M to $320M; $1.42B of net cash and no debt; $71.9M of buyback at ~$101.55. DOWN: bookings +7.9% reported and only 6% in constant currency; revenue exceeded bookings for the first time, by $9.4M; bookings per daily active user -12.4%; subscription bookings per paid subscriber -5.5%; in-app purchase revenue -23%; sales and marketing +35.3%; adjusted EBITDA -1.7% and free cash flow -8.9%; the FY bookings guide needs Q4 to accelerate to +12.8% after printing +7.9%; SBC $38.6M is HALF of adjusted EBITDA; and the FY tax rate guide quietly went from 18-20% to 23-25%. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.