Duolingo, Inc.

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Good evening, everyone, and welcome to Duolingo's second quarter earnings webcast. Today, after market close, we released this quarter's shareholder letter, a copy of which you can find on our IR website at investors.duolingo.com. On today's call, we have Luis Von Ahn, our co-founder and CEO, and Gillian Munson, our CFO. They'll begin with prepared remarks before we open the call for questions. Analysts may ask a question by using the raise hand feature. And please note this call is being recorded and all participants are currently in listen-only mode. Before we begin, please note that we'll make forward-looking statements regarding future events and financial performance. These statements are subject to risks and uncertainties described in our SEC filings and are based on assumptions we believe to be reasonable as of today. And we undertake no obligation to update them. We'll also discuss both gap and non-gap financial measures. Reconciliations of the two can be found in our earnings materials, and we encourage you to review them when evaluating our performance. And now I will turn it over to Luis.

Thanks, Debbie, and thank you all for joining. Q2 was a strong quarter. DAUs grew 23% year over year, accelerating from Q1 and coming in slightly ahead of our expectations. And we're encouraged by what we're seeing so far in Q3. The vast majority of that growth came from the work we do every day through what we call the green machine. We test hundreds of product changes, measure their impact, and double down on what works. Most changes are small, but they compound over time. As I discussed in our shareholder letter, that's also what's driving CUR, a measure of user retention to an all-time high. Another highlight of the quarter was Streak Revival, a one-time campaign we ran in June. The idea was simple. Give learners who lost their longest streak a chance to earn it back by completing three lessons. More than 15 million learners revived their streaks. and what's particularly encouraging is that these users are also showing better retention than a typical re-engaged cohort. We brought learners back to a product that keeps getting better at teaching languages, chess, math and music, and they're staying. We're still early in executing our strategy of prioritizing user growth and teaching better, but Q2 gave us more confidence that we're on the right track. With that, I'll turn it over to Gillian.

Thanks, Luis. Welcome, everyone. As Luis said, Q2 was a strong quarter. In addition to the DAU acceleration Luis just mentioned, top-line results were in line with our expectations, and profitability was slightly ahead of our plan. As we look at the remainder of 2026, I want to reiterate how we're managing the business. We are investing deliberately in the opportunities that we believe can make Duolingo a significantly larger business over the long term. At the same time, our team continues to operate with discipline. We continue to execute to our full year bookings and revenue target ranges of 10% to 12% bookings growth and 15% to 18% revenue growth. We have increased our target adjusted EBITDA outlook to 26.5% from the 25% we outlined at the start of the year. As for point estimates to help you build your models, please keep in mind the following. For the full year, we expect bookings growth of approximately 11% and revenue growth of roughly 16%. At constant foreign exchange rates from our last call, the bookings growth rate would be about half a point higher. For gross margin, we now expect to end the year closer to 70% as compared to the 69% we initially expected as we drive more AI content into our products offset by AI cost savings. We expect adjusted EBITDA to be approximately $320 million at the margin of roughly 25.5% I just mentioned. And we expect to generate over $375 million of free cash flow this year. While it is not included in our 2026 guidance, we do want you to know that the company has a bonus plan that will trigger if Q4 DAU growth is 25% or higher and would be paid out during Q1. Since it's currently uncertain whether that threshold will be met, we have not included it in our 2026 guidance. If it were achieved, we would expect the payout to be roughly $10 million in cash, potentially higher if DAU growth is higher. For Q3 itself, we expect bookings of approximately $307 million, or growth of 9%, revenue of $302 million, representing growth of 11%. We expect gross margin to be 71%, and adjusted EBITDA of roughly $76 million, representing a margin of 25.2%. Our balance sheet and cash flow potential remains strong. We ended the quarter with $1.3 billion in cash and investments and generated $79 million in free cash flow. We repurchased about $44 million of stock during the quarter, bringing cumulative repurchases under our authorization to $72 million or approximately 700,000 shares. Putting it all together, our user momentum is strong, our business model continues to generate significant cash flow, and our team is executing well in an important investment year. We remain focused on reaching 100 million DAUs in 2028, and we believe the path there can create a significantly more valuable business for our shareholders. And now I'll turn it back to the operator and we're happy to take your questions.

