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What changed in Duolingo, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Duolingo, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+384 added−409 removedSource: 10-K (2026-02-27) vs 10-K (2025-02-28)

Top changes in Duolingo, Inc.'s 2025 10-K

384 paragraphs added · 409 removed · 321 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe believe that our ability to compete successfully depends primarily on the following factors: • Continued growth in internet access and mobile adoption around the world; • Our ability to continue to increase our learner base through organic, word-of-mouth growth; • Our ability to maintain the value and reputation of our brand; • Our ability to obtain, protect and maintain our intellectual property rights and proprietary technology; • The scale, growth and engagement of our learners relative to those of our competitors; • Our ability to introduce new, and improve on existing, features and products in response to competition, learner preferences, and market and industry trends; and • Our ability to continue developing new monetization features and improving on existing features. 12 Table of Contents Intellectual Property We own several trademarks that have been registered, or for which registration applications are pending, in the U.S. as well as in a number of foreign jurisdictions.
Biggest changeWe believe that our ability to compete successfully depends primarily on the following factors: • Continued growth in internet access and mobile adoption around the world; 12 Table of Contents • Our ability to continue to increase our learner base through organic, word-of-mouth and the ongoing engagement provided by our free user experience; • Our ability to maintain the value and reputation of our brand; • Our ability to obtain, protect and maintain our intellectual property rights and proprietary technology; • The scale, growth and engagement of our learners relative to those of our competitors; • Our ability to introduce new, and improve on existing, features and products in response to competition, learner preferences, and market and industry trends; and • Our ability to continue developing new monetization features and improving on existing features.
The more learners use Duolingo and convert into paid subscribers, the more we are able to invest in creating an even more delightful, engaging and effective learning experience. In turn, this increases our popularity and user scale, as well as the effectiveness of our data analytics and AI systems, further widening our data moat.
The more learners use Duolingo and convert into paid subscribers, the more we are able to invest in creating an even more delightful, engaging and effective learning experience. In turn, this increases our popularity and user scale, as well as the effectiveness of our data analytics and AI systems, further widening our moat.
Products across our platform, like our flagship Duolingo App (including our Math and Music courses), and the Duolingo English Test, share a singular technology infrastructure, which allows us to leverage operational efficiencies in implementing new features for each. With our shared infrastructure, we are able to innovate at a higher velocity. • Strict data protection and privacy standards .
Products across our platform, like our flagship Duolingo App (including our Math, Music, and Chess courses), and the Duolingo English Test, share a singular technology infrastructure, which allows us to leverage operational efficiencies in implementing new features for each. With our shared infrastructure, we are able to innovate at a higher velocity. • Strict data protection and privacy standards .
It is also the top-grossing app globally in the Education category on both Google Play and the Apple App Store. Duolingo can also be accessed by desktop computers via a web browser at https://duolingo.com. Math and Music courses are also integrated into the Duolingo App.
It is also the top-grossing app globally in the Education category on both Google Play and the Apple App Store. Duolingo can also be accessed by desktop computers via a web browser at https://duolingo.com. Math, Music, and Chess courses are also integrated into the Duolingo App.
Our growth and competitive differentiation have been driven by two mutually-reinforcing flywheels: our learning flywheel and our investment flywheel. • Learning flywheel: The greater the scale of our learner base, the more we can use insights from data analytics to improve both engagement and efficacy.
Our growth and competitive differentiation have been driven by two mutually-reinforcing flywheels: our learning flywheel and our investment flywheel. • Learning flywheel: The greater the scale of our learner base, the more we can use insights from data to improve both engagement and efficacy.
Driving much of the demand for language learning is the reality that English can unlock tremendous economic opportunity. And the power of language learning is not limited to economic advancement. Learning another language can unlock new experiences and deep human connections, ranging from navigating a first trip to another country, to communicating with family members of an older generation.
Driving much of the demand for language learning is the reality that English can unlock tremendous economic opportunity. And the power of language learning is not limited to economic advancement. Learning another language can unlock new experiences and deepen human connections, ranging from navigating a first trip to another country to communicating with family members of an older generation.
Learners who use Duolingo for free see an ad at the end of each lesson, whereas learners who purchase one of our paid subscriptions enjoy an ad-free experience and access to additional features. As of December 31, 2024, approximately 9% of our monthly active users were paid subscribers.
Learners who use Duolingo for free see an ad at the end of each lesson, whereas learners who purchase one of our paid subscriptions enjoy an ad-free experience and access to additional features. As of December 31, 2025, approximately 9% of our monthly active users were paid subscribers.
We use these tools to adaptively construct lessons where each exercise is “just right” in terms of difficulty for each learner. And our expertise in AI and machine learning also allow us to effectively and efficiently integrate external AI models to improve our products. • Shared infrastructure.
We use these tools to adaptively construct lessons where each exercise is “just right” in terms of difficulty for each learner. And our expertise in AI and machine learning also allow us to effectively and efficiently integrate external AI models to improve our products.
Industry Trends We believe the following market trends will contribute to the continued success of our platform : • AI will increasingly shape online learning. Rapid advances in generative AI, particularly large language models (LLMs), will change how people use technology to learn.
Industry Trends We believe the following market trends will contribute to the continued success of our platform : • AI will increasingly shape online learning. Rapid advances in AI, particularly large language models, will change how people use technology to learn.
The fine can be up to ¥50 million or 5 percent of an organization’s annual revenue for the prior financial year. A broad range of other countries continue to explore either new privacy and data security laws or changes to existing laws. 14 Table of Contents Available Information Our website address is www.duolingo.com.
The fine can be up to ¥50 million or 5 percent of an organization’s annual revenue for the prior financial year. A broad range of other countries continue to explore either new privacy and data security laws or changes to existing laws. Available Information Our website address is www.duolingo.com.
It is our policy to not make employment (including hiring, promotion, or compensation) decisions on the basis of any legally protected characteristic, and to consider our efforts through a legal compliance lens. Sales & Marketing For almost a decade, Duolingo’s learner community has grown organically through word-of-mouth virality.
It is our policy to not make employment (including hiring, promotion, or compensation) decisions on the basis of any legally protected characteristic, and to consider our efforts through a legal compliance lens. 11 Table of Contents Sales & Marketing For almost a decade, Duolingo’s learner community has grown organically through word-of-mouth virality.
For many, Duolingo has become synonymous with language learning: for example, on Google, people search for the term “Duolingo” approximately nineteen times more often than “learn Spanish.” We are particularly proud that our learners come from the entire socioeconomic spectrum, ranging from billionaires and celebrities to recently resettled refugees, a rare instance in which more money does not imply better access to a high quality educational platform.
For many, Duolingo has become synonymous with language learning: for example, on Google, people search for the term “Duolingo” much more often than “learn Spanish.” We are particularly proud that our learners come from the entire socioeconomic spectrum, ranging from billionaires and celebrities to recently resettled refugees, a rare instance in which more money does not imply better access to a high quality educational platform.
We believe that by using modern technology, the very best talent, and a mission-driven approach, we can create better learning experiences and meaningful improvements in efficacy.
We believe that by combining modern technology, the very best talent, and a mission-driven approach, we can create better learning experiences and meaningful improvements in efficacy.
Our Technology Platform Technology is at the core of everything we do. We utilize the latest in AI, machine learning and data analytics, along with a relentless focus on A/B testing, to fuel our differentiated learning experience. Highlights of our technology platform include: • Large data moat.
Our Technology Platform Technology is at the core of everything we do. We utilize the latest in AI, machine learning and data analytics, along with a relentless focus on A/B testing, to fuel our differentiated learning experience. 9 Table of Contents Highlights of our technology platform include: • Large data moat.
Duolingo for Schools is a web-based tool that aims to make it easier for teachers to use the Duolingo platform in a structured learning environment, like a classroom. Duolingo ABC is an app that teaches young children early literacy skills. 10 Table of Contents People and Culture Attracting and retaining amazing talent is key to our success.
Duolingo for Schools is a web-based tool that aims to make it easier for teachers to use the Duolingo platform in a structured learning environment, like a classroom. Duolingo ABC is an app that teaches young children early literacy skills. People and Culture Attracting and retaining amazing talent is key to our success.
We developed the Duolingo English Test because language assessment has lacked innovation, with the most popular English 7 Table of Contents proficiency tests still administered in physical testing centers and usually costing hundreds of dollars per test.
We developed the Duolingo English Test because language assessment has lacked innovation, with the most popular English proficiency tests still administered in physical testing centers and usually costing hundreds of dollars per test.
The velocity of our A/B testing capabilities is a core competency that we believe allows us to optimize the Duolingo learning experience at a rapid pace and leads to compounding growth of core business metrics like DAUs and paid subscribers. 9 Table of Contents • Advanced data analytics and machine learning capabilities.
The velocity of our A/B testing capabilities is a core competency that we believe allows us to optimize the Duolingo learning experience at a rapid pace and leads to compounding growth of core business metrics like DAUs and paid subscribers. • Advanced AI, machine learning, and data analytics capabilities.
Our freemium business model, which means allowing users to access our content for free and charging a subscription for additional features, is core to our success because it enables significant user scale. We intentionally do not put our learning content behind a paywall.
Our ability to operate at scale supports our freemium business model, which means allowing users to access our content for free and charging a subscription for additional features, is core to our success because it enables significant user scale. We intentionally do not put our learning content behind a paywall.
We collect and use personal information to create online accounts, process e-commerce transactions, provide customer service, support, and for other purposes. The regulatory framework for data protection, privacy and information security is evolving rapidly. For example, the U.S.
We collect and use personal information to create online accounts, process e-commerce transactions, provide customer service, support, and for other purposes. The regulatory framework for data protection, 13 Table of Contents privacy and information security is evolving rapidly. For example, the U.S.
Brazil also enacted the Lei Geral de Proteção de Dados (the “Brazilian General Data Protection Law”), which became effective in August 2020 and imposes requirements largely similar to GDPR on products and services offered to users in Brazil.
Brazil also enacted the Lei Geral de Proteção de Dados (the “Brazilian General Data Protection Law”), which became effective in August 2020 and imposes requirements largely similar to GDPR on products 14 Table of Contents and services offered to users in Brazil.
Luis and Severin bonded over the dream of building an intelligent learning system informed by massive amounts of user engagement data that could deliver superior learning outcomes. Our team, which as of December 31, 2024, consisted of approximately 830 passionate employees, including more than 380 engineers, aims to build the most sophisticated education platform in the world.
Luis and Severin bonded over the dream of building an intelligent learning system informed by massive amounts of user engagement data that could deliver superior learning outcomes. Our team, which as of December 31, 2025, consisted of more than 900 passionate employees, including more than 430 engineers, aims to build the most sophisticated education platform in the world.
We believe that everyone, regardless of how wealthy they are, should have access to high quality education. And for the first time in history, the technology necessary to enable this is in the hands of billions of people, in the form of a smartphone.
We believe that everyone, regardless of how wealthy they are, should have access to high quality education. And today, the technology necessary to enable this is in the hands of billions of people, in the form of a smartphone.
With over a billion exercises completed every day on our platform, we believe we have built the world's largest collection of language-learning data.
With nearly 2 billion exercises completed every day on our platform, we believe we have built the world's largest collection of language-learning data.
We are committed to abiding by the strictest privacy standards and do not sell personal data to outside parties. Our Solutions The Duolingo App The Duolingo App is the world’s most popular way to learn languages. Accessible for free, as of December 31, 2024 it offers courses in over 40 languages to more than 100 million monthly active users.
We are committed to abiding by the strictest privacy standards and do not sell personal data to outside parties. Our Solutions The Duolingo App The Duolingo App is the world’s most popular way to learn languages. Accessible for free, as of December 31, 2025 it offers over 250 total language courses to more than 130 million monthly active users.
These include 24 of the top 25 undergraduate programs in the U.S. ranked by international enrollment, as well as top schools such as Yale, Stanford, MIT, Duke and Columbia. We believe that there is an opportunity to diversify the scope of our platform beyond language learning to a variety of subjects, using the same product-focused, mobile-first, gamified approach to education.
These include 24 of the top 25 undergraduate programs in the U.S. ranked by international enrollment, as well as all of the Ivy League, MIT, and Stanford. We believe that there is a significant opportunity to diversify the scope of our platform beyond language learning to a variety of subjects, using the same product-focused, mobile-first, gamified approach to education.
Duolingo is the learning product built for the mobile generation: bite-sized, on-demand and fun. We believe that the hardest part of learning something new is staying motivated, so we build gamification features into our platform to motivate our learners, and we run thousands of A/B tests to optimize each feature for maximum engagement.
We believe that the hardest part of learning something new is staying motivated, so we build gamification features into our platform to motivate our learners, and we run thousands of A/B tests to optimize each feature for maximum engagement.
As of December 31, 2024, over 5,600 education programs around the world accept the Duolingo English Test results as proof of English proficiency for international student admissions, with over 4,700 of those being higher education programs.
As of December 31, 2025, over 6,100 education programs around the world accept the Duolingo English Test results as proof of English proficiency for international student admissions, with over 5,300 of those being higher education programs.
