Duolingo Inc. (DUOL) stock surged in Wednesday's premarket trading after the company reported third-quarter results and raised its full-year revenue outlook.

Daily active users (DAUs) grew 29% year over year, accelerating from 23% growth in the second quarter. The company also issued a fourth-quarter revenue forecast above Wall Street estimates.

Duolingo Beats Revenue Estimates, Misses Earnings

Duolingo reported adjusted earnings of 54 cents per share, missing the analyst estimate of 57 cents.

Earnings faced a difficult year-ago comparison, when diluted EPS reached $5.95, boosted by a one-time $222.7 million tax benefit.

The company recorded an $11.4 million performance bonus accrual tied to its fourth-quarter user growth goal. It expects to pay the full bonus in early 2027.

Quarterly revenue reached $309.01 million, beating Wall Street's estimate of $303.23 million. However, paid subscribers fell slightly short of expectations.

Management credited stronger user retention and product improvements for the growth. Partnerships with Brawl Stars and Eggy Party attracted millions of users.

AI Features and New Products Drive Engagement

Duolingo plans to focus more on monetization in 2027 while maintaining its emphasis on user growth and learning quality.

The company is testing longer free trials, in-app purchases, improved advertising and new subscription features.

AI-powered Video Call costs dropped from 30 cents to less than 1 cent per call. The reduction could help Duolingo expand the feature's reach roughly tenfold through its Super subscription.

Meanwhile, its chess product reached 10 million daily active users. Paid marketing spending exceeded $100 million.

Management expects AI inference costs associated with free users to total only a few million dollars in 2027.

Duolingo Raises 2026 Revenue Outlook

Duolingo forecast fourth-quarter revenue of $322 million, above Wall Street's estimate of $314.55 million.

The company expects bookings growth of 13%, revenue growth of 14% and adjusted EBITDA of about $84 million. Its projected adjusted EBITDA margin is 26.1%.

Duolingo raised its full-year revenue forecast to $1.221 billion from about $1.207 billion, topping Wall Street's estimate of approximately $1.208 billion.

For 2026, management expects bookings growth of 12%, revenue growth of 18% and an adjusted EBITDA margin of 26.5%.

The company expects fourth-quarter user growth to remain near third-quarter levels. It plans to issue its 2027 outlook in February.

DUOL Price Action: Duolingo shares were up 14.06% at $146.00 during premarket trading on Wednesday, according to market data.