Duolingo(DUOL 13.81%) reported fiscal Q2 2025 results on Aug. 6, 2025, achieving 40% year-over-year daily active user (DAU) growth, record profitability, and another increase in full-year fiscal 2025 guidance.

Key operational updates included product advancements, accelerating international momentum, evolving monetization strategies, and expanding non-language verticals.

The following analysis highlights specific management commentary on conversion drivers, cost structure, and geographic trends affecting the long-term investment thesis. The company’s fiscal year ends Dec. 31.

Monetization initiatives lift ARPU and subscriber mix

Average revenue per user (ARPU) rose approximately 6% year-over-year, mainly from a shift in plan mix to higher-priced family and Max plans, with limited impact from recent Duolingo Super subscription price increases. Management is actively testing methods to improve pricing and conversion across tiers while factoring in mix, local purchasing power, and the impact of friction introduced in the web-based (non-App Store) checkout flows for iOS users.

"We ran some pricing experiments earlier in the year. The way our pricing experiments work, like I just mentioned, is we're testing volume price and trying to calculate and get a sense of LTV, although it's not perfect. They were beneficial to bookings. They increased bookings. So we raised prices, and that had a small impact. It wasn't a very large part of the movement you saw in Q2. Our ARPU has gone up really nicely. I think Q2 ARPU was up around 5% or 6%. Most of that didn't come from this price change. It either came from FX or plan mix shift to higher price plans. Again, I can't control FX, but what we can try to control is more family plan and Max over time. That will be the larger driver of ARPU, not price point increases."
-- Matt Skaruppa, CFO

Expansion of premium offerings is driving higher per-user monetization, underpinning Duolingo’s margin leverage and offering resilience against app store commission pressures as direct billing gains scale over time.

International expansion accelerates, with China emerging as fastest-growing market

The company highlighted China as its fastest-growing region, fueled by a large-scale brand partnership with Luckin Coffee and robust localized product perceptions, despite Duolingo Max (the highest-priced AI-driven subscription tier) remaining unavailable due to regulatory delays on large language model (LLM) approvals. The region showed the highest propensity among English learners to adopt new paid features.

"Regarding China, we feel really good about China. It's our fastest-growing market. We've been growing a lot. We had an incredible partnership this time around with Luckin Coffee, where for a couple of weeks, a lot of their stores were decorated with Duolingo and had Duolingo cups, and there were drinks named after Duolingo. That was a pretty big boon for us. Our product feels really good in China. The one thing is we do not have Max in China yet. Because of regulations, we cannot use LLMs other than local LLMs. After you choose a local LLM, which we have, you need approval from the government, and that's completely outside of our control. We don't have approval from the government yet, but at some point soon, we'll have Max. I cannot give you a timeline on that because I myself don't know it."
-- Luis von Ahn, CEO

Duolingo’s growing footprint and localized activation in China provide access to a vast total addressable market (TAM), and eventual regulatory clearance for Max could unlock a meaningful new premium revenue stream in the region.

Core engagement features drive retention and revenue, despite user pushback

The rollout of the new "energy" system (a gamified pacing mechanic replacing "hearts") increased daily active users, median time spent, and both ad and conversion-based revenues among free users, according to initial results from a staggered platform rollout, as discussed on the fiscal Q2 2025 earnings call. Management acknowledged churn aversion among high-frequency free cohorts but prioritized cohort-level behavior and metrics over vocal minority sentiment as rollout expands.

"What we have seen when we're rolling this out is that this increases revenue or bookings on both. It increases daily active users, and it increases the median time spent using the app. We're really happy with this. We've been rolling it out. You'll see us, it's taking some time to roll out, and it'll continue taking some time. But my sense is that significantly before the end of the year, we will have switched all of our users from hearts to energy. All of our free users from hearts to energy. This does not affect paid users, really."
-- Luis von Ahn, CEO

Retention-oriented product changes that directly boost key monetization and engagement metrics demonstrate Duolingo’s ability to optimize its freemium funnel and maximize lifetime value, even amid limited initial user resistance.

Looking Ahead

Management raised full-year revenue and profitability guidance, citing "record profitability," robust subscriber mix, and confidence in continued ARPU gains from plan mix and FX. DAU year-over-year growth is not expected to significantly deviate from the fiscal Q2 2025 rate of 40% in the next quarter. Management expects the energy mechanic rollout to be essentially complete for all free users a couple of months before year-end 2025, though no definitive timeline was provided.

No explicit quantitative bookings or margin targets were disclosed beyond these ranges and ongoing guidance practices outlined throughout the call.