We will now move to our question and answer session. At this time, if you would like to ask a question, please click on the raise hand button which can be found on the black bar at the bottom of your screen. You may remove yourself from the queue at any time by lowering your hand. When it is your turn, you will receive a message on your screen asking to be promoted to a panelist. Please accept, wait a moment, and once you have been promoted, you will hear your name called and you may unmute your video and audio and ask your question. Your Zoom application may disappear momentarily. This is expected and your window will reappear. We are allowing analysts one relevant follow-up to their main question. We will now pause a moment to allow the team to gather and assemble the queue. Your first question comes from Wyatt Swanson with DA Davidson.

Thanks for the question. Appreciate it. Hi, Wyatt. Hi. Given DAUs are now expected to be above that 20% year-over-year growth in the second half of the year, could you maybe give some color as to why the full-year bookings guide wasn't raised more? Like, I realize you're in experimentation mode, but shouldn't a larger amount of users on the platform technically translate to increased bookings, even if you're not pushing for monetization?

Yeah, I think that's a great question. I mean, the first thing to note is that our users don't monetize immediately. I mean, some of them monetize. It takes a while for them to monetize because we have this freemium model. We do expect that higher DAUs will imply higher revenue, but it's going to take some time. and, you know, the second reason is exactly what you said. We said at the beginning of this year that we were going to operate in this box in terms of revenue and we are going to continue with this box. Basically, you know, roughly 11% year-over-year bookings growth and then the rest of the efforts are in increasing DAUs and in teaching better.

Got it. Okay, that's helpful. And then you noted with the extension of free trials, it helps improve both engagement and monetization. Could you just talk to some of the underlying mechanics as to how exactly that works going from one month to two months? Thanks.

Just to put it into context, our monetization team, their goal this year is to find things that monetize that are not at odds with user growth. Historically, some of the ways that we have monetized have been by adding friction to the free user product, and that is at odds with user growth. So one of the things that has worked the best is longer free trials. And in particular, the main one that we're trying is historically Duolingo, the free trial in Duolingo. When we say, hey, you can try for free, it's been seven days. So we give you seven days for free. That's what historically has happened. We are now shifting most of our free trials, not quite all of them yet, to a one month free trial. and what the way that works is basically significantly more people decide to take that trial because it's just a better deal. And because of that, you know, we got we got a larger number of people actually converting to payers. And the other nice thing is that as soon as they agree to go on the free trial, the experience just gets better because we turn off energy, we turn off the ads. So this actually increases daily active users as well. So we like it very much. And it's you know, it's having a lot of good traction. Cool. Thanks, guys.

Thank you. Your next question comes from the line of Andrew Bruhn with Citizen. You may unmute your video and audio and ask your question. Hey, Andrew.

Hi, guys. Thanks so much for taking the questions. I wanted to ask about just your role in terms of influencers. How do we think about international marketing and kind of the changes that you guys highlighted in the letter? And then secondly, as we think about the U.S., Luis understood the strengths in the quarter and kind of resurrected users. Can you talk about top of funnel, though? How do you feel about trends there and kind of the broader opportunity of attracting new users that may be new to Duolingo? Thank you.

Yeah, so I should say our marketing team, just to put it in historicals, Most of our growth has been organic through word of mouth. In fact, for the first several years, it was 100% organic through word of mouth. Then we added mainly one form of marketing, which was our own social media accounts. And that's still going really well. We're getting more than a billion impressions per quarter on our own social media accounts, which is incredible. But our marketing team is really starting to expand to having other important tools One of them is creators, groups of creators. And that's working quite well, actually, specifically in certain countries, countries like China, Indonesia, and India. Something like two-thirds of our total social media impressions come from influencers. And what we're finding is that we are able to not spend a ton of money on this. And what's nice is that these people have different audiences than us. Thank you for joining us. So while still the majority of our growth is organic, we're getting good traction on both usage of influencers and performance marketing. And we are seeing that in top of funnel, so it is increasing. So we actually feel pretty good about our top of funnel. It is increasing. And you asked about the U.S. in particular. The U.S. growth... Thank you very much.

One thing I might add to that, Andrew, is the top of the funnel is part of the story of the quarter. It got better. As you know, that's been a focus area of ours. We've talked about how we want to get better there. And in almost every region, the rate of growth there improved in top of the funnel in the quarter, which is a great accomplishment for the team.

Thank you. Your next question comes from the line of Nathan Feather. Please unmute your audio and video and answer your question.

Hey, everyone. Thanks for taking the question. On my end, both on the monetization angle, I guess, it's interesting to hear what the learnings you've seen so far from giving video call to new super subscribers and how is that influencing your plans for video call and max generally as we go from here?

