Investment Rating - The report maintains a "Recommended" investment rating for the industry [2]. Core Insights - Duolingo continues to demonstrate strong revenue and profit growth, driven by subscription performance and product innovations, with a focus on AI applications enhancing profitability [12]. - The company reported Q2 2025 revenue of $252 million, a 41% year-over-year increase, with net profit soaring 84% to $44.8 million [5][7]. - The introduction of new features like the "Energy" system and AI-driven functionalities is expected to further enhance user engagement and conversion rates [10][11]. Revenue and Profit Performance - Duolingo's Q2 2025 revenue reached $252 million, reflecting a 41% year-over-year growth, with subscription revenue increasing by 46% to $211 million, accounting for 83.7% of total revenue [7][8]. - The gross margin for the quarter was 72.4%, with a net profit of $44.8 million, marking a significant increase of 84% year-over-year [5][11]. - Adjusted EBITDA reached $78.7 million, up 64% year-over-year, with a profit margin of 31.2%, an increase of 4 percentage points [7][11]. User Growth and Engagement - Duolingo's monthly active users (MAU) reached 128 million, a 24% year-over-year increase, while daily active users (DAU) grew by 40% to 47.7 million [9][10]. - The number of paid users increased by 37% to 10.9 million, with a paid penetration rate of 9.0% [9]. Product Innovation - The launch of the "Energy" system has replaced the previous penalty mechanism, leading to improved user engagement and subscription conversion rates [10]. - AI applications are being integrated into the platform, enhancing user experience and learning outcomes, particularly through features like Video Call in the Max subscription [10][11]. Investment Recommendations - The report suggests that Duolingo is positioned for sustained profit margin improvement and cash flow enhancement, driven by its unique "AI + Education" advantage [12].