Duolingo, Inc.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except par value amounts)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands, except per share amounts)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

Duolingo, Inc. (the “Company” or “Duolingo”) was formed on August 18, 2011, and the Duolingo App was launched to the general public on June 19, 2012. The Company’s headquarters are located in Pittsburgh, Pennsylvania.

Duolingo is a mobile learning platform, as well as a digital English language proficiency assessment exam. The Company has a freemium business model: the app and the website are accessible free of charge, although Duolingo also offers premium services for a subscription fee. As of the date of this filing, Duolingo offers over 250 total language courses, including Spanish, English, French, German, Italian, Portuguese, Japanese and Chinese. We have locations in the U.S., China, Germany, and the United Kingdom.

Principles of Consolidation—The Unaudited Condensed Consolidated Financial Statements include the accounts of the Company and subsidiaries over which the Company has control. All intercompany transactions and balances have been eliminated.

Basis of Presentation—The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”) from the Company’s accounting records and reflect the consolidated financial position and results of operations for the three months ended March 31, 2026 and 2025. Unless otherwise specified, all dollar amounts (other than per share amounts) are referred to in thousands.

The Unaudited Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such SEC rules. We believe that the disclosures made are adequate to make the information presented not misleading. In our opinion, all adjustments considered necessary for a fair presentation of the financial statements have been included, and all adjustments are of a normal and recurring nature. We applied the accounting policies consistently with those used in the preparation of the Annual Report on Form 10-K in preparing these Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q. These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited financial statements and the notes for the fiscal year ended December 31, 2025 included in the Annual Report on Form 10-K and filed with the SEC.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Principles—The Unaudited Condensed Consolidated Financial Statements and accompanying notes are prepared in accordance with GAAP.

Use of Estimates—The preparation of Unaudited Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Unaudited Condensed Consolidated Financial Statements and accompanying notes. Significant estimates and assumptions reflected in the Unaudited Condensed Consolidated Financial Statements include, but are not limited to, useful lives of property and equipment, valuation of deferred tax assets and liabilities, stock-based compensation, operating lease right-of-use assets and liabilities, capitalization of internally developed software and associated useful lives, contingent liabilities, and valuation of goodwill and intangible assets from acquisitions. Actual results may differ materially from such estimates. Management believes that the estimates, and judgments upon which they rely, are reasonable based upon information available to them at the time that these estimates and judgments are made. To the extent that there are material differences between these estimates and actual results, the Company’s Unaudited Condensed Consolidated Financial Statements will be affected.

Advertising Costs—Advertising costs were approximately $28,142 and $17,535 for the three months ended March 31, 2026 and 2025, respectively, and are included within Sales and marketing in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income.

Income Taxes—The Company’s provision for income taxes is computed by using an estimate of the annual effective tax rate, adjusted for discrete items taken into account in the relevant period, if any. Each quarter, the annual effective income tax rate is recomputed and if there are material changes in the estimate, a cumulative adjustment is made.

Concentration of Credit Risk—The Company’s concentration of credit risk relates to financial institutions holding the Company’s cash and cash equivalents and platforms with significant accounts receivable balances and revenue transactions.

The Company maintains deposits and certificates of deposit with banks which exceed the Federal Deposit Insurance Corporation (“FDIC”) insured limit and money market accounts which are not FDIC insured. Management believes that the financial institutions that hold the Company’s deposits are financially credit worthy and, accordingly, minimal credit risk exists with respect to those balances.

The majority of revenue comes through the subscriptions and advertising streams, and payments are made to Duolingo through service providers. Three service providers, Apple, Google, and Stripe accounted for 66.2%,16.8%, and 11.9%, respectively, of total Accounts receivable as of March 31, 2026 and 62.5%,22.7% and 11.4%, respectively, of total Accounts receivable as of December 31, 2025.

Segment—The Company operates as a single operating segment and derives revenues from customers through time-based subscriptions, in-app advertising placement by third parties, the Duolingo English Test, and in-app purchases of virtual goods (“IAPs”). The Chief Executive Officer, as the chief operating decision maker, evaluates the Company’s performance and allocates resources based on consolidated net income, as presented in the income statement, supplemented by disaggregated revenue details. Significant segment expenses are those that are presented on the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income. The measure of segment assets is reported on the balance sheet as total consolidated assets. Accordingly, the Company has determined that it has a single reportable segment and operating segment structure, and operates asone reporting unit.

Impairment of long-lived assets—The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the estimated undiscounted future cash flows expected to result from the use and eventual disposition of an asset is less than the carrying amount of the asset, an impairment loss is recognized. Measurement of an impairment loss is based on the fair value of the asset. No assets were impaired during the three months ended March 31, 2026 and 2025.

Allowance for Credit Losses—The Company evaluates its cash equivalents, accounts receivable and held-to-maturity marketable securities financial assets for expected credit losses. Expected credit losses represent the portion of the amortized cost basis of a financial asset that an entity does not expect to collect. An allowance for expected credit losses is meant to reflect a risk of loss even if remote, irrespective of the expectation of collection from a particular issuer or debt security. The Company has not historically experienced any credit losses on any of its financial assets.

