3Q Preview: DAUs Revived, Can Bookings Follow?

Encouraging signs on the turnaround, although largely priced in: DUOL's focus on user growth is paying off, with 3Q DAUs likely to accelerate to ~27% y/y and bookings seemingly outperforming in tandem. Much of the DAU improvement is attributable to the June Streak Revival event (estimate ~70% of sequential growth), though sequential user growth has continued (September DAUs up ~4% vs. June). We model 25% y/y DAU growth in 4Q and 20% y/y in FY27. We expect 3Q bookings to outperform, projecting 11% y/y growth. EBITDA could also beat in 3Q/FY26; we expect the FY26 EBITDA guide to be raised, modeling $323M (vs. ~$320M guidance). However, we see limited clarity on how DUOL can drive monetization without impacting free users, which we believe is needed for further re-rating. At ~15x '27 EV/EBITDA (up from 8x at the bottom), the current valuation seems full. We remain Equal-weight and raise our PT to $140 from $125.