Video call is an interesting thing. We love this feature. It's an excellent feature for learning conversation, for practicing conversation. It really works. We have, in fact, research that shows that if you use video call, you get better at conversation. It really works. It's really good. When we first started adding video call to the platform, The first time that we put a video call on the platform, I remember the team that was working on it told me, okay, we can give this to users, but it's going to cost like 30 cents per call to give to users. And that was expensive. And this is why we decided to put it behind our most expensive plan, which is Max. But we said back then, if we can decrease the cost of this, we're going to try it in different places because it is our aim to give video call to as many people as possible because it really helps in learning a language. The good news is that through a lot of really hard work, we've been able to bring down the cost of video call. It is now under a cent per video call. And the reason for that is mainly a move towards open source models. Thank you for watching. Thank you very much. and, you know, my answer is I don't know yet. There's a few possibilities. One possibility could be that, well, super subscribers get a limited version of video call, like limited number of video calls and max subscribers get unlimited. That is a possibility. Another possibility, truthfully, is that we may actually sunset max. Thank you for watching.

Okay, great. That's really helpful. And then one thing we've seen reports is that you're testing an ad-supported tier. So I guess to help us think through, do you see an opportunity for maybe a lower price tier or something in between super and the free model? And from a user segmentation perspective, what are you really going after there?

We are testing that. It's called Superlight. It is being tested. Now, I really want to emphasize the word tested. I don't know what's going to happen with Superlight in the end. It is cheaper than Super. It's about half the price, depending on the geography. It is ad-supported, so you get ads. And in addition to that, basically, you don't get unlimited energy. You get twice as much energy. So that's the idea. At the moment, still a small fraction of our subscribers are on Superlight. But part of the reason is that we're early in the testing. We're just not advertising it very well. And of course, the goal with a light plan like this would be if we're pretty sure that you're not going to buy Super, then we should try to sell you Superlight. That's kind of the idea. And you're going to see us experiment with that over the next few months. I don't know what will end up happening, but it's something that we're trying. Okay, pretty helpful. Thank you.

Your next question comes from the line of Brian Smielek with J.P. Morgan. Please unmute your audio and video and ask your question. Great.

Thanks for taking the questions. Good to see you, Luis. Good to see Kerr at an all-time high. Just curious, could you share more color on this overall retention by cohort? Are these new free trial users that are engaging on a daily basis exhibiting higher engagement trends? Just curious anything you can add there from a retention perspective going forward.

Yeah, so like we mentioned in the letter, our retention, our user retention, pretty much all metrics of user retention are an all-time high. The one we look at the most is this one called CURC, which is current user retention rate. We're very happy that it is an all-time high and that it has increased by about a percentage point in the last year because tiny changes to CURC, Thank you very much. Basically, we have added a number of things, and it's hard to pinpoint to a single one because, again, we have a new version of the app every single week, and every version of the app has approximately 350 changes. So it's hard to point to something that actually did it, but generally our product is just stickier, and we're very happy with that because that's kind of the best type of growth you can expect, that it's just pure, it's a better product.

Great. Thank you. That's super helpful. And then also kind of building on Nathan's question around Macs overall, more from the speaking angle as well, can you just share more color in terms of overall engagement with more intermediate and advanced learners, which would, you know, in my view, likely, you know, start to take on more speaking practice within the app?

So there's two things to say about that. The first one is that if you have access to video call, the engagement is very good. And in fact, that feature has just gotten significantly better. One of the main metrics that we have for this feature is number of words spoken by DAU who has access to that. That graph is a beautiful graph because it is entirely open to the right over the last couple of years. It's just every month, it is a little better than the previous month in terms of us getting you to speak more. and, you know, ultimately this will just translate in people learning better and being engaged with it. So there's video call. We're also, you know, in the free tier making people speak more. Just there's more speaking exercises and there's also more ways to answer exercises that before you had to tap on the phone. Now you can answer it with your voice. So we're pretty happy with that. And it's exactly what you said. This is much more important to advanced and intermediate users. And we see that as something that will over time really help with certainly monetization, but also word of mouth, because if people are learning better, they're going to tell their friends, etc. So we're very proud of that.

Thank you, Luis.

Thank you, Brian.

Your next question comes from the line of Ryan McDonald with Needham. Please unmute your audio and video and ask your question.

