It's ambiguous — both readings are internally consistent with the data. The right answer is a segmentation plan, not a verdict.

Possible stories, all plausible:

Healthy: better UX. You shipped a faster search / better default feed, so users get what they need and leave sooner. DAU grows because the product is sharper. Session time down is a feature, not a bug.
Healthy: pulled in casual users. A viral share or new surface brought in a large new-user cohort whose sessions are naturally shorter. DAU goes up from the mix, average drops mechanically.
Worrying: power users disengaging. DAU is up because a noisy notification is yanking people back daily, but they're bouncing faster. The “DAU” metric is getting gamed while the thing it proxied for (actual engagement) is eroding. This is Goodhart territory.
Worrying: cannibalization. A new lightweight feature is replacing a heavier one, inflating DAU on the new surface while long sessions collapse elsewhere.

How to disambiguate:

Segment by user cohort. Is session time for existing users flat while new users drag the average down (story 2), or is it down for existing users too (story 3)?
Look at the distribution, not the mean. Is the bottom of the session-time distribution growing (new casuals) or is the top shrinking (power users leaving)?
Pair with a retention metric. D7 or D30 retention tells you whether the added DAU sticks. High DAU + low retention is the classic warning sign.
Check downstream KPIs — revenue, purchases, posts, whatever the product's real north star is. If those are up, shorter sessions are probably fine.

What to tell the exec team: “Both are possible. I can get you a segmentation in a day that separates ‘we got better’ from ‘we got shallower.’ I’d hold the celebration until we see what retention does at day 30.”

Naming Goodhart's Law here — “when DAU becomes the target, it stops measuring what it used to” — earns credibility points.

DAU is up but session time is down. What does that mean?

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