Our performance marketing strategy is focused on targeting high quality user segments around the world that are more likely to retain well as users and/or subscribe. • Geographic expansion .
We complement and accelerate our organic user growth with strategic and targeted paid user acquisition. Our performance marketing strategy is focused on targeting high quality user segments around the world that are more likely to retain well as users and/or subscribe. • Geographic expansion .
In 2022 we launched a math course that motivates both children and adults to sharpen their mental math skills in our standards-aligned curriculum. In 2023, we also launched a new music course that's designed to teach music literacy, including how to read music notes and play songs. The Math and Music courses have both been integrated into the Duolingo App.
In 2022 we launched a math course that motivates both children and adults to sharpen their mental math skills and continue to develop our standards-aligned curriculum. In 2023, we launched a music course that's designed to teach music literacy, including how to read music notes and play songs.
The more engaging our products are, and the more effectively we teach, the more our learners tell their friends about Duolingo and the more we continue to grow our learner base. • Investment flywheel: The scale of our learner base and word-of-mouth growth allow us to focus our capital investments on product innovation and data analytics, as opposed to relying on brand or performance marketing.
We do this through continual experimentation. 7 Table of Contents The more engaging our products are, and the more effectively we teach, the more our learners tell their friends about Duolingo and the more we continue to grow our learner base. • Investment flywheel: The scale of our learner base and word-of-mouth growth allows us to focus our capital investments on product innovation and data analytics, rather than relying primarily on brand or performance marketing.
According to an internal study, learners who completed five sections of Duolingo achieved proficiency comparable to five university semesters of language education. Independent studies corroborate this finding: Duolingo learners’ speaking skills were found to match those of university students, and users learning English on Duolingo outperformed students in traditional classroom settings on standardized language proficiency tests.
Independent studies corroborate this finding: Duolingo learners’ speaking skills were found to match those of university students, and users learning English on Duolingo outperformed students in traditional classroom settings on standardized language proficiency tests.
To provide perspective on our reach, in the United States (“U.S”), the number of people learning a language using Duolingo is greater than the number of K-12 students taking a foreign language 6 Table of Contents class in school, and there are more people learning certain languages on Duolingo, like Irish and Hawaiian, than there are native speakers of those languages worldwide.
To provide perspective on our reach, in the United States (“U.S”), the number of people learning a language using Duolingo is greater than the number of K-12 students taking a foreign language class in school, and there are more people learning certain languages on Duolingo, like Irish and Hawaiian, than there are native speakers of those languages worldwide. 6 Table of Contents While languages remain our core focus, we began expanding into additional subjects aligned with our mission to develop the best education in the world and make it universally available.
We believe that consumers turning to online learning will not only prefer the convenience and control that mobile apps provide, but also expect experiences to be highly engaging. • Adoption of subscription models is growing globally. Rising adoption of subscription models across the globe is further enabling the shift towards mobile experiences.
We believe that consumers turning to online learning will not only prefer the convenience and control that mobile apps provide, but also expect experiences to be highly engaging.
We are proud to say that Duolingo was founded by two immigrants and that our employees come from over 40 countries. We believe an environment of inclusion and belonging, where individuals can excel regardless of their background, is important to our long-term performance and value. We also recognize the importance of pursuing such efforts in a legally sound manner.
We are proud to say that Duolingo was founded by two immigrants and that our employees represent a wide range of countries and backgrounds, representing the diversity of our global learner community. We believe an environment of inclusion and belonging, where individuals can excel regardless of their background, is important to our long-term performance and value.
As of December 31, 2024, Duolingo offers courses in over 40 languages to more than 100 million monthly active users.
As of December 31, 2025, Duolingo offers over 250 total language courses to more than 130 million monthly active users.
Duolingo Max Duolingo Max is a premium subscription tier launched in 2023 and offered to a portion of our user base and priced higher than Super Duolingo. It gives learners access to the existing features of Super Duolingo in addition to incremental features and exercises powered by generative AI technology.
Duolingo Max Duolingo Max is a premium subscription tier launched in 2023 and offered to a portion of our user base and priced higher than Super Duolingo.
We believe that as subscriptions increase in popularity across categories, consumers will also gravitate towards subscription models in online learning. Competition We believe that our relentless focus on building an engaging and effective learning product, powered by our freemium model, has led to a leading market position, as measured by downloads, active users, and brand awareness.
Competition We believe that our relentless focus on building an engaging and effective learning product, powered by our freemium model, has led to a leading market position, as measured by downloads, active users, and brand awareness. However, learners have a variety of options when choosing to learn a language.
Every course on Duolingo is free to access. Learners can spend as much time learning as they want and complete any and every course without paying. This lowers barriers to start learning and to keep learning. In a world where people are increasingly engaged in immersive, bite-sized, mobile-first experiences, we provide an experience that also results in learning valuable skills.
This lowers barriers to start learning and to keep learning. 8 Table of Contents In a world where people are increasingly engaged in immersive, bite-sized, mobile-first experiences, we provide an experience that also results in learning valuable skills.
Learners stick with Duolingo at first because it’s fun, and then over time also because they find that it works. Our expert-designed courses across languages, math, and music help learners build robust skills, and our AI technologies power personalization leading to superior learning outcomes. For more information, please visit https://www.duolingo.com/efficacy. • It's free.
A streak indicates the number of days in a row a lesson is completed. • It's effective. Learners stick with Duolingo at first because it’s fun, and then over time also because they find that it works. Our expert-designed courses help learners build robust skills, and our AI technologies power personalization leading to superior learning outcomes.
This type of learning-by-doing engages the brain and leverages its natural ability to pick up on patterns present in the surroundings, often without conscious realization—it's a fundamental way our 8 Table of Contents minds operate.
Each Duolingo lesson is designed with interactive exercises that put learners at the center of their own learning and allows them to immediately use what they are learning. This type of learning-by-doing engages the brain and leverages its natural ability to pick up on patterns present in the surroundings, often without conscious realization—it's a fundamental way our minds operate.
The Duolingo Learning Experience The Duolingo learning experience sits at the rare intersection of fun and self-improvement. Learners love Duolingo because: • It's fun. Duolingo feels more like a mobile game than an education product. Our bite-sized lessons and gamification features motivate learners to come back each day to continue learning.
We believe that expanding the scope of our platform to additional learning subjects will further expand our addressable market. The Duolingo Learning Experience The Duolingo learning experience sits at the rare intersection of fun and self-improvement. We believe that learners love Duolingo because: • It's fun. Duolingo feels more like a mobile game than an education product.
Because of the extensibility of the Duolingo platform beyond language learning, we also compete with language learning assessment providers, literacy platforms, and math and music learning products.
We compete for learners’ time, attention, and share of wallet 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, we also compete with language learning assessment providers, literacy platforms, as well as math, music, and chess learning products.
We believe new products will leverage our scalable technology platform and benefit from our core competencies in product development, gamification and use of advanced data-driven analytics to deliver quantifiable efficacy. We believe that expanding the scope of our platform to additional learning subjects will further expand our addressable market.
In 2025, we launched a new chess course to teach one of the world’s most popular games. These courses have all been integrated into the Duolingo App. We believe new products will leverage our scalable technology platform and benefit from our core competencies in product development, gamification and use of advanced data-driven analytics to deliver quantifiable efficacy.
In addition, federal and state regulators have interpreted various rules and regulations as requiring companies like ours to implement reasonable data security controls and measures. 13 Table of Contents We are also subject to laws that govern specific types of data and/or specific types of marketing or other consumer engagement activities.
In many cases, the specific limitations imposed by these standards are subject to interpretation by courts and other governmental authorities. In addition, federal and state regulators have interpreted various rules and regulations as requiring companies like ours to implement reasonable data security controls and measures.
Our owned media marketing engages our learner community, creating millions of brand advocates who drive word-of-mouth virality by sharing their love of Duolingo within their networks.
Our owned media marketing engages our learner community, creating millions of brand advocates who drive word-of-mouth virality by sharing their love of Duolingo within their networks. We send our learners personalized emails and push notifications that provide progress reports, lesson reminders, and sometimes a simple message of positivity to encourage them to remain engaged. • Paid acquisition .
These trademarks include, among others, the word marks “Duolingo” and Duolingo in Chinese, and certain logos used in connection with our business, including our mascot Duo.
Intellectual Property We own several trademarks that have been registered, or for which registration applications are pending, in the U.S. as well as in a number of foreign jurisdictions. These trademarks include, among others, the word marks “Duolingo” and Duolingo in Chinese, and certain logos used in connection with our business, including our mascot Duo.
Duolingo English Test: AI-Driven Language Assessment Launched in 2016, the Duolingo English Test is an online, on-demand, high-stakes (e.g., used for university admissions) English proficiency assessment. Anyone with a computer, webcam, and reliable internet connection can take the test from anywhere, at any time.
It gives learners access to the existing features of Super Duolingo in addition to incremental features and exercises powered by AI technology. 10 Table of Contents Duolingo English Test: AI-Driven Language Assessment Launched in 2016, the Duolingo English Test is an online, on-demand, high-stakes (e.g., used for university admissions) English proficiency assessment.
As of December 31, 2024, there were about 32 million daily active users with a 7-day streak, or longer, and about 10 million daily active users with a 365-day streak or longer. A streak indicates the number of days in a row a lesson is completed. • It's effective.
Our bite-sized lessons and gamification features motivate learners to come back each day to continue learning. As of December 31, 2025, there were about 43 million daily active users with a 7-day streak or longer, and about 15 million daily active users with a 365-day streak or longer.
Our millions of learners complete over a billion exercises every day, creating what we believe to be the world's largest learning dataset. This data powers the high volume A/B testing and novel AI that we use to continually improve how well we teach.
This data powers the high volume A/B testing and AI-driven systems that we use to continually improve how well we teach. According to an internal study, learners who completed five sections of Duolingo achieved proficiency comparable to five university semesters of language education.
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Our official social media accounts have generated more than ten billion impressions to date and have been highlighted by numerous press outlets. All of this has allowed us to grow our business organically, primarily relying on word-of-mouth and brand buzz rather than paid user acquisition.
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We now offer courses in Math and Music, and recently launched Chess, which is growing rapidly as learners embrace these new subjects on the Duolingo platform. Duolingo is the learning product built for the mobile generation: bite-sized, on-demand, and fun.
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Each Duolingo lesson is designed with interactive exercises that put learners at the center of their own learning and allows them to immediately use what they are learning.
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All of this has allowed us to grow our business organically, primarily driven by word-of-mouth and brand buzz, and supplemented by selective and targeted paid user acquisition. Our millions of learners complete nearly 2 billion exercises every day, creating what we believe to be the world's largest learning dataset.
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We send our learners personalized emails and push notifications that provide progress reports, lesson reminders, and sometimes a simple message of positivity to encourage them to remain engaged. 11 Table of Contents • Paid acquisition . We complement and accelerate our organic user growth with strategic and targeted paid user acquisition.
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Studies also found that our instructional quality continued to improve, and new learning features like Roleplay, Explain My Answer, DuoRadio, and Video Call contributed to increased learner confidence and measurable gains in listening and speaking skills. We believe rapid advances in Artificial Intelligence (“AI”) will fundamentally change the way people learn.
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However, learners have a variety of options when choosing to learn a language. We compete for learners’ time, attention, and share of wallet not only with other online and app-based language learning platforms but also with offline forms of language learning.
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As a technology company and global education platform, we believe we are well positioned to play a leading role in this innovation. AI plays an increasingly important role in how we provide effective learning experiences and generate content at scale. For example, Roleplay, Explain My Answer, and Video Call are all AI-powered learning features.
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In many cases, the specific limitations imposed by these standards are subject to interpretation by courts and other governmental authorities.
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While the use of AI enhances the learning experience and supports product innovation at scale, it also requires increased investment in computing infrastructure and related costs, which we actively manage as we continue to expand these capabilities.
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For more information, please visit https://www.duolingo.com/efficacy. • It's free. Every course on Duolingo is free to access. Learners can spend as much time learning as they want and complete any and every course without paying.
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For example, we are able to generate high quality course content at materially faster speeds due to leveraging AI, and AI powers numerous new learning features contributing to gains in learner outcomes. • Shared infrastructure.
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To take the test, an individual must have access to both (i) a computer equipped with a webcam and (ii) a smartphone, as well as a reliable internet connection. The test can be taken from anywhere, at any time.
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We also recognize the importance of pursuing such efforts in a legally sound manner.
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We are also subject to laws that govern specific types of data and/or specific types of marketing or other consumer engagement activities.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe may 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 histories; • accurately review acquisition candidates’ business practices against applicable laws and regulations and, where applicable, implement proper remediation controls, procedures, and policies; • successfully integrate the operations, as well as the accounting, financial controls, management information, technology, human resources and other administrative systems, of acquired businesses with our existing operations and systems; • overcome cultural challenges associated with integrating employees from the acquired company into our organization; • successfully identify and realize potential synergies among acquired and existing businesses; • fully identify potential risks and liabilities associated with acquired businesses, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities, litigation or other claims in connection with the acquired company, including claims from terminated employees, former stockholders or other third parties, and other known and unknown liabilities; • retain or hire senior management and other key personnel at acquired businesses; and • successfully manage acquisition-related strain on our management, operations and financial resources and those of the various brands in our portfolio 34 Table of Contents Furthermore, we may not be successful in addressing other challenges encountered in connection with our acquisitions.
