Duolingo(US:DUOL) The Motley Foolยท2025-11-10 09:19Core Insights - Duolingo's business is experiencing rapid growth, with a significant increase in users, revenue, and profits in Q3 2025 [1][8] - Despite a 63% decline in stock price from its peak, the company is seen as an attractive investment opportunity due to its advancements in AI and user engagement strategies [2][3] User Growth and Engagement - Duolingo reported 135.3 million monthly active users in Q3 2025, marking a 20% year-over-year increase [4] - The platform had a record 11.5 million paid subscribers at the end of Q3, representing a 34% increase from the previous year [5] Revenue and Financial Performance - Q3 2025 revenue grew by 41% year-over-year to $271.1 million, exceeding the company's guidance [8] - Net income soared to $292.2 million, largely due to a one-time tax benefit of $245.7 million, while adjusted EBITDA increased by 68% year-over-year to $80 million [9][10] Subscription and AI Features - Duolingo Max, the premium subscription tier, accounted for 9% of the total subscriber base, with bookings doubling year-over-year [6][7] - The introduction of AI-powered features is expected to enhance user experience and drive revenue growth [6][7] Stock Valuation and Market Sentiment - Following a significant stock price drop, Duolingo's price-to-sales (P/S) ratio decreased to 10.6, down from over 30 earlier in the year [12] - The price-to-earnings (P/E) ratio has also fallen from over 240 to around 80, with future earnings estimates suggesting a forward P/E ratio of 23.1 for 2026 [14] Strategic Shift - The CEO announced a strategic shift focusing on user acquisition and improving the learning experience rather than immediate monetization, which has raised concerns among investors [11]