Duolingo's $11.4 million of staff bonuses ride on daily users a lawsuit says were cracking; they grew 29%
Daily users grew 29% to 64.9 million, a second straight quarter of acceleration, in Duolingo's first report since a securities suit built on its own A/B tests alleged that paywall friction was eroding engagement. Revenue grew 14%, and an $11.4 million staff bonus now rides on Q4.
Vincent Jiang · 3 min read
A bonus that pays only on fourth-quarter users
Duolingo's+4.98% — Duolingo, up 4.98 percent today third-quarter accounts carry $11.4 million for a company-wide bonus payable only if fourth-quarter daily-active-user growth reaches 25%, a cost management says it had previously kept out of its outlook 1. That is payroll money staked on the number a securities class action says was quietly cracking.
The suit, filed in October by shareholder-rights firm Levi & Korsinsky, leans on Duolingo's own A/B tests, the split-run experiments that show one app change to two user groups at once. Plaintiffs say those tests showed unskippable ads and the Energy paywall draining free learners while executives called user growth the priority 23. The Inference walked through the tests on October 12.
The user line held and rose
The first hard reading since the suit landed above the bar. Daily users rose 29% year over year to 64.9 million, a second straight quarter of acceleration, from 23% in Q2 and 21% in Q1, with growth in every region and every subject 14. Co-founder and chief executive Luis von Ahn called it proof the pivot to "teaching better and user growth" is working 5. The bonus itself turns on Q4, not tonight 5.
Revenue of $309 million grew 14%, ahead of the $303 million consensus, and earnings of 58 cents a share cleared a 56-cent estimate 6. The 12% some earnings roundups printed is the letter's bookings growth, bookings being cash collected up front and recognized as revenue over a subscription's life 1. The stock, down 5.4% at the close, jumped 11.9% after hours 6.
One quarter cannot reach the suit
The class period, the window of stock purchases the case covers, closed on February 26, 2026 3. Inside it, user growth slid from 49% early in 2025 to 36% in November and a preliminary 30% in January 47, disclosures that cut the stock 61% 2. The complaint names von Ahn and former chief financial officer Matthew Skaruppa, who resigned January 8 2.
And the rebound was bought by abandoning the conduct under attack: in February, management surrendered more than $50 million of planned 2026 bookings to strip friction out of the free app 4. On the plaintiffs' theory, a recovery purchased by removing the paywalls corroborates the tests rather than refuting them.
Users grew at twice the speed of money
What the quarter does test is the exchange rate. Users grew 29%, operating expenses 24%, paid subscribers and revenue 14% each, and bookings 12%; adjusted EBITDA margin fell to 25.5% from 29.5% a year earlier 1. The plaintiffs now have an accelerating line to explain; the bulls have 14% revenue growth against 29% user growth 1.
Users grew 29% while bookings grew 12% and revenue 14%
Data
| Value | |
|---|---|
| Daily users | 29% |
| Operating expenses | 24% |
| Paid subscribers | 14% |
| Revenue | 14% |
| Bookings | 12% |
User growth bottomed at 21% and climbed back to 29%, above the bonus bar
- Year-over-year DAU growth
- Estimate
Data
| Year-over-year DAU growth | |
|---|---|
| Q3 '25 | 36% |
| Q4 '25 | 30% |
| Q1 '26 | 21% |
| Q2 '26 | 23% |
| Q3 '26 | 29% |
| Q4 '26e (estimate) | 29% |
February settles the bonus and the docket
The letter guides fourth-quarter user growth "similar to Q3" and raised full-year adjusted EBITDA guidance to $323 million, a 26.5% margin 1. December 7, the deadline to apply as lead plaintiff, comes first 23. February then settles both questions at once: whether 25% growth holds and the bonus pays, and whether the re-acceleration survives the return of monetization 5.
Get Applications by email, free
How AI is changing the software people and companies use. In our daily email, every weekday.