Biggest changeWe may also experience operational and financial risks in connection with historical and future acquisitions if we are unable to: • properly value prospective acquisitions; • accurately review acquisition candidates’ business practices against applicable laws and regulations and, where applicable, implement proper remediation controls, procedures, and policies; • successfully integrate the operations, as well as the accounting, financial controls, management information, technology, human resources and other administrative systems, of acquired businesses with our existing operations and systems; • overcome cultural challenges associated with integrating employees from the acquired company into our organization; • fully identify potential risks and liabilities associated with acquired businesses; or • retain or hire senior management and other key personnel at acquired businesses.
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.
If people do not perceive our products to be useful, effective, reliable, 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.
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.
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 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.
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.
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 or prolonged it could adversely affect our business, financial condition, results of operations or reputation.
To continue to reach potential users and grow our businesses, we must identify and devote our overall marketing activities and expenditures 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.
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.
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 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, or significant incident response, system restoration or remediation and future compliance costs.
In connection with running our business, we receive, store, use and otherwise process information that relates to individuals and/or constitutes “personal data,” “personal information,” “personally identifiable information,” or similar terms under applicable data privacy laws (collectively, “Personal Data”), including from and about actual and prospective users, as well as our employees and business contacts.
In connection with running our business, we receive, store, use and otherwise process information that relates to individuals or constitutes “personal data,” “personal information,” “personally identifiable information,” or similar terms under applicable data privacy laws (collectively, “Personal Data”), including from and about actual and prospective users, as well as our employees and business contacts.
As the regulatory guidance and enforcement landscape in relation to data transfers continue to develop, there will be uncertainty as to how we comply with EEA and U.K. privacy laws and we could suffer additional costs, complaints, and/or regulatory investigations or fines.
As the regulatory guidance and enforcement landscape in relation to data transfers continue to develop, there will be uncertainty as to how we comply with EEA and U.K. privacy laws and we could suffer additional costs, complaints, or regulatory investigations or fines.
Other countries have also passed or are considering passing laws requiring local data residency and/or restricting the international transfer of data, which would create similar risks for us in those countries. We are also subject to evolving privacy laws in the EEA and the U.K. on cookies, tracking technologies and e-marketing.
Other countries have also passed or are considering passing laws requiring local data residency or restricting the international transfer of data, which would create similar risks for us in those countries. We are also subject to evolving privacy laws in the EEA and the U.K. on cookies, tracking technologies and e-marketing.
In particular, if these AI or machine learning models are (i) incorrectly designed or implemented; (ii) trained or reliant on incomplete, inadequate, inaccurate, biased or otherwise poor quality data or on data to which we do not have sufficient rights; and/or (iii) are adversely impacted by unforeseen defects, technical challenges, cyber security threats or material performance issues, the performance of our products, services, and business, as well as our reputation could suffer or we could incur liability through the violation of laws or contracts to which we are a party or civil claims.
In particular, if these AI or machine learning models are (i) incorrectly designed or implemented; (ii) trained or reliant on incomplete, inadequate, inaccurate, biased or otherwise poor quality data or on data to which we do not have sufficient rights; or (iii) are adversely impacted by unforeseen defects, technical challenges, cyber security threats or material performance issues, the performance of our products, services, and business, as well as our reputation could suffer or we could incur liability through the violation of laws or contracts to which we are a party or civil claims.
The EU AI Act and the regulatory framework in China are expected to have a material impact on the way AI is regulated in the EU and in China, and together with developing guidance and/or decisions in this area, may affect our use of AI and our ability to provide and to improve our services, require additional compliance measures and changes to our operations and processes, result in increased compliance costs and potential increases in civil claims or fines against us, and could adversely affect our business, financial condition and operations.
The EU AI Act and the regulatory framework in China are expected to have a material impact on the way AI is regulated in the EU and in China, and together with developing guidance and decisions in this area, may affect our use of AI and our ability to provide and to improve our services, require additional compliance measures and changes to our operations and processes, result in increased compliance costs and potential increases in civil claims or fines against us, and could adversely affect our business, financial condition and operations.
While we have engaged, and expect to continue to engage in, certain initiatives (such as disclosures, certifications, or goals) to improve the ESG profile of our company and/or products or respond to stakeholder concerns, such initiatives may be costly and may not have the desired effect.
While we have engaged, and expect to continue to engage in, certain initiatives (such as disclosures, certifications, or goals) to improve the ESG profile of our company and products or respond to stakeholder concerns, such initiatives may be costly and may not have the desired effect.
Our corporate governance documents provide for: • a dual-class structure; • a classified board of directors with three-year staggered terms, who can only be removed for cause, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the exclusive right of our board of directors to set the size of the board of directors and to elect a director to fill a vacancy, however occurring, including by an expansion of the board of directors, which prevents stockholders from being able to fill vacancies on our board of directors; • the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including voting or other rights or preferences, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror; • the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval; 51 Table of Contents • in addition to our board of director’s ability to adopt, amend, or repeal our amended and restated bylaws, our stockholders may adopt, amend, or repeal our amended and restated bylaws only with the affirmative vote of the holders of at least 66 2/3% of the voting power of all our then-outstanding shares of capital stock; • the required approval of (i) at least 66 2/3% of the voting power of the outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class, to adopt, amend, or repeal certain provisions of our restated certificate of incorporation and (ii) for so long as any shares of Class B common stock are outstanding, the holders of at least 80% of the shares of Class B common stock outstanding at the time of such vote, voting as a separate series, to adopt, amend, or repeal certain provisions of our restated certificate of incorporation; • the ability of stockholders to act by written consent only as long as holders of our Class B common stock hold at least 50% of the voting power of our capital stock; • the requirement that a special meeting of stockholders may be called only by an officer of our company pursuant to a resolution adopted by a majority of our board of directors then in office or the chairperson of our board; and • advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.
Our corporate governance documents provide for: • a dual-class structure; • a classified board of directors with three-year staggered terms, who can only be removed for cause, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the exclusive right of our board of directors to set the size of the board of directors and to elect a director to fill a vacancy, however occurring, including by an expansion of the board of directors, which prevents stockholders from being able to fill vacancies on our board of directors; • the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including voting or other rights or preferences, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror; • the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval; • in addition to our board of director’s ability to adopt, amend, or repeal our amended and restated bylaws, our stockholders may adopt, amend, or repeal our amended and restated bylaws only with the affirmative vote of the holders of at least 66 2/3% of the voting power of all our then-outstanding shares of capital stock; 49 Table of Contents • the required approval of (i) at least 66 2/3% of the voting power of the outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class, to adopt, amend, or repeal certain provisions of our restated certificate of incorporation and (ii) for so long as any shares of Class B common stock are outstanding, the holders of at least 80% of the shares of Class B common stock outstanding at the time of such vote, voting as a separate series, to adopt, amend, or repeal certain provisions of our restated certificate of incorporation; • the ability of stockholders to act by written consent only as long as holders of our Class B common stock hold at least 50% of the voting power of our capital stock; • the requirement that a special meeting of stockholders may be called only by an officer of our company pursuant to a resolution adopted by a majority of our board of directors then in office or the chairperson of our board; and • advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.
Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the 52 Table of Contents registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful; • we may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law; • we are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification; • the rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons; and • we may not retroactively amend our amended and restated bylaw provisions to reduce our indemnification obligations to directors, officers, employees, and agents.
Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful; • we may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law; 50 Table of Contents • we are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification; • the rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons; and • we may not retroactively amend our amended and restated bylaw provisions to reduce our indemnification obligations to directors, officers, employees, and agents.
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, stories, news, digital textbooks, and through other means, which compete with our products.
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.
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.
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.
While we ask our influencers to comply with the FTC regulations and our guidelines, we do not regularly monitor what our influences 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.
While we ask our influencers to comply with the FTC regulations and our guidelines, we do not regularly monitor what our influencers 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.
Despite our efforts, no assurances can be given that such measures will be sufficient. Failure to comply with such laws could expose us to significant liability, penalties, reputational harm and loss of revenue, or force us to change the way in which we process data, among other things.
Despite our efforts, no assurances can be given that such measures will be sufficient. Failure to comply with such laws could expose us to significant liability, penalties, reputational harm and loss of revenue, or force us to change the way in which we process Personal Data, among other things.
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.
These threats include physical or electronic break-ins, security breaches from inadvertent or intentional actions by our employees, contractors, consultants, 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.
Any number of factors can negatively affect user stickiness, growth, engagement and conversion, including if: • users increasingly engage with other competitive products or services instead of our own; • user behavior on any of our products changes, including decreases in the frequency and duration of use of our products and services; • 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 ads that we display; • users become concerned about our user data practices or other matters related to privacy, security and the sharing of user data; 15 Table of Contents • users lose confidence in our ability to teach language or there is a decrease in user stickiness as a result of users no longer being interested in pursuing online language learning or reaching a point where they feel our product cannot advance their language ability; • users are no longer willing to pay for subscriptions or in-app purchases or we are unable to increase the price of our subscriptions or in-app purchases; • users have difficulty installing, updating or otherwise accessing our products on mobile devices as a result of actions by us or third parties that we rely on to distribute our products and deliver our services; • we fail to introduce new features, products or services that users find engaging or that are well received, or if we introduce new products or services, or make changes to existing products and services, that are not favorably received or that we are not able to monetize; • initiatives designed to attract and keep users and increase engagement are unsuccessful or discontinued, whether as a result of actions by us, third parties or otherwise; • third-party initiatives that may enable greater use of our products, including low-cost or discounted data plans, are discontinued; • we adopt terms, policies or procedures related to areas such as user data or advertising that are perceived negatively by our users or the general public; • we fail to combat inappropriate or abusive activity on our platform; • we fail to provide adequate customer service to users, marketers or other partners; • we fail to protect our brand image or reputation; • we, our partners, or companies in our industry are the subject of adverse media reports or other negative publicity, including as a result of our or their user data practices; • technical or other problems prevent us from delivering our products in a rapid and reliable manner or otherwise affect the user experience, such as unplanned site outages due to our failure or the failure of third-party systems we rely on, security breaches, distributed denial-of-service attacks or failure to prevent or limit spam or similar content; • there is decreased engagement with our products as a result of internet shutdowns or other actions by governments that affect the accessibility of our products in any of our markets; • there is decreased engagement with our products, or failure to accept our terms of service, as part of changes that we have implemented, or may implement, in the future in connection with regulations, regulatory actions or otherwise; • there is decreased engagement with our products as a result of changes in prevailing social, cultural or political preferences in the markets where we operate; or • there are changes mandated by legislation, regulatory authorities or litigation that adversely affect our products or users.
Any number of factors can negatively affect user stickiness, growth, engagement and conversion, including if: • users increasingly engage with other competitive products or services instead of our own; • user behavior on any of our products changes, including decreases in the frequency and duration of use of our products and services; • 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 lose confidence in our ability to teach language or there is a decrease in user stickiness as a result of users no longer being interested in pursuing online language learning or reaching a point where they feel our product cannot advance their language ability; • 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 IAPs; • users have difficulty installing, updating or otherwise accessing our products on mobile devices as a result of actions by us or third parties that we rely on to distribute our products and deliver our services; • we fail to introduce new features, products or services that users find engaging or that are well received, or if we introduce new products or services, or make changes to existing products and services, that are not favorably received or that we are not able to monetize; • initiatives designed to attract and keep users and increase engagement are unsuccessful or discontinued, whether as a result of actions by us, third parties or otherwise; • third-party initiatives that may enable greater use of our products, including low-cost or discounted data plans, are discontinued; • we adopt terms, policies or procedures related to areas such as user data or advertising that are perceived negatively by our users or the general public; • users become concerned about our user data practices or other matters related to privacy, security and the sharing of user data; • we fail to combat inappropriate or abusive activity on our platform; • we fail to provide adequate customer service to users, marketers or other partners; • we fail to protect our brand image or reputation; • we, our partners, or companies in our industry are the subject of adverse media reports or other negative publicity, including as a result of our or their user data practices; • technical or other problems prevent us from delivering our products in a rapid and reliable manner or otherwise affect the user experience, such as unplanned site outages due to our failure or the failure of third-party systems we rely on, security breaches, distributed denial-of-service attacks or failure to prevent or limit spam or similar content; • there is decreased engagement with our products as a result of internet shutdowns or other actions by governments that affect the accessibility of our products in any of our markets; 16 Table of Contents • there is decreased engagement with our products, or failure to accept our terms of service, as part of changes that we have implemented, or may implement, in the future in connection with regulations, regulatory actions or otherwise; • there is decreased engagement with our products as a result of changes in prevailing social, cultural or political preferences in the markets where we operate; or • there are changes mandated by legislation, regulatory authorities or litigation that adversely affect our products or users.
Any failure or perceived failure by us (or the third parties with whom we have contracted to process such information) to comply with applicable data, privacy and security laws, policies or related contractual obligations, or any compromise of security that results in unauthorized access, use or transmission of, Personal Data, could result in a variety of claims against us, including governmental enforcement actions and investigations, class action privacy litigation in certain jurisdictions and proceedings by data protection authorities.
