What happened

Shares of Duolingo (DUOL 3.73%) fell 13.3% through 11:25 a.m. ET on Friday even though the language learning app maker reported an earnings beat for its fiscal third quarter.

Analysts had warned that Duolingo might lose as much as $0.55 per share for the quarter, but the company managed to dodge that particular bullet, losing only $0.46 per share instead. Sales for the quarter -- $96.1 million -- also exceeded Street expectations for $95.2 million.  

So what

Relatively speaking, all of the above is good news. Still, there's no getting around the fact that there was precious little profit to be found in Duolingo's earnings release -- which probably explains why the stock is down so much today. Still, the company did have some other promising news to report.

For example, subscription bookings (prepaid subscriptions to its services, for premium accounts) grew 42% year over year, and the number of paying subscribers to this mostly free service grew 68%. Actual revenue not only exceeded analyst expectations slightly but also grew much more than slightly -- up 51% year over year.

Finally, while Duolingo lost money in the quarter, it lost less than half as much money as it did in the year-ago quarter, when losses topped $0.98 per share -- so at least the losses are getting better.

Now what

Probably the best news of all for investors in Duolingo is found on the company's cash-flow statement. It is there that we learn that Duolingo is continuing to generate strong free cash flow, and indeed it has now generated positive cash profits of just under $39 million over the past year.

Granted, at a stock valuation of 86 times free cash flow, Duolingo stock remains far from cheap at present. But if the company can keep growing paying subscribers, bookings, and revenue at the rate it just did in Q3, who is to say this stock can't fly higher after today's fall?