With respect to cash equivalents and accounts receivable, given consideration of their short maturity, lack of historical losses and the current environment, the Company concluded there is generally no expected credit losses for these financial assets. With respect to held-to-maturity marketable securities which are comprised of debt securities, the Company evaluates expected credit losses on a pooled basis based on issuer-type which have similar credit risk characteristics. There isno allowance for credit losses for all periods presented.

Related Parties—During the three months ended March 31, 2026 and 2025, the Company incurred approximately $219 and $164, respectively, in expenses with a vendor which certain members of the Company’s Board of Directors and executive officers serve as members of the vendor’s board of directors. As of March 31, 2026 and 2025, no amounts remained payable to the vendor. These transactions were conducted in the ordinary course of business on terms the Company believes to be comparable to those available from unaffiliated third parties and were reviewed and approved in accordance with the Company’s related person transaction policy.

Recent Accounting Pronouncements

Recently Issued Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures(Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendment requires new financial statement disclosures to provide disaggregated information for certain types of expenses, including employee compensation, depreciation, and amortization in commonly presented expense captions such as cost of revenue, sales and marketing, and general and administrative expenses. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The Company is currently evaluating the disclosure requirements related to the new standard.

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amendments in this update remove all references to prescriptive and sequential software development stages (referred to as “project stages”) throughout Subtopic 350-40. The amendments in this update are effective for all entities for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. The Company is in the process of evaluating the effect that the adoption of this standard may have on its consolidated financial statements.

Recently Adopted Accounting Pronouncements

There are no recently adopted accounting pronouncements.

3. FAIR VALUE

The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1—Observable inputs such as quoted prices in active markets for identical investments that the Company has the ability to access.

Level 2—Inputs include:

•Quoted prices for identical or similar assets or liabilities in active markets;

•Quoted prices for identical or similar assets or liabilities in inactive markets;

•Inputs, other than quoted prices in active markets, which are observable either directly or indirectly;

•Inputs that are derived principally from, or corroborated by, observable market data by correlation or other means.

Level 3—Unobservable inputs in which there is little or no market activity for the asset or liability, which require the reporting entity to develop its own estimates and assumptions relating to the pricing of the asset or liability including assumptions regarding risk.

The following table presents amortized cost, gross unrealized gains and losses, and fair value by major security type and balance sheet classification as of March 31, 2026 and December 31, 2025:

As of March 31, 2026 and December 31, 2025, all of the Company’s short-term investments have contractual maturities of one year or less and all of the Company’s long-term investments have contractual maturities betweenone andfive years. The Company has elected to present accrued interest within Prepaid expenses and other current assets in the Unaudited Condensed Consolidated Balance Sheets. Accrued interest was $2,062 and $2,099 as of March 31, 2026 and December 31, 2025, respectively.

Changes in market interest rates, credit risk of borrowers and overall market liquidity, among other factors, may cause the short-term and long-term debt investments to fall below their amortized cost basis, resulting in unrealized losses. For those debt securities in an unrealized loss position as of March 31, 2026, the Company does not intend to sell, nor is it more likely than not that it will be required to sell, such securities before recovering the amortized cost basis. No allowance for credit losses were recognized in the financial statements for held-to-maturity debt securities for the periods ended March 31, 2026 and 2025.

4. REVENUE

Disaggregation of Revenue

In accordance with ASC 606, Revenue from Contracts with Customers, the Company disaggregates revenue from contracts with customers into revenue streams, which most closely depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Three service providers Apple, Google, and Stripe processed 60.2%,22.9%, and 11.5% of total revenues for the three months ended March 31, 2026, respectively, and 61.3%,23.3% and 11.0% of total revenues for the three months ended March 31, 2025, respectively.

Deferred revenue mostly consists of payments received in advance of revenue recognition, and is mostly related to time-based subscriptions, which will be recognized into revenue over the course of the upcoming year (recognized over 12 months or less). Additionally, the Duolingo English Test has deferred revenue related to tests that have been purchased, but will not be recognized until the tests have been proctored. Changes in deferred revenues were as follows:

5. PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consists of the following:

Depreciation expense is included within the following financial statement line items within the Company’s Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income.

6. INTANGIBLE ASSETS

Intangible assets, net, consist of the following:

The Company capitalized $2,853 and $1,310 of software development costs, with the majority of the costs being employee wages, during the three months ended March 31, 2026 and 2025, respectively. Amortization expense is included within the following financial statement line items within the Company’s Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income.

7. INCOME TAXES

Year-to-date income tax expense or benefit is the product of the most current projected annual effective tax rate (“PAETR”) and the actual year-to-date pretax income, adjusted for any discrete items. The income tax expense or benefit for a particular quarter is the difference between the year-to-date calculation of income tax expense or benefit and the year-to-date calculation for the prior year period. Items unrelated to current period ordinary income or loss are recognized entirely in the period identified as a discrete item of tax.