Any failure or perceived failure by us (or the third parties with whom we have contracted to process such information) to comply with applicable data, privacy and security laws, policies or related contractual obligations, or any compromise of security that results in unauthorized access, use or transmission of, Personal Data, could result in a variety of claims against us, including governmental enforcement actions and investigations, class action privacy litigation and proceedings by data protection authorities.
See “—Unfavorable media coverage could materially adversely affect our business, brand image or reputation.” We are subject to certain risks as a mission-based company. 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.
See “Unfavorable media coverage could materially adversely affect our business, brand image or reputation.” We are subject to certain risks as a mission-based company. 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.
Such additional regulations, and the manner in which such new laws are interpreted, may impact our ability to develop, use, procure and commercialize AI and machine learning technologies in the future.
Such regulations, and the manner in which such new laws are interpreted, may impact our ability to develop, use, procure and commercialize AI and machine learning technologies in the future.
Further, if we are deemed to not have sufficient rights to the data we use to train our AI technologies, we may be subject to litigation by the owners of the content or other materials that comprise such data, similar to the litigation that is currently pending in various U.S. courts against other developers of generative AI technologies, and in which the outcome of such litigation is uncertain.
Further, if we are deemed to not have sufficient rights to the data we use to train our AI technologies, we may be subject to litigation by the owners of the content or other materials that comprise such data, similar to the litigation that is currently pending in various U.S. courts against other developers of GenAI technologies, and in which the outcome of such litigation is uncertain.
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 ensure compliance, which could decrease demand for services, reduce revenues, increase costs and subject us to additional liabilities.
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 facilitate compliance, which could decrease demand for services, reduce revenues, increase costs and subject us to additional liabilities.
While these numbers are based on what we believe to be reasonable estimates of our metrics for the applicable period of measurement, there are inherent challenges in measuring how our products are used across large populations globally. Errors or inaccuracies in our metrics or data could also result in incorrect business decisions and inefficiencies.
While these numbers are based on what we believe to be reasonable estimates of our metrics for the applicable period of measurement, there are inherent challenges in measuring how our products are used across large populations globally. Errors or inaccuracies in our metrics or data could also result in misinformed business decisions and inefficiencies.
Both our mobile learning application and the Duolingo English Test are available all over the world, and we have operations in various international markets.
Both our learning application and the Duolingo English Test are available all over the world, and we have operations in various international markets.
Our exposure to these risks may be increased as a result of evolving our core source code base, introducing new content and offerings, integrating acquired-company technologies, or making other 48 Table of Contents business changes, including in areas where we do not currently compete.
Our exposure to these risks may be increased as a result of evolving our core source code base, introducing new content and offerings, integrating acquired-company technologies, or making other 46 Table of Contents business changes, including in areas where we do not currently compete.
Purchases of these subscriptions and features via our mobile applications are mainly processed through the in-app payment systems provided by Apple and Google. As of December 31, 2024 we paid Apple and Google, as applicable, a meaningful share (generally 15-30%) of the payments we receive from transactions processed through in-app payment systems during the year.
Purchases of these subscriptions and features via our mobile applications are mainly processed through the in-app payment systems provided by Apple and Google. As of December 31, 2025 we paid Apple and Google, as applicable, a meaningful share (generally 15-30%) of the payments we receive from transactions processed through in-app payment systems during the year.
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.
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.
AI applications in the “high” risk category are subject to new ex ante conformity assessments and a range of new requirements, particularly on risk management, testing, technical documentation and robustness, data training and data governance and log recording, transparency, human oversight, and cybersecurity, while AI applications in the “limited” risk category are expected to become subject to new transparency obligations.
AI applications in the “high” risk category are subject to new ex ante conformity assessments and a range of new requirements, particularly on risk management, testing, technical documentation and robustness, data training and data governance and log recording, transparency, human oversight, and cybersecurity, while AI applications in the “limited” risk category are expected to become subject to new transparency and output labelling obligations.
For example, several countries in the European Union have proposed or enacted taxes applicable to digital services, which includes business activities on social media platforms and online marketplaces, and would likely apply to our business. Many questions remain about the enactment, form and application of these digital services taxes.
For example, several countries in the European Union have proposed or enacted taxes applicable to digital services, which include business activities on social media platforms and online marketplaces, and would likely apply to our business. Many questions remain about the enactment, form and application of these digital services taxes.
We and our vendors are subject to a variety of federal, state and foreign data privacy laws, rules, regulations, industry standards and other requirements, including those that apply generally to the handling of Personal Data, and those that are specific to certain industries, sectors, contexts, or locations.
We and our vendors are subject to a variety of federal, state and foreign data privacy laws, rules, regulations, industry standards, contractual obligations, and other requirements, including those that apply generally to the handling of Personal Data, and those that are specific to certain industries, sectors, contexts, or locations.
New laws and interpretations of the law are taken into account for financial statement purposes in the quarter or year that they become applicable. See “—Changes to tax laws could impact our financial results and operations.” Tax authorities are increasingly scrutinizing the tax positions of companies.
New laws and interpretations of the law are taken into account for financial statement purposes in the quarter or year that they become applicable. See “Changes to tax laws could impact our financial results and operations.” Tax authorities are increasingly scrutinizing the tax positions of companies.
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, ensure acceptable load times for our products and keep up with changes in technology and user preferences.
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, provide for acceptable load times for our products and keep up with changes in technology and user preferences.
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 example potential U.S. governmental restrictions on the TikTok platform).
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 example, the potential U.S. governmental restrictions or limitations on the TikTok platform).
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.
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 30 Table of Contents attractive target for such attacks, including from highly sophisticated, state-sponsored, or otherwise well-funded criminal actors.
We are, and from time to time may become, subject to litigation and various legal proceedings, including litigation and proceedings related to intellectual property matters, privacy and consumer protection laws, as well as stockholder derivative suits, class action lawsuits, actions from former employees and other matters, that involve claims for substantial amounts of money or for other relief or that might necessitate changes to our business or operations.
We are, and from time to time may become, subject to litigation and various legal proceedings, including litigation and proceedings related to intellectual property matters, privacy and consumer protection laws, as well as stockholder derivative suits, class action lawsuits, actions from former employees and other 41 Table of Contents matters, that involve claims for substantial amounts of money or for other relief or that might necessitate changes to our business or operations.
In 2023, China implemented a number of regulations to govern AI, algorithmic recommendation and deep synthesis technologies, namely the Provisional Provisions on Management of Generative Artificial Intelligence Services, Administrative Provisions on Algorithm Recommendation for Internet Information Services and Provisions on Management of Deep Synthesis in Internet Information Service, respectively.
China has implemented a number of regulations to govern AI, algorithmic recommendation and deep synthesis technologies, namely the Provisional Provisions on Management of Generative Artificial Intelligence Services, Administrative Provisions on Algorithm Recommendation for Internet Information Services and Provisions on Management of Deep Synthesis in Internet Information Service, respectively.
In addition, other parties may independently develop technologies that are 46 Table of Contents substantially similar or superior to ours and we may not be able to stop such parties from using such independently developed technologies to compete effectively with us.
In addition, other parties may independently develop technologies that are 44 Table of Contents substantially similar or superior to ours and we may not be able to stop such parties from using such independently developed technologies to compete effectively with us.
Despite the measures we take to protect our intellectual property rights, our intellectual property rights may still not be adequate and protected in a meaningful manner, challenges to contractual rights could arise, third parties could copy or otherwise obtain and use our intellectual property without authorization, or laws and interpretations of laws regarding the enforceability of existing intellectual property rights may change over time in a manner that provides less protection or introduces uncertainty.
The measures we take to protect our intellectual property rights may not always be successful, and our intellectual property rights may still not be adequate and protected in a meaningful manner, challenges to contractual rights could arise, third parties could copy or otherwise obtain and use our intellectual property without authorization, or laws and interpretations of laws regarding the enforceability of existing intellectual property rights may change over time in a manner that provides less protection or introduces uncertainty.
Foreign currency exchange rate fluctuations could adversely affect our 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., China and Germany.
Foreign currency exchange rate fluctuations could adversely affect our 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., China, Germany, and the United Kingdom.
The EU AI Act also includes specific requirements for general purpose AI and foundational models, such as transparency, training data obligations, and labeling for generative AI systems. Fines for breaches of the EU AI Act extend up to 7% of worldwide annual turnover.
The EU AI Act also includes specific requirements for general purpose AI and foundational models, such as transparency, training data obligations, and labeling for GenAI systems. Fines for breaches of the EU AI Act extend up to 7% of worldwide annual turnover.
It is difficult to predict the impact of future changes to accounting principles and accounting policies over financial reporting, any of which could adversely affect our financial condition and results of operations and could require significant investment in systems and personnel. Changes to tax laws could impact our financial results and operations.
It is difficult to predict the impact of future changes to accounting principles and accounting policies over financial reporting, any of which could adversely affect our financial condition and results of operations and could require significant investment in systems and personnel.
If free products 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.
If other 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.
There also can be no assurance that we would be able to develop or license suitable 45 Table of Contents alternative technology to permit us to continue offering the affected products or services as currently offered.
There also can be no assurance that we would be able to develop or license suitable 43 Table of Contents alternative technology to permit us to continue offering the affected products or services as currently offered.
These proposals 55 Table of Contents and new laws include changes to the existing framework to calculate income tax, as well as proposals to change or impose new types of non-income taxes, including taxes based on a percentage of revenue.
These proposals and new laws include changes to the existing framework to calculate income tax, as well as proposals to 53 Table of Contents change or impose new types of non-income taxes, including taxes based on a percentage of revenue.
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, language and cultural differences; • the cost and resources required to localize our platform and services, which often requires the translation of our platform into foreign languages and adaptation for local practices and regulatory requirements; • difficulties in staffing and managing international operations; • differing levels of social and technological acceptance of our products or lack of acceptance of them generally; • foreign currency fluctuations, and in particular, decreases in the value of foreign currencies relative to the U.S. dollar; • imposition of tariffs on our products or other regulatory demands or retaliatory actions in regions where we sell our products • restrictions on the transfer of funds among countries and back to the U.S., as well as costs associated with repatriating funds to the U.S.; • differing and potentially adverse tax laws, including resulting from the complexities of foreign corporate income tax systems, value added tax (“VAT”) regimes, tax withholding rules, and other indirect taxes, tax collection or remittance obligations, and restrictions on the repatriation of earnings; • multiple, conflicting and changing laws, rules and regulations, and difficulties understanding and ensuring compliance with those laws, rules and regulations by both our employees and our users, over whom we exert no control; • compliance challenges due to different laws and regulatory environments, particularly in the case of privacy, data security, and content, which are complex, sometimes inconsistent, and subject to unexpected changes; • competitive environments that favor local businesses; • reduced or varied protection for our intellectual property rights in some countries; • low usage and/or penetration of internet-connected consumer electronic devices; • political tension or social unrest and economic instability, particularly in countries in which we operate; • trade sanctions, political unrest, terrorism, war, health and safety epidemics or the threat of any of these events; and • breaches or violation of any anti-corruption laws, rules or regulations applicable to our business, including but not limited to the Foreign Corrupt Practices Act of 1977, as amended. 29 Table of Contents Moreover, geopolitical tensions or regulatory uncertainty in countries in which we operate, such as China, may prevent us from operating in certain countries or increase our costs of operating in those countries.
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, language, legal and cultural differences; • the cost and resources required to localize our platform and services, which often requires the translation of our platform into foreign languages and adaptation for local practices and regulatory requirements; • difficulties in staffing and managing international operations; • differing levels of social and technological acceptance of our products or lack of acceptance of them generally; • foreign currency fluctuations, and in particular, decreases in the value of foreign currencies relative to the U.S. dollar; 28 Table of Contents • imposition of tariffs on our products or other regulatory demands or retaliatory actions in regions where we sell our products • restrictions on the transfer of funds among countries and back to the U.S., as well as costs associated with repatriating funds to the U.S.; • differing and potentially adverse tax laws, including resulting from the complexities of foreign corporate income tax systems, value added tax (“VAT”) regimes, tax withholding rules, and other indirect taxes, tax collection or remittance obligations, and restrictions on the repatriation of earnings; • multiple, conflicting and changing laws, rules and regulations, and difficulties understanding and ensuring compliance with those laws, rules and regulations by both our employees and our users, over whom we exert no control; • compliance challenges due to different laws and regulatory environments, particularly in the case of privacy, data security, and content, which are complex, sometimes inconsistent, and subject to unexpected changes; • competitive environments that favor local businesses; • reduced or varied protection for our intellectual property rights in some countries; • low usage or penetration of internet-connected consumer electronic devices; • political tension or social unrest and economic instability, particularly in countries in which we operate; • trade sanctions, political unrest, terrorism, war, health and safety epidemics or the threat of any of these events; and • breaches or violation of any anti-corruption laws, rules or regulations applicable to our business, including but not limited to the Foreign Corrupt Practices Act of 1977, as amended.
