Duolingo operating model
Duolingo from its 10-Ks: subscribers, revenue per subscriber, margins, cash, value. Rebuild a company’s own non-GAAP measures from its GAAP lines, model a subscription business as subscribers times what each pays, carry it five years in three labelled cases, and read what the forecast is worth at a chosen discount rate without mistaking it for a view on the shares.
Built in: Equity research and hedge funds, Product and technology, Venture capital, Investment banking
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: duolingo operating model.Updated 24 October 2026
Built for Model the business: Duolingo, from its 10-Ks, where the filings, the arithmetic and the assumptions are set out.
Who builds it, and for whatThe model an equity analyst, a growth investor or a product finance team builds for a consumer subscription business from its filings: the filed history on one sheet, the arithmetic on another, the judgements on a third, so a reader can see at every row whether a number was reported, derived or assumed. Duolingo is the subject because its filings disclose the operating metrics the model needs and its 2025 results carry a one-time tax item that has to be separated from earning power.
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| A | B | C | D | E | F | G | H | I | J | K | L | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1 | Reported | |||||||||||
| 2 | $m unless stated, as filed. Blue cells are typed from the filings named on the Sources sheet; nothing here is adjusted. | |||||||||||
| 4 | $m | Unit | FY2023A | FY2024A | FY2025A | FY2026E | FY2027E | FY2028E | FY2029E | FY2030E | Notes | |
| 5 | Revenue by type (Form 10-K, note 2, disaggregation of revenue) | |||||||||||
| 6 | Subscription revenue | $m | 404.7 | 607.5 | 873.4 | Super Duolingo, Max and Family subscriptions. FY2025 10-K, note 2. | ||||||
| 7 | Advertising revenue | $m | 49.9 | 54.9 | 79.7 | FY2025 10-K, note 2. | ||||||
| 8 | Duolingo English Test revenue | $m | 41.2 | 45.6 | 42.0 | FY2025 10-K, note 2. | ||||||
| 9 | In-app purchases | $m | 34.7 | 38.7 | 40.5 | FY2025 10-K, note 2. | ||||||
| 10 | Other | $m | 0.7 | 1.3 | 1.9 | FY2025 10-K, note 2. | ||||||
| 11 | Total revenues | $m | 531.1 | 748.0 | 1,037.6 | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax. | ||||||
| 13 | Costs and profit (consolidated statements of operations) | |||||||||||
| 14 | Cost of revenues | $m | 142.1 | 203.6 | 288.1 | us-gaap:CostOfRevenue. Includes the app stores’ fees, hosting and AI costs. | ||||||
| 15 | Research and development | $m | 194.4 | 235.3 | 306.3 | us-gaap:ResearchAndDevelopmentExpense. | ||||||
| 16 | Sales and marketing | $m | 75.8 | 90.5 | 125.7 | us-gaap:SellingAndMarketingExpense. | ||||||
| 17 | General and administrative | $m | 132.1 | 156.0 | 181.9 | us-gaap:GeneralAndAdministrativeExpense. | ||||||
| 18 | Income (loss) from operations | $m | (13.3) | 62.6 | 135.6 | us-gaap:OperatingIncomeLoss. | ||||||
| 19 | Other income (expense), net | $m | (0.1) | (3.0) | 1.6 | us-gaap:NonoperatingIncomeExpense. | ||||||
| 20 | Interest income | $m | 31.1 | 42.7 | 45.2 | Statement of operations line. | ||||||
| 21 | (Benefit from) provision for income taxes | $m | 1.7 | 13.7 | (231.7) | us-gaap:IncomeTaxExpenseBenefit. FY2025 includes the release of the valuation allowance on deferred tax assets. | ||||||
| 22 | Of which: one-time benefit from the valuation allowance release | $m | - | - | 256.7 | FY2025 10-K, Key Operating Metrics, footnote 1. | ||||||
| 23 | Net income | $m | 16.1 | 88.6 | 414.1 | us-gaap:NetIncomeLoss. | ||||||
| 24 | Diluted earnings per share | $ per share | 0.35 | 1.88 | 8.57 | us-gaap:EarningsPerShareDiluted. | ||||||
| 25 | Weighted average diluted shares | m shares | 46.52 | 47.10 | 48.31 | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding. | ||||||
| 27 | Non-cash charges and the adjusted EBITDA add-backs | |||||||||||
| 28 | Depreciation and amortisation | $m | 7.1 | 10.9 | 14.4 | us-gaap:DepreciationDepletionAndAmortization. | ||||||
| 29 | Stock-based compensation expense (cash flow statement) | $m | 95.2 | 110.5 | 137.4 | us-gaap:ShareBasedCompensation. | ||||||