Hi, Ryan. Hi, Gillian. Thanks for taking the questions. Maybe just to ask on the bonus incentive comment sort of at the end of the prepared remarks. Obviously, the team internally is operating towards trying to get to that 25% rate. How should we think about that translating to, let's call it the pace of new experimentation between now and the end of the year? And if that picks up, are there any sort of features or initiatives that you'd call out that you're most excited about? Or is this really about just letting the changes and the experiments you've already made continue to sort of mature within the market and sort of let them sort of produce results?

It's a bit of both. Thank you for joining us. It's related to the bonus in some way, but mainly it's just this year our goal as a company was we decided we are going to focus most of our efforts of our incredible experimentation machine to just make it so that we can continue growing daily active users because we think that if, as we said many times, Thank you for watching.

Excellent. And then maybe on Max, you obviously are sort of working on a lot of things with Max right now, and one being sort of Super or Voice sort of being rolled out more to Super. Is there any sort of, I would call it, new feature or product development that's sort of maybe geared or aimed towards the Max tier at this point? That could potentially sort of continue to extend the life of that tier or is really everything more focused sort of at the lower tier experimentation right now?

So I won't rule that out. It may happen that we develop something that we end up putting behind Max. We're developing a lot of features and there may be some that, you know, because of costs of them or something, we end up putting them behind Max. But that is not the goal. The goal really is to try to give speaking, particularly speaking features which are the most expensive ones to provide. The goal is to provide it to as many users as possible. Because again, we just believe that the more people have access to this, the more word of mouth, the more users we have, and the larger this business becomes. So that's the goal. So I guess what I'll say is that that's not what we're trying to do, but it may be that in two months I come back and say, hey, Max actually got a new feature. And it's not because I'm trying to be secretive to you. I just don't know what will end up happening in terms of cost of certain features that we're developing.

Appreciate the talk. Thanks.

Thanks, Ryan.

Thank you, Ryan.

Your next question comes from the line of Swita Kajuria with Wolf Research. Please unmute your audio and video and ask your question.

Hello. Good to see both of you. Thanks for taking my questions. First one is on attention span for users. As attention span, I guess, decreases, how is the engagement and session time across the app trending? And I guess, how are you addressing that? And then the second is on math and music. Could you please talk about just the product roadmap as you see math and music develop through the year and how that could drive contribution to DAU growth. Thank you.

Yeah, thank you. I think part of your question is, you know, something that we've said in the past, which is just The world in general, attention span is going down. I mean, if you look at, you know, how people use things like social media apps, they use them in like 10 second bursts. Whereas for Duolingo, you know, our lesson on Duolingo is maybe two minutes. Thank you very much. That's good, but you've got to make sure that people actually also come back many other times in the day so that it compounds. And that's kind of what we're experimenting with. But it is something we're actively experimenting with. In terms of math and music, we're pretty excited about both of those. I should say, certainly when compared to chess, even though they do have single-digit millions of DAUs, they're much smaller than chess. So we do expect growth from both of them, but the contribution to our overall... I mean, we have 60-some million daily active users. Even a 50% growth here doesn't contribute all that much, but we do expect that they're growing. We expect them to grow. Probably the easiest one to talk about in terms of strategy is math, because we understand that pretty well, or at least better than music, I think. With math... Originally, when we launched math, I thought, and I was wrong, I thought that we could get the average person on the street to get addicted to learning math. Thank you very much. And as soon as we started working on that, that clarified a lot of things. And I think we started making a lot more progress rather than trying to get your average 35-year-old person who hates math to suddenly love it. I would love to do that, but I've given up on that one. And in music, it's a bit early. I mean, we are working a lot on music. We'll have more to say about music in maybe a quarter or two.

Okay. Thanks, Luis. 35 may be a bit too late for math. Your next question comes from the line of Mark Mahaney with Evercore.

Please unmute your audio and video and ask your question.

I'm trying to come on here. All right. Sorry about that. Let's see. Hello to both of you. Your comment about video call functionality. I'm sorry, Luis, were you saying that you could make it available to all Duolingo users or all super subscribers?

Look, I would love to make it available to all Duolingo users. I don't think we can do that right now. My goal in the moment is to make it available to all super subscribers.

Okay. The gating factor for it not to be available to all users is just price or cost. You bring it out by another 90% next year and you could do it.

Yes, but there's one other thing that we do have to take into account. This is one of the main things that gets people to buy. So if suddenly all users have it, there's less incentive to buy, and then we would have to find other reasons to get people to buy. So there's a little bit of a tradeoff here. So it's both costs, and this is one of the main things that gets people to buy.

