With revenue halved and daily active users approaching 60 million, two financial statements unveil the new growth momentum of the education technology industry.
From August 5 to 6, Duolingo and Chegg successively released their 2026 Q2 financial results.
One side is still in growth: Duolingo's revenue increased by 18.3% year-on-year, with daily active users reaching 58.7 million; the other side is still contracting: Chegg's revenue dropped by 51% year-on-year, and the company will put more bets on the employment sector in the next step.
Behind the two vastly different financial reports, the two established edtech companies are both answering the same question: Where will the next phase of growth come from?
01
Revenue Down 51%,
Chegg Bets Growth on Employment
Over the past year, Chegg has continued to shrink its business and adjust its organizational structure. In 2025, the company carried out two large-scale rounds of layoffs; its fourth-quarter revenue dropped to $72.7 million, down roughly 49% year-on-year, with a full-year net loss of $103.4 million.
Entering 2026, Chegg's revenue is still declining. In the second quarter, the company's total net revenue was $51.8 million, down 51% year-on-year; among which, Chegg Skills generated $17.5 million in revenue, up 2% year-on-year. Total net revenue for the third quarter is expected to be between $43 million and $44 million, which will continue to decrease compared to the second quarter.
Ongoing restructuring has been reflected in costs and cash flow. In the second quarter, Chegg's net loss was $2.951 million, which narrowed significantly year-on-year. Its adjusted EBITDA stood at $9.1 million, and free cash flow reached $6.4 million. In the first half of this year, after paying $14.4 million in restructuring-related severance payments, the company still generated $9.5 million in free cash flow.
However, the gross margin for the third quarter is expected to drop from 55% in the second quarter to 48% to 49%, and adjusted EBITDA is expected to be between $1 million and $2 million. With revenue continuing to contract, Chegg has begun to shift more of its business to the employment sector.
During the earnings call, Dan Rosensweig, CEO and Executive Chairman of Chegg, stated that the company is integrating its academic platform, skills business and language learning capabilities to help students build the skills, confidence and connections they need to graduate, land internships and enter the workforce. Chegg estimates that nearly 20 million students will enter the job market in the coming years.
Starting from the third quarter, Chegg will gradually launch a new generation of platforms on its main site and Internships.com. More than 10,000 students have already participated in tests and provided feedback, and related services will continue to be rolled out until 2027.
The new platform extends its service scope further from learning to job hunting. Chegg can judge students' existing skills and the capabilities they need to supplement for target positions based on their school, major and courses taken, and provide corresponding learning content. After that, the platform will also match internship and job opportunities, providing resume customization, cover letter writing, application form filling and submission, alumni outreach, interview preparation and targeted skill training.
Several existing businesses of Chegg have also begun to adjust around this direction.
In the academic business, Chegg has split previously developed courses into 5,000 shorter content units, which are used to assess students' existing skills and provide training for capability gaps. These contents will also be adjusted according to the actual skills required by enterprises.
Chegg Skills continues to expand to enterprises and schools. In the second quarter, the business generated $17.5 million in revenue, up 2% year-on-year. 6 new partners including OpenSesame and Dale Carnegie have been signed this year, and relevant cooperations will be launched in the second half of the year. The company also plans to use AI and data to further expand and personalize its course catalog.
Busuu further extends language learning to specific work scenarios. Its AI agent coach can provide support based on learners' goals and usage contexts, currently covering scenarios such as customer calls, presentations and interviews. Chegg plans to connect this feature further to learners' actual work processes early next year.
As such, Chegg is forming a more complete service path: identify skill gaps based on students' majors and courses, supplement corresponding capabilities through academic content, Chegg Skills and Busuu, and then enter the stages of job matching, application and interview through Internships.com and the new platform.
This is also the difference between Chegg's current employment transformation and simply adding job-hunting functions. The company hopes to integrate academic, skill, language and internship businesses into one set of services, extending its coverage from the student learning stage to the employment stage.
At present, this adjustment is still in its early stage. Only more than 10,000 students have participated in the test of the new platform, which will be gradually rolled out starting in the third quarter; in the same period, Chegg expects revenue to continue to decline. Employment has become a key business direction for Chegg in the next stage, but whether it can bring new revenue growth depends on the actual performance after the platform goes online.
02
58.7 Million Daily Active Users,
Duolingo Continues to Explore Monetization Potential
Compared with Chegg, which is still contracting its business, Duolingo's user scale continued to expand in the second quarter.
In the second quarter of 2026, Duolingo's daily active users reached 58.7 million, up 23% year-on-year, with a higher growth rate than that in the first quarter; its revenue hit $298.5 million, up 18.3% year-on-year; net profit was $33.2 million, with a net profit margin of 11.1%. Paying users reached 12.7 million, up 17% year-on-year, which was lower than analysts' expectations. After the financial report was released, the company's stock price once fell by more than 11% in after-hours trading.
Since the beginning of this year, Duolingo has prioritized user growth and learning outcomes over monetization. CEO Luis von Ahn stated that the company suspended monetization methods that might affect DAU growth at the beginning of the year. In the second quarter, user growth picked up pace, and the company also began to increase monetization inputs again.