This and other stakeholder expectations will likely lead to increased costs as well as scrutiny that could heighten all of the risks identified in this risk factor. Additionally, certain of our customers, business partners, and suppliers may be subject to similar expectations, which may augment or create additional risks, including risks that may not be known to us. Item 1B.
This and other stakeholder expectations will likely lead to increased costs as well as scrutiny that could heighten all of the risks identified in this risk factor. Additionally, our customers, business partners, and suppliers may be subject to similar expectations, which may augment or create additional risks, including risks that may not be known to us.
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.
We estimate that there are thousands of free mobile applications for language learning; free products are provided in at 17 Table of Contents 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.
Accordingly, our efforts to enforce our intellectual property rights around the world 47 Table of Contents may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
Accordingly, our efforts to enforce our intellectual property rights around the world 45 Table of Contents may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
Because of the 20-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively could continue to control a significant percentage of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval until all outstanding shares of Class A and Class B 49 Table of Contents common stock have converted automatically into shares of a single class of common stock.
Because of the 20-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively could continue to control a significant percentage of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval until all outstanding shares of Class A and Class B common stock have converted automatically into shares of a single class of common stock.
Any limit or discontinuation of our access to any platform could significantly reduce our ability to distribute our products to users, decrease the size of the user base we could convert into paying users, or decrease the payments we derive from paying users or advertisers, each of which would materially and adversely affect our business, financial condition and results of operations.
Any limit or discontinuation of our access to any platform could 22 Table of Contents significantly reduce our ability to distribute our products to users, decrease the size of the user base we could convert into paying users, or decrease the payments we derive from paying users or advertisers, each of which would materially and adversely affect our business, financial condition and results of operations.
There is a risk that generative AI technologies could produce inaccurate or misleading content or other discriminatory or unexpected results or behaviors, such as hallucinatory behavior that can generate irrelevant, nonsensical, or factually incorrect results but in a manner that appears accurate, all of which could harm our reputation, business, or customer relationships.
There is a risk that GenAI technologies could produce inaccurate or misleading content or other discriminatory or unexpected results or behaviors, such as hallucinatory behavior that can generate irrelevant, nonsensical, or factually incorrect results but in a manner that appears accurate, all of which could harm our reputation, business, or customer relationships.
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 30 Table of Contents Confidential Information related to our business and expose us to liability, which could harm our reputation and materially adversely affect our business.
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.
It is likely that we would not be able to reach all affected users, and even if we 32 Table of Contents could, some users’ new payment card information may not be obtained and some pending transactions may not be processed, which could materially adversely affect our business, financial condition and results of operations.
It is likely that we would not be able to reach all affected users, and even if we could, some users’ new payment card information may not be obtained and some pending transactions may not be processed, which could materially adversely affect our business, financial condition and results of operations.
This concentrated control may limit or preclude your ability to influence corporate matters for the foreseeable future, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.
This 47 Table of Contents concentrated control may limit or preclude your ability to influence corporate matters for the foreseeable future, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.
During the year ended December 31, 2024, approximately 7.3% of our total revenues were derived from advertising. We generally enter into arrangements with the major programmatic advertising networks to monetize our advertising inventory. We need to maintain good relationships with these advertising networks to provide us with a sufficient inventory of advertisements.
During the year ended December 31, 2025, approximately 7.7% of our total revenues were derived from advertising. We generally enter into arrangements with the major programmatic advertising networks to monetize our advertising inventory. We need to maintain good relationships with these advertising networks to provide us with a sufficient inventory of advertisements.
In addition, some of our agreements with third-party partners require us to indemnify them for certain intellectual property claims against them, which could require us to incur considerable costs in defending such claims, and may require us to pay significant damages in the event of an adverse ruling.
In addition, some of our agreements with third-party partners require us to indemnify them for certain 42 Table of Contents intellectual property claims against them, which could require us to incur considerable costs in defending such claims, and may require us to pay significant damages in the event of an adverse ruling.
In the twelve months ended December 31, 2024, we derived 61% of our revenue and 62% of our total bookings from the Apple App Store, and 20% of our revenue and 20% of our total bookings from the Google Play Store. The timing of their payments also may change, which may negatively impact our cash receipts and working capital.
In the twelve months ended December 31, 2025, we derived 62% of our revenue and 61% of our total bookings from the Apple App Store, and 20% of our revenue and 21% of our total bookings from the Google Play Store. The timing of their payments also may change, which may negatively impact our cash receipts and working capital.
These shares can be freely sold in the public market upon issuance, subject to applicable vesting requirements, compliance by affiliates with Rule 144, and other restrictions provided under the terms of the applicable plan and/or the award agreements entered into with participants.
These shares can be freely sold in the public market upon issuance, subject to applicable 48 Table of Contents vesting requirements, compliance by affiliates with Rule 144, and other restrictions provided under the terms of the applicable plan or the award agreements entered into with participants.
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.
If we fail to protect our 26 Table of Contents 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.
The defense of these actions could be time consuming and expensive and could distract our personnel from their normal responsibilities. We evaluate these litigation 43 Table of Contents claims and legal proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses.
The defense of these actions could be time consuming and expensive and could distract our personnel from their normal responsibilities. We evaluate these litigation claims and legal proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses.
Many of the current and potential competitors, both domestically and internationally, 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.
Current and potential competitors, both domestically and internationally, may have 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.
If we cannot successfully attract users of these free products and convert a sufficient portion of these free users into paying users, our business could be adversely affected.
If we cannot successfully attract users of these products and services and convert a sufficient portion of these users into paying users, our business could be adversely affected.
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, 33 Table of Contents any or all of which could materially adversely affect our business, financial condition and results of operations.
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.
The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations. Additionally, the integration of acquisitions requires significant time and resources, and we may not manage these processes successfully.
The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations. 33 Table of Contents Additionally, the integration of acquisitions requires significant time and resources, and we may not manage these processes successfully.
A variety of laws and regulations have been adopted aimed at protecting children using the internet such as the COPPA, U.S. state laws such as the Texas Securing Children Online Through Parental Empowerment (“SCOPE”) Act, Article 8 of the GDPR and the U.K.
A variety of laws and regulations have been enacted aimed at protecting minors/children using the internet such as COPPA, U.S. state laws such as the Texas Securing Children Online Through Parental Empowerment (“SCOPE”) Act, Article 8 of the GDPR and the U.K.
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.
There is no guarantee that we will not experience an erosion of our 15 Table of Contents user or subscriber base or engagement levels. User engagement can be difficult to measure, particularly as we introduce new and different products and services.
If we violate, or a platform provider believes we have violated, its terms of service (or if there is any change or deterioration in our relationship with these platform providers), that platform provider could limit 22 Table of Contents or discontinue our access to the platform.
If we violate, or a platform provider believes we have violated, its terms of service (or if there is any change or deterioration in our relationship with these platform providers), that platform provider could limit or discontinue our access to the platform.
Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.
Many of these laws and regulations are subject to change and uncertain interpretation, and could 34 Table of Contents result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.
Additionally, governmental agencies like the Federal Trade Commission and state attorneys general enforce a variety of data privacy issues, such as promises made in privacy policies or failures to appropriately protect information about individuals, as unfair or deceptive acts or practices in or affecting commerce in violation of the Federal Trade Commission Act or similar state laws.
Further, U.S. governmental agencies like the Federal Trade Commission and state attorneys general enforce a variety of data privacy issues, such as promises made in privacy policies or failures to appropriately protect information about individuals, as unfair or deceptive acts or practices in or affecting commerce in violation of the Federal Trade Commission Act or similar state laws.
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.
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 U.S.
If we or are service providers are unable to comply with the security standards established by banks and the payment card industry, including PCI-DSS, we may be subject to fines, restrictions and expulsion from card acceptance programs, which could materially and adversely affect our business.
If we or are service providers are unable to comply with the security standards established by 31 Table of Contents banks and the payment card industry, including PCI-DSS, we may be subject to fines, restrictions and expulsion from card acceptance programs, which could materially and adversely affect our business.
Such third- 44 Table of Contents party partners may also discontinue their relationships with us as a result of injunctions or otherwise, which could result in loss of revenue and adversely impact our business operations.
Such third-party partners may also discontinue their relationships with us as a result of injunctions or otherwise, which could result in loss of revenue and adversely impact our business operations.
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), 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.
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.
Climate change may increase the frequency and/or intensity of such events or contribute to various 35 Table of Contents 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.
Climate change may increase the frequency 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.
Unfavorable publicity or media reports regarding us, our privacy practices, our social media activities, data security compromises or breaches, product changes, product or service quality or features, litigation 26 Table of Contents 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.
Unfavorable publicity or media reports, 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.
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 AI), or a new or existing distribution channel, creating a new or different approach to connecting people or some other means.
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 artificial intelligence “GenAI”)), or a new or existing distribution channel, creating a new or different approach to connecting people or some other means.
Failure to manage our future growth effectively could have a material adverse effect on our business, financial condition, and operating results. Our costs are continuing to grow, 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.
Failure to manage our future growth effectively could have a material adverse effect on our business, financial condition, and operating results. Our costs continue to 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.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur cybersecurity risk management program includes: • risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; • a dedicated information security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; • the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls; • cybersecurity awareness training of our employees, incident response personnel, and senior management; • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and • a third-party risk management process for service providers, suppliers, and vendors. 57 Table of Contents We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, financial condition, or results of operations.
Biggest changeKey elements of our cybersecurity risk management program include the following: • risk assessments designed to help identify material risks from cybersecurity threats to our critical systems and information; • a dedicated information security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; • the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security processes and controls; • cybersecurity awareness training of our employees, including incident response personnel, and senior management; • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and • a third-party risk management process for key service providers based on our assessment of their criticality to our operations and respective risk profile.
Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.
Our cybersecurity risk management program is integrated into our overall risk management program, and shares common methodologies, reporting channels and governance processes that apply across the risk management program to other legal, compliance, strategic, operational, and financial risk areas.
Cybersecurity Governance Our Board has ultimate oversight of cybersecurity risk and is assisted by its Audit Committee (the "Committee"), which regularly reviews our cybersecurity program with management and reports to the Board. Cybersecurity reviews by the Committee generally occur quarterly or more frequently as determined to be necessary or advisable.
Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and is assisted by its Audit Committee (the "Committee"), which regularly reviews our cybersecurity program with management and 55 Table of Contents reports to the Board. Cybersecurity reviews by the Committee generally occur quarterly or more frequently as determined to be advisable.
This Governance Council also includes the leader of our dedicated Information Security Team, who has over six years of specific cybersecurity experience, manages the day-to-day activities needed to prevent, detect, and mitigate cybersecurity incidents, and reports to senior management through the Governance Council.
This Governance Council also includes our Head of Information Security, who with our dedicated Information Security Team, manages the day-to-day activities needed to prevent, detect, and mitigate cybersecurity incidents, and reports to senior management through the Governance Council.
Item 1C. Cybersecurity Cybersecurity Risk Management, Strategy and Governance Disclosures Cybersecurity Risk Management and Strategy We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information. Our cybersecurity risk management program includes a cybersecurity incident response plan.
Item 1C. Cybersecurity Cybersecurity Risk Management, Strategy and Governance Disclosures Cybersecurity Risk Management and Strategy We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information. We design and assess our program based on various cybersecurity frameworks and guidelines.
We design and assess our program based on the International Organization for Standardization (“ISO”) 27001 requirements. This does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the ISO 27001 requirements as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.
This does not imply that we meet any particular technical standards, specifications, or requirements, only that we use these frameworks and guidelines as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.
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We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, financial condition, or results of operations.
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This Head of Information Security has served in various roles within the cybersecurity field for over 15 years, including security leadership roles in multiple organizations and holds an undergraduate degree in information security and forensics.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties We lease approximately 83,586 square feet in multiple facilities in Pittsburgh, Pennsylvania where we operate our headquarters, and lease approximately 85,666 square feet of office space in New York City. We also lease other office space around the world as needed for our employees, including in Beijing, Berlin, Detroit, Tokyo, and Seattle.
Biggest changeItem 2. Properties We lease approximately 195,254 square feet in multiple facilities in Pittsburgh, Pennsylvania where we operate our headquarters, and lease approximately 85,666 square feet of office space in New York City. We also lease other office space around the world as needed for our employees, including in Bangalore, Beijing, Berlin, Detroit, London, Tokyo, and Seattle.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings From time to time we may be involved in claims and proceedings arising in the course of our business. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain. We are not currently party to any material legal proceedings.
Biggest changeItem 3. Legal Proceedings From time to time we may be involved in claims and proceedings arising in the course of our business. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain. We are not currently party to any material legal proceedings. Item 4.
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Mine Safety Disclosures Not applicable. 56 Table of Contents Part II Financial Information

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders of our Common Stock As of February 26, 2025, there were 9 stockholders of record of our Class A common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
Biggest changeHolders of our Common Stock As of February 25, 2026, there were 0 stockholders of record of our Class A common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
The graph uses the closing market price on July 28, 2021 of $134.26 per share as the initial value of our Class A common stock. The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our Class A common stock. 60 Table of Contents Item 6. [Reserved]
The graph uses the closing market price on July 28, 2021 of $134.26 per share as the initial value of our Class A common stock. The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our Class A common stock. 57 Table of Contents Item 6. [Reserved]
As of February 26, 2025, there were 3 stockholders of record of our Class B common stock. Dividend Policy We have never declared or paid any cash dividends on our common stock, and we do not currently intend to pay any cash dividends on our common stock in the foreseeable future.