The Company’s PAETR differs from the U.S. federal statutory rate of 21.0% during the three months ended March 31, 2026 primarily due to discrete tax expense related to stock-based compensation. In the prior year period, the variance was primarily driven by a discrete tax benefit from excess tax benefits on stock-based compensation, when the Company maintained a valuation allowance.

The Company’s income before taxes, income tax provision or benefit and effective tax rates were as follows:

8. STOCKHOLDERS’ EQUITY

A summary of stock option activity as of March 31, 2026 is as follows:

(1) There wereno stock options granted during the three months ended March 31, 2026.

(2) There was a nominal amount of forfeitures and expirations during the three months ended March 31, 2026.

The total intrinsic value of options exercised was approximately $18,492 and $90,743 for the periods ended March 31, 2026, and 2025, respectively.

A summary of RSU activity as of March 31, 2026 is as follows:

As of March 31, 2026, there wasno unrecognized stock-based compensation expense related to stock options granted under the plans. The amount of unrecognized stock-based compensation expense for RSUs as of March 31, 2026 was $297,979 with a weighted-average period of approximately three years.

There were 10,739 shares available for issuance under the Company’s 2021 Incentive Award Plan and 1,604 shares available for issuance under the Company’s 2021 Employee Stock Purchase Plan, in each case, at March 31, 2026.

Performance-based RSUs

In June 2021, the Company granted performance-based RSUs to its founders that vest based on continued service and the achievement of specified stock price targets. As of March 31, 2026, certain performance conditions have been achieved, while others remain subject to future stock price performance. Stock-based compensation expense is recognized over the derived service period using an accelerated attribution method, subject to continued service.

The Company recognized $1,216 and $4,114 of stock-based compensation expense related to the Founder Awards for the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, $4,661 of unrecognized stock-based compensation expense remains.

Stock-Based Compensation

Total stock-based compensation expense was $34,647 and $31,018 for the three months ended March 31, 2026 and 2025, respectively.

Stock-based compensation expense is included in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income as shown in the following table:

Nominal amounts of stock-based compensation expense is capitalized into intangible assets for the three months ended March 31, 2026 and 2025.

Common Stock Repurchases

In February 2026, Duolingo’s Board of Directors authorized a share repurchase program of up to $400,000. During the three months ended March 31, 2026, the Company repurchased a total of 262 shares of the Company’s Class A common stock through open market purchases at an average per share price of $98.45 for a total repurchase price of $25,830. During the three months ended March 31, 2026,216 of these shares were retired. The cost of the remaining 46 shares is recorded as treasury stock in the Unaudited Condensed Consolidated Balance Sheets. As of March 31, 2026, $374,170 of the total amount authorized to be repurchased remained available.

9. COMMITMENTS AND CONTINGENCIES

Legal Proceedings— From time to time, the Company may become involved in various legal proceedings in the ordinary course of its business and may be subject to third-party infringement claims. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain. The Company is not currently party to any material legal proceedings.

Letters of Credit— The Company has a standby letter of credit obtained in connection with an operating lease. This letter of credit acts as security for the faithful performance by us of all terms, covenants and conditions of the lease agreement. The amount of the letter of credit is equal tosix months rent of $442, totaling $2,656. The cash collateral for the letter of credit has been recognized as restricted cash in the Unaudited Condensed Consolidated Balance Sheet and is equivalent to 103% of the letter of credit and totaled $2,735.

10. EMPLOYEE BENEFIT PLAN

The Company sponsors a profit sharing plan with an Internal Revenue Code Section 401(k) feature, the Duolingo Retirement Trust (the “Plan”), for eligible employees. The Plan, effective January 1, 2021, provides for Company safe harbor matching contributions of 100% of the first 4% of the employees’ elective deferrals and 50% of the next 2%, with vesting starting upon the first day of employment. The Company also has the option to make discretionary matching or profit sharing contributions. The Company made safe harbor matching contributions of approximately $2,213 and $1,969 during the three months ended March 31, 2026 and 2025, respectively. The Company didnot make any discretionary matching or profit sharing contributions during the three months ended March 31, 2026 or 2025.

11. EARNINGS PER SHARE

Basic net income per share attributable to common stockholders is calculated by dividing net income by the weighted-average number of shares of common stock outstanding during the period, less shares subject to repurchase. Diluted net income per share is calculated by giving effect to all potentially dilutive common stock equivalents.

The rights of Class A and Class B common stock are identical, except with respect to voting and conversion. As a result, undistributed earnings are allocated on a proportional basis and net income per share is the same for both classes.

The computation of basic and diluted earnings per share attributable to common shareholders is as follows:

(1) The Company had 0.7 million options outstanding as of March 31, 2026. The estimated dilutive effect is calculated as the number of shares expected to be issued upon vesting or exercise, adjusted for the strike price proceeds that are received by the Company and assumed to be used to repurchase shares of Duolingo common stock.

12. SUBSEQUENT EVENTS

None.