Okay. And then I want to switch gears and ask you about advertising. And I think you've maybe changed a little bit, you know, the last couple of years in terms of your view on both advertising revenue and on advertising spend. Where are you on that journey? Is there something that you've seen that's made you maybe a little bit more constructive on marketing spend and the efficiency of it and the desirability, perhaps, of advertising revenue?

You are right that over the last couple of years, I have come around to ads both in terms of ad revenue and ad spend. A couple of things to say. In terms of ad revenue, for the foreseeable future, we will remain a subscription business. Our subscription business is much larger than ads, and it will continue being like that for a while. However, we see a pretty large opportunity with ads. We have a lot of users. We have a lot of active users. And pretty much every app our size or larger than us makes a ton more money from ads than we do. We see a pretty big opportunity there, which is why we have become a lot more sophisticated on that over the last... There was a time at Duolingo a couple of years ago where our entire investment in ad revenue was half a person. There was one person whose half-time job was to deal with ads. This is how much we were investing in them. We now have a team. It's significantly much more professional. They know what they're doing. I would expect that over the next few quarters... Thank you for joining us. were also significantly more sophisticated. I mean, there was a while where I was massively allergic to performance marketing. The way I see it now is I don't think that we want to get addicted to performance marketing because that's never good. However, it is a good tool to have. to complement your other marketing strategies. So our marketing team, which I really think is probably the best marketing team in the world, has now started adding as another strategy performance marketing. And we're very happy with that. We're seeing the results in our top of funnel for that.

Okay. Thank you, Luis. Thank you, Gillian. Yeah, thank you.

Your next question comes from the line of Yagal Arunian with Wedbush. Please unmute your audio and video and ask your question.

Hi, Yagal. Hey Luis, hey Gillian. So thanks for taking the questions. I guess as I listened to the call and what we're talking about here, it feels a little bit like we're starting to maybe shift or start to focus a little bit more on monetization, talking about ads and new tiers. Is that fair? Not to say that you're moving away from the optimization around DAUs, but it does feel like you are maybe shifting a little bit the monetization side. How do you think about that transition? When is the right time? What's involved? And then I have a follow-up.

Yeah, I mean, it's perceptive of you. It's a good question. I mean, the reality is this year and, you know, for a while, we really – one of the main thing that we're concentrating on is expanding our active user base because we just think that more users is just better for everything. It's a significantly larger business, et cetera. And we have this – Thank you for joining us. and the reality is we were doing a number of things that were counter to DAE growth. So we kind of had a little bit of a reset. At this point, enough time has passed that we understand levers significantly better. So we are a little more back into like, okay, this type of monetization is good, this type of monetization is good. So, for example, we mentioned longer free trials. We understand that and we are kind of going hard on those. Thank you for joining us. and then when compared to six months ago. So that is true. I don't think there's a time when we're like, you know, a lot of people ask us, oh, when are you going to stop worrying about DAUs and when are you going to start making money? A lot of people ask us that. I don't think that we're going to have a shift like that. You know, we're going to continue really trying to get to 100 million DAUs in 2028. But you will see, you know, you'll see probably increased monetization focus in and many more.

A, how should we think about that opportunity in terms of the margin structure over time? It feels like there's multiple levers you could pull on that. It's an interesting theme because we've heard this over and over again, this earning cycle from a lot of companies and this lean into open source models. And then how does that change the product velocity? Because I know AI has been a big component in driving your product velocity. So does that become a bigger opportunity with the costs coming down? Thanks.

Yeah, I mean, so, you know, at the highest level, it just turns out that there's when compared to a year ago. Thank you for watching. Thank you very much. You don't need to serve a, you know, your model doesn't need to be as good as a philosopher. You're probably going to talk about, you know, I don't know, frying eggs. Like you're not going to talk about very sophisticated stuff. So we find that in a lot of cases we can switch to the open source model. You know, internally, of course, we're still using many, you know, models from, say, OpenAI, Anthropic, and we'll continue doing that. And it'll just always be a decision, a trade-off between, you know, can we do it at roughly the same quality but with the open source? And if that's the case, we'll use the open source. There are still cases where we're not able to, and in those cases, we'll continue paying. But I do expect that what will happen is that the cost per... Thank you very much.

Yeah, and the way to think about it is we set out the year to be very patient with ourselves about what the business model is going to be. So we really have been trying to stick to this idea that we're going to grow bookings 10% to 12%, revenue 15% to 18%. And when we started the year, a 25% adjusted EBITDA margin felt like the right level of investment relative to growth. What we're basically saying is by going up about a point and a half on that adjusted EBITDA margin, we are seeing AI cost savings that will give us a bit structurally a better margin, even with our goal to put voice call out to all super users over the course of the year.