As of February 25, 2026, there were 0 stockholders of record of our Class B common stock. Dividend Policy We have never declared or paid any cash dividends on our common stock, and we do not currently intend to pay any cash dividends on our common stock in the foreseeable future.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear Ended December 31, ( In thousands) 2024 2023 Net income $ 88,574 $ 16,067 Add (deduct): Interest income (42,697) (31,091) Provision for income taxes 13,732 1,710 Depreciation and amortization 10,854 7,095 Stock-based compensation expenses related to equity awards (1) 120,267 99,226 Acquisition transaction costs (2) 774 — Acquisition earn-out costs (3) 200 338 Gain on sale of capitalized software (4) — (100) Loss on disposal of leasehold improvements (5) — 433 Impairment of capitalized software (6) 238 — Adjusted EBITDA $ 191,942 $ 93,678 ________________ (1) In addition to stock-based compensation expense of $110.5 million and $95.2 million for the years ended December 31, 2024 and 2023, respectively, this includes costs incurred related to taxes paid on equity transactions as follows: Year Ended December 31, (In thousands) 2024 2023 Research and development $ 2,318 $ 1,693 Sales and marketing 130 93 General and administrative 7,342 2,219 Total $ 9,790 $ 4,005 (2) Represents costs incurred related to acquisitions, including integration costs, which are included in General and administration expense within our Consolidated Statements of Operations and Comprehensive Income (Loss).
Biggest change(2) In addition to stock-based compensation expense of $137.4 million and $110.5 million for the years ended December 31, 2025 and 2024, respectively, this includes costs incurred related to taxes paid on equity transactions as follows: Year Ended December 31, (In thousands) 2025 2024 Research and development $ 4,258 $ 2,318 Sales and marketing 237 130 General and administrative 6,711 7,342 Total $ 11,206 $ 9,790 (3) Represents acquisition transaction costs, including legal and accounting fees, and integration costs, both of which are included within our Consolidated Statements of Operations and Comprehensive Income as shown below.
Non-GAAP Financial Measures 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. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.
Non-GAAP Financial Measures 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 measures. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.
See Note 10, “Stock-Based Compensation,” to our Consolidated Financial Statements in the notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for a discussion of equity based compensation. Restricted Stock Units (RSUs) We began to grant RSUs in November 2020.
See Note 10, “Stock-Based Compensation,” in the notes to our Consolidated Financial Statements in the notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for a discussion of equity based compensation. Restricted Stock Units (RSUs) We began to grant RSUs in November 2020.
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.
We typically capitalize a 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.
We also offer in-app purchases, which consist of learners purchasing one-time benefits within the app, such as “Streak Freezes” and “Timer Boosts.” In addition to monetizing the Duolingo App, we generate revenue from the Duolingo English Test by charging test takers a one-time fee. University program acceptance is a driver of Duolingo English Test revenue.
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.” In addition to monetizing the Duolingo App, we generate revenue from the Duolingo English Test by charging test takers a one-time fee. University program acceptance is a driver of Duolingo English Test revenue.
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.
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 ("IAPs").
The service-based condition is satisfied as to 25% of the Founder Awards on each anniversary of the initial public offering (“IPO”), July 30, 2021, subject to the continuous service of the founders through the applicable date.
The service-based condition is satisfied as to 25% of the Founder Awards on each anniversary of the initial public offering, July 30, 2021, subject to the continuous service of the founders through the applicable date.
Research and development continues to be our largest operating expense as we test and experiment with new products and product features and improve existing ones to drive engagement and efficacy.
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.
We believe the following key attributes of our freemium subscription business model are core to our success. • Large Market : There is an enormous pool of potential language learners globally that HolonIQ estimates at approximately 2 billion people. • Free Users : Since none of our learning content is 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.
We believe the following key attributes of our freemium subscription business model are core to our success. • Large Market : There is an enormous pool of potential language learners globally that HolonIQ estimates at approximately 2 billion people. • Free Users : Since the 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.
The measurement period for MAUs is the three months ended December 31, 2024 and the same period in the prior year where applicable, and the analysis of results is based on those periods. MAUs are a measure of the size of our global active user community on Duolingo.
The measurement period for MAUs is the three months ended December 31, 2025 and the same period in the prior year where applicable, and the analysis of results is based on those periods. MAUs are a measure of the size of our global active user community on Duolingo.
To the extent that we change the manner in which we develop and test new features and functionalities related to our platform, assess the ongoing value of capitalized assets or determine the estimated useful lives over which the costs are amortized, the amount of internal-use software development costs we capitalize and amortize could change in future periods.
To the extent that we change the manner in which we develop and test new features and functionalities related to our platform, assess the ongoing value of capitalized assets or determine the 74 Table of Contents estimated useful lives over which the costs are amortized, the amount of internal-use software development costs we capitalize and amortize could change in future periods.
Recent Accounting Pronouncements 77 Table of Contents See Note 1, “Description of the Business and Basis of Presentation,” and Note 2, “Summary of Significant Accounting Policies,” in the notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for a discussion of recent accounting pronouncements.
Recent Accounting Pronouncements See Note 1, “Description of the Business and Basis of Presentation,” and Note 2, “Summary of Significant Accounting Policies,” in the notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for a discussion of recent accounting pronouncements.
Basis of Presentation Items within Management's Discussion and Analysis of Financial Condition and Results of Operations include a discussion of changes between the years ended December 31, 2024 and 2023.
Basis of Presentation Items within Management's Discussion and Analysis of Financial Condition and Results of Operations include a discussion of changes between the years ended December 31, 2025 and 2024.
Our gross profit may fluctuate from period to period as our revenues fluctuate, and also as a result of the timing and amount of investments we make in items related to cost of revenues. 68 Table of Contents Operating Expenses Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses.
Our gross profit may fluctuate from period to period as our revenues fluctuate, and also as a result of the timing and amount of investments we make in items related to cost of revenues. Operating Expenses Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses.
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. Our Business Model 61 Table of Contents How We Generate Revenue We use a freemium business model that relies on a premium subscription offering, advertising, and in-app-purchases (IAPs) to produce revenue.
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. Our Business Model 58 Table of Contents How We Generate Revenue We use a freemium business model that relies on premium subscription offerings, advertising, and in-app-purchases (IAPs) to produce revenue.
The performance-based condition will be satisfied with respect to each of ten equal tranches only upon the achievement of the specified stock-price hurdles for each such tranche over a period of ten years from the date of grant.
The performance-based condition will be satisfied with respect to each of ten equal tranches only upon the 73 Table of Contents achievement of the specified stock-price hurdles for each such tranche over a period of ten years from the date of grant.
For a discussion of changes from the year ended December 31, 2023 to the year ended December 31, 2022, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operation in Part II, Item 7. of our Annual Report on Form 10-K for the year ended December 31, 2023 (filed with the SEC on February 29, 2024).
For a discussion of changes from the year ended December 31, 2024 to the year ended December 31, 2023, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operation in Part II, Item 7. of our Annual Report on Form 10-K for the year ended December 31, 2024 (filed with the SEC on February 28, 2025).
Components of Our Results of Operations Revenue 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, as well as from Duo’s Taquería.
Components of Our Results of Operations Revenue 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.
Interest Income Interest income consists of income earned on our money market funds included in cash and cash equivalents and income earned and net accretion on our marketable securities. Other (expense) income, net Other (expense) income, net consists primarily of foreign currency exchange gains and losses.
Interest Income 66 Table of Contents 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), net Other income (expense), net consists primarily of foreign currency exchange gains and losses.
The level, timing, and relative investment in these areas could affect our cost of revenues in the future. Gross Profit and Gross Margin Gross profit represents revenues less cost of revenues. Gross margin is gross profit expressed as a percentage of revenues.
The level, timing, and relative investment in these areas could affect our cost of revenues in the future. 65 Table of Contents Gross Profit and Gross Margin Gross profit represents revenues less cost of revenues. Gross margin is gross profit expressed as a percentage of revenues.
Our future capital requirements will depend on many factors, including our subscription growth rate and renewal activity, the timing of cash received from our payment processing platforms, the expansion and efficacy of our sales and marketing activities, the introduction of new products and the enhancements to existing products, and the current uncertainty in the global markets impacting, for example, consumer spending, inflation and foreign currency exchange rates.
Our future capital requirements will depend on many factors, including our subscription growth rate and renewal activity, the timing of cash received from our payment processing platforms, the expansion and efficacy of our sales and marketing investments, the research and development investment related to the introduction of new products and the enhancements to existing products, and the current uncertainty in the global markets impacting, for example, consumer spending, inflation and foreign currency exchange rates.
To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.
To the extent that there are differences between our 72 Table of Contents estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.
As of December 31, 2024, subscribers made up 8.8% of our average MAUs over the last twelve months as compared to 8.3% of our average MAUs during the year ended December 31, 2023. Subscription Our subscription offerings as of the date of this filing are called Super Duolingo and Duolingo Max.
As of December 31, 2025, subscribers made up 9.2% of our average MAUs over the last twelve months as compared to 8.8% of our average MAUs during the year ended December 31, 2024. Subscription Our subscription offerings as of the date of this filing are called Super Duolingo and Duolingo Max.
As of December 31, 2024, we had deferred revenues of $372.9 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.
As of December 31, 2025, we had deferred revenues of $496.2 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.
Overview 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 40 languages to over 100 million monthly active users for the three months ended December 31, 2024.
Overview 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 over 250 total language courses to over 130 million monthly active users for the three months ended December 31, 2025.
As of December 31, 2024 and 2023, we had approximately 9.5 million and 6.6 million paid subscribers, respectively, representing an increase of 43% from the prior year period. We grew paid subscribers through product initiatives designed to make Duolingo subscription offerings more appealing, which we believe helped us attract new subscribers and retain existing subscribers. Subscription Bookings and Total Bookings.
As of December 31, 2025 and 2024, we had approximately 12.2 million and 9.5 million paid subscribers, respectively, representing an increase of 28% 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. Subscription Bookings and Total Bookings.
These millions of learners provide two benefits to our business model: ◦ They become advocates for Duolingo and provide word-of-mouth publicity for our product, which enables our growth and has allowed us to make very selective and efficient marketing investments. ◦ Our users complete over one billion exercises every day, generating large amounts of data that powers our high-volume A/B testing and novel AI techniques.
We have seen these millions of learners provide two benefits to our business model: ◦ They become advocates for Duolingo and support our growth through positive word-of-mouth for our product, which enables us to make very selective, efficient, and targeted marketing investments. ◦ Our users complete nearly 2 billion exercises every day, generating large amounts of data that powers our high-volume A/B testing and novel AI techniques.
If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in 73 Table of Contents continued innovation, we may not be able to compete successfully, which would harm our business and financial condition and results of operations.
If we cannot meet our future capital requirements, we may be required to seek additional liquidity. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business and financial condition and results of operations.
We generally grant our option awards in a combination of service-based and performance-based. We measure the fair value of our options on the date of grant using the Black-Scholes pricing model which requires the use of several estimates, including the volatility of our share price, the expected life of the option, risk free interest rates and expected dividend yield.
Historically, we have granted option awards, and we would measure the fair value of our options on the date of grant using the Black-Scholes pricing model which requires the use of several estimates, including the volatility of our share price, the expected life of the option, risk free interest rates and expected dividend yield.
As of December 31, 2024, over 5,600 education programs around the world accept the Duolingo English Test results as proof of English proficiency for international student admissions, with over 4,700 of those being higher education programs.
As of December 31, 2025, over 6,100 education programs around the world accept the Duolingo English Test results as proof of English proficiency for international student admissions, with over 5,300 of those being higher education programs.
As a result, the benefits of our research and development investments may be difficult to forecast. Sales and Marketing.
As a result, the impact resulting from our research and development investments may be difficult to forecast. Sales and Marketing.
This increase was mainly due to: • Increased direct marketing and other expenses of $11.2 million; and • Increased personnel costs of $3.5 million driven primarily by the growth in headcount, including increased stock-based compensation expense of $1.0 million. 72 Table of Contents General and Administrative.
This increase was mainly due to: • Increased direct marketing and other expenses of $25.8 million; • Increased personnel costs of $6.8 million driven primarily by the growth in headcount, including increased stock-based compensation expense of $1.6 million; and • Increased web services and technology costs of $2.5 million. 69 Table of Contents General and Administrative.
The following table provides the change in cost of revenues, along with related gross margins: Year Ended December 31, 2024 2023 Change (In thousands, except gross margin) Costs Gross Margin Costs Gross Margin Costs Gross Margin Total cost of revenues $ 203,645 72.8 % $ 142,105 73.2 % $ 61,540 (0.4)% Operating Expenses Research and Development.
The following table provides the change in cost of revenues, along with related gross margins: Year Ended December 31, 2025 2024 Change (In thousands, except gross margin) Costs Gross Margin Costs Gross Margin Costs Gross Margin Total cost of revenues $ 288,132 72.2 % $ 203,645 72.8 % $ 84,487 (0.6)% Operating Expenses Research and Development.