User retention is one of the better-performing indicators this quarter. Duolingo's current user retention rate CURR has reached a new all-time high of 84%, about 1 percentage point higher than last year. The company continuously tests product changes through an internal mechanism called the "Green Machine", releasing new versions every week. Each version includes about 350 adjustments, mainly optimized around retention, learning outcomes and commercialization.
In addition to improving retention, Duolingo is also reactivating past users. In June this year, the company launched the "Streak Freeze Recovery" campaign, allowing eligible learners to restore their previous longest streak after completing three lessons. Eventually, 15.4 million people recovered their streaks, nearly 8 million of whom no longer had an active learning streak at the start of the campaign.
With the user scale continuing to expand, Duolingo is refocusing more energy on paid conversion and revenue.
One change lies in the subscription entry. The company is gradually extending the original 7-day free trial of Super to 1 month. Test results show that a longer trial period increases users' willingness to try subscriptions and paid conversion rate. Meanwhile, user activity has also improved as ads and energy limits are removed during the trial period.
For users who are reluctant to purchase Super, Duolingo is testing Super Lite, a lower-priced plan that costs roughly half of the standard Super, keeps ads, and provides double energy instead of unlimited energy. This product is still in the early testing stage at present.
The advertising business has also increased investment again. In the past few years, Duolingo had little investment in advertising, and has now formed a more professional team. The company believes that compared with leading apps of the same size, its current ad revenue is still relatively low. Subscriptions remain the main source of revenue, but free users have also become the target for the company to further increase revenue.
Another change comes from AI costs. In the early stage of Duolingo Video Call's launch, the AI cost per call was about $0.30, so the feature could only be placed in the higher-priced Max plan. Currently, the cost per call has dropped to less than $0.01, and the company has not observed obvious quality loss.
After the cost dropped, most new Super subscribers have been able to use Video Call, and the feature will be gradually opened to existing Super users in the coming months. The company is also reconsidering the division of functions between Super and Max.
An important reason why Duolingo can significantly reduce the cost of Video Call is that it uses more open-source models. The company still uses proprietary models in scenarios that require higher quality, but open-source models have been able to meet the needs in some daily conversation practice scenarios.
While AI costs are falling, Duolingo has raised its full-year profit forecast. The 2026 adjusted EBITDA margin guidance has been raised from 25% to 26.5%, and the gross margin expectation has been increased from 69% to nearly 70%. Full-year adjusted EBITDA is expected to be about $320 million, and free cash flow is expected to exceed $375 million.
Judging from the performance in the second quarter, Duolingo has not changed its direction of prioritizing user growth, but commercialization investment is recovering. Extending the free trial period improves subscription conversion, Super Lite covers users with lower willingness to pay, advertising increases the revenue source from free users, and the drop in Video Call costs allows AI features to cover more subscribers.
The company still maintains its target of reaching 100 million DAU by 2028. Compared with actively lowering the monetization priority at the beginning of the year, Duolingo needs to push forward two things at the same time in the next stage: continue to maintain user growth, and improve the payment and revenue contribution of existing users.
03
Established Edtech Companies
Are Seeking New Growth
The situations faced by Chegg and Duolingo are different. Chegg is still coping with declining revenue, while Duolingo maintains growth. However, in the second quarter, DAU increased by 23% year-on-year, while paying users and revenue increased by 17% and 18.3% respectively, meaning the commercialization growth rate is lower than the user growth rate.
The next focus of both companies falls more on their existing businesses.
Chegg is expanding its service scope for students. It used to focus on academic learning, and now it further covers skill training, language learning, internships and employment, hoping to increase the usage scenarios for students on the platform. Duolingo continues to focus on existing users to improve retention and paid conversion, and increase revenue sources through subscription products at different price points and advertising.
Compared with continuing to add new product categories, these adjustments are directly related to the businesses that the two companies have already accumulated. Chegg has academic content, Chegg Skills, Busuu and Internships.com, while Duolingo has nearly 60 million daily active users and a mature subscription system. How to use these existing foundations to continue growing has become a common problem faced by both companies at present.
AI is also reducing the cost of some education services. The AI cost per single Video Call of Duolingo has dropped from about $0.30 to less than $0.01, and the feature has begun to be opened from the Max plan to the Super plan. Chegg applies AI to links such as skill assessment, content matching, job hunting and interview training, to expand the coverage of personalized services.
The impact of cost reduction has been reflected in both product and financial dimensions. AI features that used to have high costs can now be opened to more users, and different scenarios can also choose different models according to actual needs. While adding AI features, Duolingo raised its 2026 adjusted EBITDA margin guidance from 25% to 26.5%, and its gross margin expectation also increased from 69% to nearly 70%.
User growth, revenue growth and cost control must ultimately remain balanced. Chegg needs to wait for the employment business to bring new revenue, while Duolingo needs to make paying users and revenue better keep up with the expansion of user scale.
The direction presented by the two latest financial reports is clear enough: Chegg is expanding its business scope, while Duolingo is raising its commercialization level, and the drop in AI costs has provided both companies with more space to adjust their products and services.
This article is from the WeChat Official Account "DJEDUINNO" (ID: DJEDUINNO), written by Si Luo, authorized for release by 36Kr.