| 30 | Stock-based compensation and related expenses (adjusted EBITDA add-back) | $m | 120.3 | 148.6 | Adjusted EBITDA reconciliation; includes employer taxes on awards. Not given on a comparable basis for FY2023. | |||||||
| 31 | Acquisition costs, earn-outs and impairments added back | $m | 1.2 | 5.7 | FY2024: 0.774 + 0.200 + 0.238. FY2025: 4.847 + 0.818 + 0. | |||||||
| 32 | Adjusted EBITDA, as reported | $m | 93.7 | 191.9 | 305.9 | Non-GAAP. FY2025 10-K, Key Operating Metrics; FY2023 from the FY2024 10-K. | ||||||
| 34 | Cash flow (consolidated statements of cash flows) | |||||||||||
| 35 | Net cash provided by operating activities | $m | 153.6 | 285.5 | 387.8 | us-gaap:NetCashProvidedByUsedInOperatingActivities. | ||||||
| 36 | Purchases of property and equipment | $m | 3.2 | 12.1 | 18.1 | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment. | ||||||
| 37 | Capitalised software development costs and intangibles | $m | 10.4 | 9.0 | 9.3 | FY2024 and FY2025 from the free cash flow reconciliation; FY2023 us-gaap:CapitalizedComputerSoftwareAdditions. | ||||||
| 38 | Free cash flow, as reported (current definition) | $m | 264.4 | 360.4 | Non-GAAP: operating cash flow less capitalised software and property purchases. Redefined in 2025; FY2023 not restated. | |||||||
| 39 | Change in deferred revenue (cash flow statement) | $m | 91.6 | 123.7 | 123.3 | Operating cash flow working capital line. | ||||||
| 41 | Balance sheet at 31 December | |||||||||||
| 42 | Cash and cash equivalents | $m | 747.6 | 785.8 | 1,036.4 | us-gaap:CashAndCashEquivalentsAtCarryingValue. No debt. | ||||||
| 43 | Deferred revenues (current) | $m | 249.2 | 372.9 | 496.2 | us-gaap:ContractWithCustomerLiabilityCurrent. | ||||||
| 44 | Operating lease liabilities | $m | 25.0 | 57.2 | 101.0 | us-gaap:OperatingLeaseLiability, current and non-current. | ||||||
| 45 | Stockholders’ equity | $m | 655.5 | 824.6 | 1,347.0 | us-gaap:StockholdersEquity. | ||||||
| 47 | Key operating metrics (MD&A) | |||||||||||
| 48 | Monthly active users, fourth-quarter average | m users | 88.40 | 116.70 | 133.10 | Average of the three months to 31 December. | ||||||
| 49 | Daily active users, fourth-quarter average | m users | 26.90 | 40.50 | 52.70 | Item 7, Key Operating Metrics; FY2023 from the FY2024 10-K. | ||||||
| 50 | Paid subscribers at period end | m subscribers | 6.60 | 9.50 | 12.20 | Item 7, Key Operating Metrics; FY2023 from the FY2024 10-K. | ||||||
| 51 | Subscription bookings | $m | 495.5 | 730.7 | 996.3 | Amounts received for subscriptions in the year, before deferral. | ||||||
| 52 | Total bookings | $m | 622.2 | 870.6 | 1,158.4 | Subscription bookings plus advertising, the English Test and in-app purchases. | ||||||
Select a cell to see its row, its schedule and the type of cell. Font colours: blue for inputs, black for formulas, green for links to other sheets. Scroll sideways to see every period.
Download
Duolingo operating model: the workbook
Excel workbook with working formulas, no macros and no external links. Work with it above first; it is the same model as the preview.
- The worked model
- The workbook above as an Excel file: 9 sheets and 551 live formulas, all 7 schedules built and linked, every check reading zero. Change an input in Excel and the whole model moves, so you can rebuild a step and compare.
- The starter
- The same inputs and layout with the revenue build left blank for you to build, each blank cell marked. Free with any account. It has no worked answer to check yourself against; the worked model is that answer.
What the base case says
- FY2025A revenue
- $1,037.6m
- FY2025A adjusted EBITDA margin
- 29.5%
- FY2025A free cash flow less SBC
- $223.0m
- FY2030E revenue, selected case
- $2,505.9m
- FY2030E adjusted EBITDA margin
- 31.4%
- Value per share the forecast implies
- 163.50
Read from the workbook as served, every input at its default. Periods: FY2023A, FY2024A, FY2025A, FY2026E, FY2027E, FY2028E, FY2029E, FY2030E. Built from Duolingo, Inc.’s Forms 10-K, cited on the Sources sheet; the forecast, the discount rate and the terminal assumptions are editorial judgements, labelled on the Forecast sheet, and move with whatever you type in.