The following table summarizes our cash flows for the periods presented: Year Ended December 31, (In thousands) 2024 2023 Net cash provided by operating activities $ 285,513 $ 153,614 Net cash used for investing activities (217,330) (13,584) Net cash (used for) provided by financing activities (30,002) 2,135 Net increase in cash, cash equivalents and restricted cash $ 38,181 $ 142,165 Operating Activities Cash flows from operating activities can fluctuate significantly from period to period due to timing of payments and cash collections.
The following table summarizes our cash flows for the periods presented: Year Ended December 31, (In thousands) 2025 2024 Net cash provided by operating activities $ 387,823 $ 285,513 Net cash used for investing activities (107,678) (217,330) Net cash used for financing activities (29,547) (30,002) Net increase in cash, cash equivalents and restricted cash $ 250,598 $ 38,181 Operating Activities Cash flows from operating activities can fluctuate significantly from period to period due to timing of payments and cash collections.
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.
See the definition of Free Cash Flow below for additional information. Operating Metrics 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.
We grew subscription bookings by selling more first-time and renewal subscriptions. For the years ended December 31, 2024 and 2023, we generated $870.6 million and $622.2 million total bookings, respectively, representing an increase of $248.4 million, or 40% from the prior year period. We grew total bookings primarily through growth in subscription bookings as noted above.
Subscription bookings increased, driven by growth in both first-time and renewal subscriptions. For the years ended December 31, 2025 and 2024, we generated $1,158.4 million and $870.6 million total bookings, respectively, representing an increase of $287.8 or 33% from the prior year period. We grew total bookings primarily through growth in subscription bookings as noted above.
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 exercises powered by generative AI technology.
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 exercises, such as Video Call.
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 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.
Provision for income taxes 69 Table of Contents The provision for income taxes represents the income tax provision associated with our operations based on 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.
Income taxes Income taxes represent the tax impact associated with our operations under 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.
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, which is generally from one to twelve months. 64 Table of Contents For the years ended December 31, 2024 and 2023, we generated $730.7 million and $495.5 million of subscription bookings, respectively, representing an increase of $235.2 million, or 47% from the prior year period.
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 are twelve months in duration. 61 Table of Contents For the years ended December 31, 2025 and 2024, we generated $996.3 million and $730.7 million of subscription bookings, respectively, representing an increase of $265.5 million or 36%.
The above increases were partially offset by decreases in insurance and other costs of $0.8 million. Interest Income Interest income increased by $11.6 million, or 37%, to $42.7 million during the year ended December 31, 2024, from $31.1 million during the year ended December 31, 2023. The increase was due to higher average interest-bearing balances and higher average yields.
The above increases were partially offset by decreases in taxes and other costs of $0.8 million. Interest Income Interest income increased by $2.5 million, or 6%, to $45.2 million during the year ended December 31, 2025, from $42.7 million during the year ended December 31, 2024 due to higher average interest-bearing balances partially offset by slightly lower interest rates.
General and administrative expense increased by $23.9 million, or 18%, to $156.0 million during the year ended December 31, 2024 from $132.1 million during the year ended December 31, 2023.
General and administrative expense increased by $25.9 million, or 17%, to $181.9 million during the year ended December 31, 2025 from $156.0 million during the year ended December 31, 2024.
Equity Based Compensation We follow ASC 718, Compensation-Stock Compensation , to account for our equity based compensation. 75 Table of Contents Stock-based Compensation ASC 718 requires all stock-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values.
Stock-based Compensation ASC 718 requires all stock-based payments to employees, including grants of employee stock options and restricted stock units, to be recognized in the income statement based on their fair values.
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.
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. 62 Table of Contents The following table presents a reconciliation of our net income, the most directly comparable financial measure presented in accordance with GAAP, to Adjusted EBITDA.
We calculate constant currency revenues by using current period foreign currency revenues and translating them to constant currency using prior year comparable period exchange rates for the entire period of related bookings. 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.
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.
Sales and marketing expense increased by $14.7 million, or 19%, to $90.5 million during the year ended December 31, 2024 from $75.8 million during the year ended December 31, 2023.
Sales and marketing expense increased by $35.2 million, or 39%, to $125.7 million during the year ended December 31, 2025 from $90.5 million during the year ended December 31, 2024.
If the stock-price hurdles are met sooner than the requisite service period, the stock-based compensation expense will be adjusted to prospectively recognize the remaining expense over the remaining derived service period.
If the stock-price hurdles are met sooner than the requisite service period, the stock-based compensation expense will be adjusted to prospectively recognize the remaining expense over the remaining derived service period. Provided that the founders continue to provide services to us, stock-based compensation expense is recognized over the derived service period, regardless of whether the stock-price hurdles are achieved.
Our short-term investments consist mainly of corporate debt securities, U.S. Treasury securities, certificates of deposit, and commercial paper. We believe that our existing cash and cash equivalents, short-term investments and cash flow from operations will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months.
We believe that our existing cash and cash equivalents, short-term investments and cash flow from operations will be sufficient to support working capital and capital expenditure requirements, and any future share repurchases, for at least the next 12 months.
Free Cash Flow . Free cash flow is defined as net cash provided by operating activities, reduced by capitalized software development costs and purchases of property and equipment and increased by taxes paid related to stock-based compensation equity awards, transaction costs related to acquisitions and acquisition earn-out payments as we believe such items are not indicative of future liquidity.
Free cash flow is defined as net cash provided by operating activities, less capitalized software development costs and purchases of property and equipment. Prior to the first quarter of 2025, free cash flow added back taxes paid related to stock-based compensation equity awards, acquisition transaction costs, and acquisition earn-out payments.
We had approximately 116.7 million and 88.4 million MAUs for the three months ended December 31, 2024 and 2023, respectively, representing an increase of 32% from the prior year period.
We had approximately 133.1 million and 116.7 million MAUs for the three months ended December 31, 2025 and 2024, respectively, representing an increase of 14% from the prior year period. We grew MAUs through a combination of product initiatives and marketing.
The following critical accounting policies reflect the significant estimates and judgments used in the preparation of our Consolidated Financial Statements.
The following critical accounting policies reflect the significant estimates and judgments used in the preparation of our Consolidated Financial Statements. Equity Based Compensation We follow ASC 718, Compensation-Stock Compensation , to account for our equity based compensation.
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 improvements and impairment of capitalized software.
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 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 grew DAUs through many of the same marketing and product initiatives as we grew MAUs, such as making the product more fun and engaging. Paid Subscribers. Paid subscribers are defined as users who pay for access to any Duolingo subscription offering and had an active subscription as of the end of the measurement period.
Paid subscribers are defined as users who pay for access to any Duolingo subscription offering and had an active subscription as of the end of the measurement period.
The measurement period for DAUs is the three months ended December 31, 2024 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.
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 December 31, 2025 and the same period in the prior year where applicable, and the analysis of results is based on those periods.
Cash provided by operating activities increased by $131.9 million, or 86%, to $285.5 million for the year ended December 31, 2024 from $153.6 million for the year ended December 31, 2023.
Cash provided by operating activities increased by $102.3 million, or 36%, to $387.8 million for the year ended December 31, 2025 from $285.5 million for the year ended December 31, 2024.
The use of different assumptions in the Black-Scholes pricing model would result in different amounts of equity based compensation expense. Furthermore, if different assumptions are used in future periods, our equity based compensation expense could be materially impacted in the future.
The use of different assumptions in the Black-Scholes pricing model would result in different amounts of equity based compensation expense. While we do not currently grant options, if we were to grant options in the future and use different assumptions for calculating Black-Scholes values in future periods, our equity based compensation expense could be materially impacted in the future.
Other (expense) income, net Other (expense) income, net increased by $2.9 million, during the year ended December 31, 2024, mainly from the impact from changes in foreign currency rates.
Other income (expense), net Other income (expense), net was $1.6 million during the year ended December 31, 2025, mainly from the impact from changes in foreign currency rates compared to $3.0 million of expense during the year ended December 31, 2024.
A substantial source of our cash from operations comes from deferred revenue, which is included in the liabilities section of our Consolidated Balance Sheet. Deferred revenues consists of the unearned portion of customer billings, which is recognized as revenue in accordance with our revenue recognition policy.
Deferred revenues consists of the unearned portion of customer billings, which is recognized as revenue in accordance with our revenue recognition policy.
Results of Operations Comparison of the years ended December 31, 2024 and 2023 The following table sets forth our Consolidated Statements of Operations and Comprehensive Income data, including year-over-year change, for the periods indicated: Year Ended December 31, (In thousands) 2024 2023 % Change Revenues $ 748,024 $ 531,109 41 Cost of revenues (1) (2) 203,645 142,105 43 Gross profit 544,379 389,004 40 Operating expenses: Research and development (1) (2) 235,298 194,352 21 Sales and marketing (1) (2) 90,494 75,788 19 General and administrative (1) (2) 155,992 132,123 18 Total operating expenses 481,784 402,263 20 Income (loss) from operations 62,595 (13,259) nm Other (expense) income, net (2,986) (55) >100 Income (loss) before interest income and income taxes 59,609 (13,314) nm Interest income 42,697 31,091 37 Income before income taxes 102,306 17,777 >100 Provision for income taxes 13,732 1,710 >100 Net income and comprehensive income $ 88,574 $ 16,067 >100 ________________ (1) Includes stock-based compensation expenses as follows: Year Ended December 31, (In thousands) 2024 2023 Cost of revenues $ 68 $ 55 Research and development 60,076 45,119 Sales and marketing 4,912 3,908 General and administrative 45,421 46,139 Total $ 110,477 $ 95,221 70 Table of Contents (2) Includes amortization of capitalized software and depreciation of property and equipment as follows: Year Ended December 31, (In thousands) 2024 2023 Cost of revenues (a) $ 5,310 $ 2,020 Research and development 2,358 1,650 Sales and marketing (a) 860 1,165 General and administrative 2,326 2,260 Total $ 10,854 $ 7,095 ________________ (a) Amortization of capitalized software is recorded to Cost of revenue and Sales and marketing for revenue and non-revenue generating capitalized software, respectively.
Results of Operations Comparison of the years ended December 31, 2025 and 2024 The following table sets forth our Consolidated Statements of Operations and Comprehensive Income data, including year-over-year change, for the periods indicated: Year Ended December 31, (In thousands) 2025 2024 % Change Revenues $ 1,037,589 $ 748,024 39% Cost of revenues (1) (2) 288,132 203,645 41 Gross profit 749,457 544,379 38 Operating expenses: Research and development (1) (2) 306,323 235,298 30 Sales and marketing (1) (2) 125,677 90,494 39 General and administrative (1) (2) 181,887 155,992 17 Total operating expenses 613,887 481,784 27 Income from operations 135,570 62,595 >100 Other income (expense), net 1,609 (2,986) nm Income before interest income and income taxes 137,179 59,609 >100 Interest income 45,231 42,697 6 Income before income taxes 182,410 102,306 78 (Benefit from) provision for income taxes (231,655) 13,732 nm Net income and comprehensive income $ 414,065 $ 88,574 >100 ________________ (1) Includes stock-based compensation expenses as follows: Year Ended December 31, (In thousands) 2025 2024 Cost of revenues $ 96 $ 68 Research and development 84,874 60,076 Sales and marketing 6,358 4,912 General and administrative 46,109 45,421 Total $ 137,437 $ 110,477 67 Table of Contents (2) Includes amortization of capitalized software and depreciation of property and equipment as follows: Year Ended December 31, (In thousands) 2025 2024 Cost of revenues (a) $ 8,658 $ 5,310 Research and development 3,328 2,358 Sales and marketing (a) 937 860 General and administrative 1,468 2,326 Total $ 14,391 $ 10,854 ________________ (a) Amortization of capitalized software is recorded to Cost of revenue and Sales and marketing for revenue and non-revenue generating capitalized software, respectively.
This increase was mainly due to: • Increased net personnel costs of $11.6 million, including an increase of $4.4 million in stock-based compensation related expense; • Increased travel and meals expenses of $3.2 million; • Increased facility-related costs of $2.8 million; • Increased web services and technology costs of $2.8 million; • Increased professional fees of $1.9 million; and • Increased other expenses of $2.4 million.
This increase was mainly due to: • Increased personnel costs of $8.8 million; • Increased web services and technology costs of $6.3 million; • Increased travel and meals expenses of $4.4 million; • Increased facilities and office expenses of $3.0 million; and • Increased professional and acquisition related costs of $4.2 million.
Year Ended December 31, 2024 2023 Revenues 100 % 100 % Cost of revenues 27 27 Gross profit 73 73 Operating expenses: Research and development 31 37 Sales and marketing 12 14 General and administrative 21 25 Total operating expenses 64 76 Income (loss) from operations 8 (2) Other (expense) income, net — — Income (loss) before interest income and income taxes 8 (3) Interest income 6 6 Income before income taxes 14 3 Provision for income taxes 2 — Net income and comprehensive income 12 % 3 % Revenues Revenues increased by $216.9 million, or 41%, to $748.0 million during the year ended December 31, 2024, from revenues of $531.1 million during the year ended December 31, 2023.
