Duolingo(US:DUOL) Guohai Securities·2025-08-27 09:16Investment Rating - The report maintains a "Buy" rating for the company [1] Core Insights - The company has shown significant growth in revenue and profit margins, leading to an upward revision of its full-year revenue guidance [6][7] - User engagement metrics have improved, with a notable increase in daily active users (DAU) and monthly active users (MAU) [5][7] - The company is expanding its market presence, particularly in China, and has successfully collaborated with local brands [7] Financial Performance - In Q2 2025, the company achieved revenue of $252 million, a year-over-year increase of 41.46%, exceeding Bloomberg consensus estimates by 4.84% [6] - Subscription revenue reached $211 million, growing 46.40% year-over-year, attributed to increased market penetration and successful marketing strategies in China [6] - Gross profit for Q2 2025 was $183 million, with a gross margin of 72.38%, slightly down year-over-year but up sequentially [6] - Adjusted EBITDA for Q2 2025 was $79 million, a year-over-year increase of 63.5%, surpassing previous guidance by 27.7% [6] - The company has raised its revenue guidance for Q3 2025 to between $257 million and $261 million, with full-year revenue expectations set at $1.011 billion to $1.019 billion [6] User Engagement and Market Expansion - DAU reached 48 million, up 2.36% quarter-over-quarter and 39.9% year-over-year, while MAU was 128 million, down 1.46% quarter-over-quarter but up 23.84% year-over-year [5] - The user engagement rate (DAU/MAU) improved to 37.18%, indicating stronger user retention [7] - The company is introducing new features to enhance user experience and engagement, such as the "Energy" system to replace the previous "Heart" system [7] - The collaboration with Luckin Coffee in China has generated significant interest, with over 8.4 million views on social media related to the partnership [7] Earnings Forecast - The company is projected to achieve revenues of $1.016 billion, $1.289 billion, and $1.552 billion for the years 2025, 2026, and 2027, respectively [8] - Estimated net profits for the same years are $154 million, $228 million, and $306 million, with corresponding P/E ratios of 94, 64, and 47 [8][9]