What this model is
An operating model of Duolingo, Inc., the language-learning app, built from its filed results for 2023 to 2025 and carried five years forward in three editorial cases.
The Reported sheet holds only what the company filed: revenue by type, the cost lines, profit, cash flow, the balance sheet and the key operating metrics, each with its filing and XBRL tag. The Derived sheet does arithmetic on them, including the rebuild of the company’s own adjusted EBITDA and free cash flow from GAAP lines, so a reader can see what each add-back is worth. The Forecast sheet is where judgement enters, and says so on every row.
Uses: seeing how a consumer subscription business is modelled (subscribers times what each pays, not a growth rate on revenue); reading a non-GAAP measure back to its GAAP parts; separating a one-time tax release from earning power; and testing how far a value moves with the discount rate, growth and the treatment of stock-based compensation.
Seats: Equity research and hedge funds, Product and technology, Venture capital, Investment banking.
Careers that do this work: growth equity, venture capital, equity research, corp dev / m&a, bizops / strategy & ops.
How the schedules connect
Every row in the workbook is tagged with the schedule it belongs to; the inspector above shows the tag when you click a row. These are the schedules this model is made of and where each one lives.
Revenue build
Where the top line comes from
Reported, rows 6–11 · Derived, rows 6–9 · Forecast, rows 11–22 · P&L & Cash Flow, rows 6–12 · P&L & Cash Flow, rows 48–53
Operating costs and margins
Cost of sales, opex, EBITDA
Reported, rows 14–25 · Derived, rows 12–21 · Forecast, rows 25–44 · P&L & Cash Flow, rows 15–26
SaaS profit and loss
Gross margin, sales and marketing, R&D, G&A, cash
Reported, rows 28–32 · Derived, rows 24–35 · Derived, rows 47–49 · P&L & Cash Flow, rows 29–35
Unit economics
CAC, payback, LTV, retention, magic number, burn multiple
Reported, rows 48–52 · Derived, rows 38–44
Cash flow statement
Indirect method, closing on balance-sheet cash
Reported, rows 35–39 · Reported, rows 42–45 · Forecast, rows 47–53 · P&L & Cash Flow, rows 38–45
Discounting and terminal value
Discount factors, two terminal methods, reconciled
Forecast, rows 56–58 · Valuation, rows 6–8 · Valuation, rows 11–23 · Valuation, rows 26–28
Sensitivity tables
Two assumptions at once, without a data table
Sensitivity, rows 5–7 · Sensitivity, rows 10–15 · Sensitivity, rows 18–25
What you should be able to explain
- Why a consumer subscription business is modelled from subscribers and revenue per subscriber rather than a growth rate on revenue, and why the average subscriber count, not the period-end count, earns the revenue.
- How adjusted EBITDA and free cash flow are rebuilt from net income, tax, interest, D&A and stock-based compensation, and what each add-back is worth.
- Why a valuation allowance release lifts net income without lifting earning power, and how to read the year without it.
- How bookings, deferred revenue and revenue relate in a business paid in advance, and why the bookings gap and the change in deferred revenue nearly agree.
- What the value per share moves with: the discount rate, terminal growth, the cost fades, and whether stock-based compensation is a cost or an add-back.
What a reviewer looks for
- Growing revenue at a rate with no subscriber count or price behind it, so the forecast cannot be argued with.
- Taking adjusted EBITDA as the company presents it without rebuilding it, so the add-backs are never seen.
- Treating FY2025 net income of $414m as the run rate when $257m of it is a one-time tax benefit.
- Adding back stock-based compensation in a DCF and presenting the result as the value, rather than as a memo beside the value with it as a cost.
- Mixing filed figures and assumptions on one sheet, so a reader cannot tell which cells came from the 10-K.
Conventions this workbook uses
Stated on the cover sheet too. A model is only as trustworthy as the decisions it tells you it made.
- Three kinds of number, on three sheets: Reported (filed, blue, cited), Derived (arithmetic on Reported, no assumption), Forecast (editorial, blue, labelled). Every other sheet is formulas over them.
- Subscription revenue is average paid subscribers times subscription revenue per average subscriber. Subscribers are a period-end count, averaged with the prior year; the revenue per subscriber is recognised revenue, not bookings.