Very helpful. Thank you. Thank you, Gal.

Your next question comes from the line of Justin Patterson with KeyBank. Please unmute your audio and video and ask your question.

Justin, hello.

Hi, Justin.

Hi, good afternoon. First, could you talk through just what's driving the confidence level behind that acceleration in Q4? Is that simply easy comps or are you just seeing something with the product side finally starting to click there? And then, Luis, I just wanted to go back to making the mission affordable or making education affordable for the masses. Obviously, as you increase advertising in there, you do start to have attention. Pension point in there of people get frustrated with the user experience in it. Does that start causing some bad behaviors? So I'd love to hear more how you're thinking through the guardrails of still monetizing across the business while still having education be widely accessible within here. Thank you.

Thank you so much for joining us. Acceleration is going to come over time. You know, this is not a slow and steady. That's not the way this place is. But, you know, we know this can take a little time for the work we're doing to play through. And that's what you see in terms of us holding the guidance, which implies Q4 gets better from a year-over-year rate of growth perspective.

A question about making education affordable. This is a very mission-driven company. Hopefully, we have shown that. We will continue being a very mission-driven company. Our mission is to develop the best education in the world and make it universally available, and that is our goal. you know the way we're going to be operating is similar to what we're operating right now to how we're operating right now which is we are you know first and foremost care about our reach and that you know every extra active users that active users that we reach means there's one other person that we're teaching means there's one other person that instead of scrolling you know doom scrolling on you know social media is actually learning something that is valuable to them so we're That's what we're emphasizing. But we also believe that it turns out that our mission, I really do believe that even though we're a very mission-driven company, I think that if we succeed in our mission, that's also aligned with just making this a very large business. The more users we have in one way or another, the more we'll be able to monetize them.

Thank you.

Thanks, Justin.

Your last question comes from the line of Arvin Ramnani with Truist. Please unmute your audio and video and ask your question.

Hi, Luis. Hi, Gillian. Hope you're doing well. Just a couple of questions. With China just continuing to become an important geo for y'all, and y'all are running OpenAI and Anthropic to run your models, or I think mostly OpenAI. Does it create some sort of data residency risk or regulatory risk? There's just a lot going on in terms of regulation and sort of protectionist measures. Or would you just kind of move to a local model in that market? Just how are you thinking about it? Because Luis, I know you're fairly forward thinking about AI and Thank you for your time.

Thank you very much. So we do that. In China, all of our usage of AI uses Chinese models. You have to do that. In terms of regulatory risk, it's important to mention that, of course, we understand that China poses some regulatory risk. It's kind of outside of our control how they operate the country. But we feel pretty good about what we're doing there in terms of our government relations. So we feel pretty good.

I don't know what the government will decide at any point perfect yeah and and just just on this topic right can you just give us a just a rough estimate right like I'm not looking for anything precise or whether you know but this rough estimate of what your AI costs are and is it like largely on anthropic open AI or they kind of you know open weight weight weight models uh you know and I'm just you know in terms of like your cost of revenues that like you know does AI cost you like 1% is a 10% just directionally. How significant are your AI expenses?

Yeah, our expenses on AI in the cost of goods sold are in the tens of millions of dollars. So they're significant to the cost of goods sold. Hosting is another big cost for us as well. But those are the two biggies going through the cost of goods sold. Inside the business, we also use AI. And that is more closer to the $10 million range internally.

Perfect. That sounds great. Yeah, I think those are the main questions. I mean, unless, Luis, if you have any like broader thoughts on just, you know, there's a lot of debate right now on like AI sovereignty, you know, open-weight models or closed-loop models. If you're able to share anything, I'd love to get your high-level view on that.

I mean, at the highest level, our view inside the company is that it is in our best interest as a company to use open weight models as much as possible. So if I had a magic wand, I would try to move everything to an open weight model. It's not always possible because sometimes the frontier models are more advanced. But from a company standpoint, it is just significantly better because it's way cheaper to use open weight models.

Perfect, perfect. And so what do you expect like this? You know, have we had a hybrid cloud? You know, do you think that's where we end up? Like, you know, you have some sort of orchestration where you put and many more.

Thank you so much. Thank you. I'm showing no further questions. This concludes the Q&A section of the call. I would now like to turn the call back to the host for closing remarks. Thank you, operator. I'd just like to thank everyone for joining us, and we look forward to seeing you on the next call.