Duolingo Stock (DUOL) Offers Volatility-Fueled Buying Opportunity

Duolingo’s (DUOL) press release issued on Monday landed poorly and only extended the stock’s already brutal sell-off. Investors seem to have zeroed in on the CFO transition and management’s commitment to continue pouring money into product development rather than focusing on juicing near-term margins.

Yet the document itself doesn’t read like a profit warning. I translated it more like management saying, “we’re still compounding, we’re just not bending our strategy to short-term market noise.” With momentum intact and the valuation now at rather depressed levels, I remain bullish and happily selling puts to capitalize on the ongoing volatility.

CFO Change, Not a Crisis

The headline item of Monday’s press release was the CFO change. Matt Skaruppa, who helped steer Duolingo through its IPO and rapid scaling, will step down in early 2026 and move into an advisory role, while Gillian Munson, who has been a board member since 2019 and chair of the audit committee, becomes CFO. She already knows the product, the culture, and the investor base, and brings prior senior finance experience from Vimeo and other tech firms.

Markets tend to treat “CFO transition” as a red flag. This is especially the case when it lands next to fresh guidance. Here, however, that reaction ignores the bigger picture. Duolingo is coming off another stretch of strong user and revenue growth, all while management is confident enough to pair the CFO transition news with an upbeat operating update. I honestly can’t see any hidden caveats.

In fact, I think the new CFO could bring some fresh thinking to capital returns, which the company still hasn’t introduced, even though it’s absolutely swimming in cash (for its size). Duolingo held $1.1 billion in cash at the end of last quarter, against well under $100 million in debt, leaving around $1 billion in net cash and virtually no leverage.

For a company still growing this fast, that is an enviable financial position and gives a new CFO room to argue for buybacks at today’s beaten-down prices without undermining the long-term investment agenda.

Prelim Results Still Show Real Momentum

Alongside the personnel news, Duolingo pre-announced key operating metrics for Q4. Daily active users grew about 30% year-on-year, and bookings came in at or slightly above the top of the already strong guidance range of $329.5–$335.5 million.

You can see the same story in the last full set of reported numbers. Last quarter, Duolingo surpassed 50 million daily active users, up 36% year-on-year, while revenue grew roughly 41%. Those are elite compounding rates for a business already at this scale, powered largely by subscription growth and better monetization of its huge free user base.

So then what exactly spooked the market? The only truly cautious note was management’s reiterated willingness to keep investing in the product and in AI, even at the expense of some near-term margin expansion. But that’s a stance they had already flagged earlier last year, and they followed it with strong quarterly results, as evidenced by the preliminary numbers. For me, that is a rational long-term choice because management achieves impressive user growth numbers that would otherwise drive short-term margin headwinds (and margins are very high anyway).

Volatility Has Turned Duolingo Into a Bargain

If you strip away the noise, you are left with a striking valuation reset. After its extended sell-off, Duolingo is now trading on a forward P/E of around 22. I find this to be a depressed valuation for a company still growing its core user base by 30% and its revenue by an even higher 30–40% rate. Given a capital-light, software-like model with strong incremental margins, that looks undemanding, not extravagant.

Set that against the balance sheet, and it becomes even more compelling. A business with $1.1 billion in cash is being priced closer to a mature consumer-staple name that has lost any prospect of extraordinary growth. Even if growth slows into the mid-20s or down towards 20% over the next few years, today’s valuation leaves plenty of room for earnings growth to drive excellent returns.

These days, I am leaning into volatility by selling puts rather than simply buying the common. The recent slide has pushed option premiums higher, so I am being paid to take the risk of owning more at lower effective entry prices. If the stock snaps back, the options expire, and I keep the premium; if it sells off further and I am assigned, I am comfortable becoming a larger shareholder in a business whose fundamentals still look much better than the mood around the stock suggests.

Is DUOL a Good Stock to Buy?

On Wall Street, DUOL stock features a Moderate Buy consensus rating, based on 10 Buy, six Hold, and one Sell rating. Notably, Duolingo’s average stock price target of $262.69 implies ~68% upside potential over the next 12 months.

See more DUOL analyst ratings

Duolingo’s Long Game Meets Short-Term Fear

In a single press release, Duolingo reminded investors that leadership transitions and continued investment are exactly what it takes to build a brand that lasts. There’s no evidence of deterioration here—only deliberate reinvestment. Still, the market responded the way it often does: with another wave of selling.

I see something different. I see a cash-rich compounding machine that’s been temporarily mispriced by short-term fear—and I’m perfectly happy to let the options market pay me to stay bullish.