- Cost ratios fade linearly from the FY2025A ratio to the case’s FY2030E target over the years set on the Forecast sheet. Stock-based compensation sits inside the cost lines and is shown separately for the add-back and the valuation.
- Adjusted EBITDA in filed years is the company’s own figure, which also adds back acquisition items and employer taxes on awards; in forecast years it is operating income plus D&A plus stock-based compensation.
- Operating cash flow in forecast years is net income plus non-cash charges plus the change in deferred revenue less other working capital; filed years tie to the reported figure through a balancing line that carries the deferred tax release.
- The valuation discounts free cash flow after stock-based compensation at 31 December 2025, with a perpetuity-growth terminal value and an exit multiple as a cross-check. Cash is added and operating leases deducted; there is no financial debt. The value per share is what the inputs imply and nothing more.
- The FY2025 net income includes a $256.7m one-time tax benefit from the release of the valuation allowance on deferred tax assets; the Derived sheet shows net income without it.
Build it yourself
The starter workbook
The revenue build has been cleared: paid subscribers, the average, revenue per subscriber, subscription and other revenue and the total on the P&L & Cash Flow sheet, in every forecast year. Rebuild them from the Forecast sheet’s selected drivers so the filed years still tie to Reported and the forecast years carry through to the valuation.
Blanks: Revenue build. Free with any account. Compare with the worked model when you are done: download above.
The path around this model
Understand it, drill it, read the build, then apply it to a real company.
Build · Lab · ~12 min
Unit Economics
Build an LTV:CAC you could defend under questioning, and answer payback as its own question.
Build · Lab · ~12 min
Product Metrics Tree
Name the right north star for a product shape, and the guardrail your change would break.
Build · Lab · ~15 min
DCF Builder
Build a DCF by hand from revenue to a share price, know how much of it sits in the terminal value, and name the one assumption the answer hinges on.
Read · Guide · 11 min
SaaS Operating Models: ARR, Sales Capacity, Billings and the Metrics That Follow
Read · Guide · 16 min
How to Build a DCF Model: From Operating Assumptions to a Defensible Valuation
Read · Guide · 13 min
How to Build a Three-Statement Model That Actually Balances
Apply · Skill
Model Audit
Find the errors in a financial model before someone senior does.
Apply · Skill
Company Profile
Build a banker-grade one-pager on any company, fast.
Vocabulary: Deferred Revenue, Free Cash Flow (FCF), Stock-Based Compensation (SBC), GAAP vs. Non-GAAP, Terminal Value, Gross Margin.
Questions about this model
Which figures in this model are the company’s and which are the page’s?
Every figure on the Reported sheet is the company’s, from the FY2025 and FY2024 Forms 10-K, cited on the Sources sheet with its note and XBRL tag. Every figure on the Derived sheet is arithmetic on those. Every figure on the Forecast sheet is a judgement of this page: subscriber growth, revenue per subscriber, other revenue, margins, the cost fades, stock-based compensation, capex, tax, dilution, the discount rate and the terminal assumptions. The company publishes guidance; none of it is used.
Why does the model rebuild adjusted EBITDA and free cash flow instead of taking them as reported?
Because the reconciliation is the point. Adjusted EBITDA adds back stock-based compensation and related employer taxes, acquisition costs and earn-outs to a GAAP figure that already includes them; rebuilding it from net income shows that in 2025 the add-backs were worth about $155m of the $306m. Free cash flow is operating cash flow less property purchases and capitalised software; rebuilding it shows the definition changed in 2025, so the FY2023 figure the company once reported is not comparable. The Checks sheet proves both rebuilds tie to the reported figures to the thousand dollars.
What is the value per share on the Valuation sheet?
What the selected forecast is worth at the discount rate and terminal growth on the Forecast sheet, with stock-based compensation treated as a cost, cash added and operating leases deducted, divided by the diluted shares. It is a consequence of the inputs and moves with every one of them; the Sensitivity sheet shows how far. It is not a target, a fair value or a recommendation, and the page does not compare it with the share price.
Why are the cases labelled editorial rather than bull and bear?
Because they are the page’s judgements, not the company’s or the market’s. The base case carries subscriber growth down from 28% to 10% over five years with 3% a year more revenue per subscriber; the downside halves the growth and holds the price; the upside keeps growth higher for longer. Each is a set of numbers a reader can replace, and the model says on every row which numbers those are.
What does it cost?
Nothing to preview: the whole workbook is on this page, and a free account works with it online, every formula included. Every starter workbook downloads with a free account. L3VLUP Plus ($4.99/month) keeps one worked model each billing month, yours for good, and L3VLUP Pro ($25/month) keeps every one.