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: Year Ended December 31, 2025 2024 Revenues 100 % 100 % Cost of revenues 28 27 Gross profit 72 73 Operating expenses: Research and development 30 31 Sales and marketing 12 12 General and administrative 18 21 Total operating expenses 59 64 Income from operations 13 8 Other income (expense), net — — Income before interest income and income taxes 13 8 Interest income 4 6 Income before income taxes 18 14 (Benefit from) provision for income taxes (22) 2 Net income and comprehensive income 40 % 12 % Revenues Revenues increased by $289.6 million, or 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.
Liquidity and Capital Resources Since inception, we have financed operations primarily through revenues and the net proceeds we have received from the issuance of equity. As of December 31, 2024, we had $785.8 million in cash and cash equivalents and $91.9 million of short-term investments. Our cash and cash equivalents primarily consist of bank deposits and money market funds.
Liquidity and Capital Resources We finance our operations primarily through revenues and the net proceeds we have received from the issuance of equity. 70 Table of Contents As of December 31, 2025, we had $1,036.4 million in cash and cash equivalents and $104.1 million of short-term investments.
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.
This, in turn, can impact the growth in, and 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.
We use this data and the insights that come from it to continually improve both engagement and efficacy. • Paid Subscriber Conversion : As learners tend to use our product for months or even years before they decide to subscribe, we enjoy economic benefits from users well into their tenure on the platform.
We see stronger conversion from users that recently joined or reengage with the platform, but also see learners who use our product for months or even years before they decide to subscribe. This allows us to enjoy economic benefits from users well into their tenure on the platform.
We invest heavily in research and development to create new products and product features that help us grow our user base, engage our users, monetize our users, and teach our users. This, in turn, drives additional growth in, and better lifetime value of, our paid subscribers, as well as increased advertising revenue from impressions from our free users.
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.
These include 24 of the top 25 undergraduate programs in the U.S. ranked by international enrollment, as well as top schools such as Yale, Stanford, MIT, Duke and Columbia. 62 Table of Contents The Company also recognizes revenue from Dos Lenguas LLC, “Duo’s Taquería,” a restaurant that opened during 2022, in the space adjacent to our headquarters in Pittsburgh.
These include 24 of the top 25 undergraduate programs in the 59 Table of Contents U.S. ranked by international enrollment, as well as top schools such as Yale, Stanford, MIT, Duke and Columbia.
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 that our users are realizing the full benefit of our products.
We intend to continue to invest additional resources in our infrastructure to expand the capabilities of our platform and allow our users to realize the full benefit of our products.
For the years ended December 31, 2024 and 2023, we generated $274.9 million and $144.3 million of free cash flow, respectively, representing an increase of $130.7 million. The increase in free cash flow was mainly attributable to the increase in net cash provided by operating activities. Constant Currency.
See the definition of Free Cash Flow below for additional information. For the years ended December 31, 2025 and 2024, we generated $387.8 million and $285.5 million of net cash provided by operating activities, respectively, representing an increase of $102.3 million.
Financing Activities Cash used for financing activities was $30.0 million for the year ended December 31, 2024 and was related to taxes paid on the net-share settlements of share-based compensation awards of $49.4 million, partially offset by proceeds from exercises of stock options of $19.4 million.
Cash used for financing activities in both periods is due to taxes paid on the net-share settlements of share-based compensation awards of $41.6 million and $49.4 million, for the years ended December 31, 2025 and 2024, respectively.
For the years ended December 31, 2024 and 2023, we generated net income of $88.6 million and $16.1 million, respectively, representing an increase of $72.5 million.
(5) Represents impairment of capitalized software, which is included within Research and development expense within our Consolidated Statements of Operations and Comprehensive Income. For the years ended December 31, 2025 and 2024, we generated net income of $414.1 million and $88.6 million, respectively, representing an increase of $325.5 million.
Cost of Revenues Cost of revenues predominantly consists of third-party payment processing fees charged by various distribution channels in addition to hosting fees and generative 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.
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.
Provided that the founders continue to provide services to us, stock-based compensation expense is recognized over the derived service period, regardless of whether the stock-price hurdles are achieved. 76 Table of Contents Income Taxes Deferred tax assets and liabilities are recognized principally for the expected tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts, using currently enacted tax rates.
Income Taxes Deferred tax assets (“DTAs”) and liabilities are recognized principally for the expected tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts, using currently enacted tax rates.
The following table presents a reconciliation of net cash provided by operating activities, the most directly comparable financial measure calculated in accordance with GAAP, to free cash flow: Year Ended December 31, ( In thousands) 2024 2023 Net cash provided by operating activities $ 285,513 $ 153,614 Less: Capitalized software development costs and purchases of intangible assets (9,024) (10,493) Less: Purchases of property and equipment (12,116) (3,191) Plus: Taxes paid related to stock-based compensation equity awards 9,790 4,005 Plus: Acquisition transaction costs (1) 774 — Plus: Acquisition earn-out payment (2) — 338 Free cash flow $ 274,937 $ 144,273 ________________ (1) Represents costs incurred related to acquisitions, including integration costs.
The following table presents a reconciliation of net cash provided by operating activities, the most directly comparable financial measure calculated in accordance with GAAP, to free cash flow: Year Ended December 31, ( In thousands) 2025 2024 Net cash provided by operating activities $ 387,823 $ 285,513 Less: Capitalized software development costs and purchases of intangible assets (9,303) (9,024) Less: Purchases of property and equipment (18,096) (12,116) Free cash flow (1) $ 360,424 $ 264,373 ________________ (1) The prior period has been recast to conform to current period presentation of free cash flow.
Contractual Obligations The following table summarizes our contractual obligations and commitments as of December 31, 2024: 74 Table of Contents Payments Due by Period Total Less than 1 Year 1-3 Years 3-5 Years More than 5 years Operating lease commitments (1) $ 80,604 $ 4,185 $ 18,639 $ 18,791 $ 38,989 Operating lease commitments not yet commenced (2) 61,884 1,971 9,777 10,866 39,270 Other commitments (3) 90,953 45,153 45,800 — — Total contractual obligations $ 233,441 $ 51,309 $ 74,216 $ 29,657 $ 78,259 ________________ (1) Consists of future non-cancelable minimum rental payments under operating lease obligations, excluding short-term leases.
Contractual Obligations The following table summarizes our contractual obligations and commitments as of December 31, 2025: Payments Due by Period Total Less than 1 Year 1-3 Years 3-5 Years More than 5 years Operating lease commitments (1) $ 137,818 $ 13,931 $ 30,575 $ 29,270 $ 64,042 Other commitments (2) 44,377 44,377 — — — Total contractual obligations $ 182,195 $ 58,308 $ 30,575 $ 29,270 $ 64,042 ________________ (1) Consists of future non-cancelable minimum rental payments under operating lease obligations, excluding short-term leases.
(3) 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). (4) Represents proceeds from a sale of capitalized software, which is included within Other (expense) income, net within our Consolidated Statements of Operations and Comprehensive Income (Loss).
Year Ended December 31, (In thousands) 2025 2024 Transaction costs General and administrative 1,338 774 Integration costs Research and development $ 2,798 $ — Sales and marketing 133 — General and administrative 578 — Total Integration 3,509 0 Total transaction and integration costs $ 4,847 $ 774 (4) 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.
We had approximately 40.5 million and 26.9 million DAUs for the three months ended December 31, 2024 and 2023, respectively, representing an increase of 51% from the prior year period. The DAU / MAU ratio, which we believe is an indicator of user engagement, increased to 34.7% from 30.4% a year ago.
We had approximately 52.7 million and 40.5 million DAUs for the three months ended December 31, 2025 and 2024, respectively, representing an increase of 30% from the prior year period, driven largely by an increase in retention of current users supported by modest growth of new and reengaged users.
Three Months Ended December 31, (In millions) 2024 2023 Operating Metrics Monthly active users (MAUs) 116.7 88.4 Daily active users (DAUs) 40.5 26.9 Paid subscribers (at period end) 9.5 6.6 Year Ended December 31, (In thousands) 2024 2023 Operating Metrics Subscription bookings $ 730,737 $ 495,497 Total bookings $ 870,601 $ 622,181 Non-GAAP Financial Measures Net income (GAAP) $ 88,574 $ 16,067 Adjusted EBITDA $ 191,942 $ 93,678 Net cash provided by operating activities (GAAP) $ 285,513 $ 153,614 Free cash flow $ 274,937 $ 144,273 63 Table of Contents Operating Metrics Monthly active users (MAUs).
Three Months Ended December 31, (In millions) 2025 2024 Operating Metrics Monthly active users (MAUs) 133.1 116.7 Daily active users (DAUs) 52.7 40.5 Paid subscribers (at period end) 12.2 9.5 Year Ended December 31, (In thousands) 2025 2024 Operating Metrics Subscription bookings $ 996,268 $ 730,737 Total bookings $ 1,158,425 $ 870,601 Non-GAAP Financial Measures Net income (GAAP) (1) $ 414,065 $ 88,574 Adjusted EBITDA $ 305,878 $ 191,942 Net cash provided by operating activities (GAAP) $ 387,823 $ 285,513 Free cash flow (2) $ 360,424 $ 264,373 ________________ (1) During the year ended December 31, 2025, the Company released the valuation allowance previously recorded against its federal and state deferred tax assets, resulting in a one-time income-tax benefit of $256.7 million. 60 Table of Contents (2) The prior period has been recast to conform to current period presentation of free cash flow.
Cost of Revenues and Gross Margin. Total gross margin decreased slightly to 72.8% from 73.2% during the years ended December 31, 2024 and 2023. This was due to lower advertising gross margin, partially offset by an increase in subscription revenue as a percentage of total revenue.
Cost of Revenues and Gross Margin. Total gross margin decreased to 72.2% from 72.8% during the years ended December 31, 2025 and 2024. The decrease was primarily attributable to both a decline in subscription gross margin, reflecting increased AI costs used in features like Video Call, and a shift in revenue mix toward advertising, which carries lower margins than subscriptions.
Additionally, other revenue increased by $4.4 million from Duolingo English Test revenue, which was driven by increases in the average revenue per test. 71 Table of Contents The following table provides the changes in revenues by product type: Year Ended December 31, (in thousands) 2024 2023 Change % Change Subscription $ 607,531 $ 404,684 $ 202,847 50 Other (1) 140,493 126,425 14,068 11 Total revenues $ 748,024 $ 531,109 $ 216,915 41 ________________ (1) Other revenue is comprised mainly of Advertising, Duolingo English Test, and In-App Purchases.
The main drivers of the increases were: • Subscription revenue increased $265.9 million, or 44%, to $873.4 million during the year ended December 31, 2025, primarily due to an increase in the average number of paid subscribers during the period; • Other revenue increased $23.7 million, or 17%, to $164.1 million during the year ended December 31, 2025, primarily due to increased advertising revenue, resulting from an increase in DAUs, which resulted in increased advertisements served. 68 Table of Contents The following table provides the changes in revenues by product type: Year Ended December 31, (in thousands) 2025 2024 Change % Change Subscription $ 873,442 $ 607,531 $ 265,911 44 Other (1) 164,147 140,493 23,654 17 Total revenues $ 1,037,589 $ 748,024 $ 289,565 39 ________________ (1) Other revenue is comprised mainly of Advertising, Duolingo English Test, and IAPs.
Research and development expense increased by $40.9 million, or 21%, to $235.3 million during the year ended December 31, 2024 from $194.4 million during the year ended December 31, 2023. The increase was mainly due to: • Increased net personnel costs of $39.5 million, driven primarily by the growth in headcount.
Research and development expense increased by $71.0 million, or 30%, to $306.3 million during the year ended December 31, 2025 from $235.3 million during the year ended December 31, 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeCertain 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. Our operating expenses are denominated in the currencies of the countries in which our operations are located, which are primarily in the U.S., China and Germany.
Biggest changeCertain 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.
As of December 31, 2024, a hypothetical 10% relative change in interest rates would not have a material impact on our Consolidated Financial Statements. Foreign Currency Exchange Risk Our reporting currency and the functional currency of our wholly owned foreign subsidiaries is the U.S. dollar.
As of December 31, 2025, a hypothetical 10% relative change in interest rates would not have a material impact on our Consolidated Financial Statements. Foreign Currency Exchange Risk Our reporting currency and the functional currency of our wholly owned foreign subsidiaries is the U.S. dollar.
If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition or results of operations. 78 Table of Contents
If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition or results of operations. 75 Table of Contents
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk As of December 31, 2024, we had $712.4 million of cash equivalents invested in money market funds and $190.1 million of investments mainly in corporate debt securities, U.S. Treasury securities, certificates of deposit, and commercial paper.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk As of December 31, 2025, we had $880.5 million of cash equivalents invested in money market funds and commercial paper and $239.2 million of investments mainly in corporate debt securities, U.S. Treasury securities, asset-backed securities and commercial paper.
Added
Our operating expenses are denominated in the currencies of the countries in which our operations are located, which are primarily in the U.S., China, the United Kingdom and Germany.

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