Duolingo (DUOL) shares have delivered a roller-coaster performance this summer. After plunging nearly 40% from their 52-week high in May—driven largely by a social media backlash—the stock staged a dramatic rebound yesterday, surging almost 30%, following a blowout earnings report, before closing the day up about 14%.
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Even after the rally, shares remain nearly 30% below their 52-week peak. This raises the key question for investors: what’s driving Duolingo’s dizzying volatility, and does the current pullback present a compelling entry point? The answer, as you’ll soon see, is a resounding yes. Therefore, I’m stoutly Bullish on DUOL stock in the short- to medium-term.
Why is Duolingo Stock So Volatile?
It’s worth noting that shares of the popular language platform had tripled since last August, so there was some froth in the stock that was bound to come out based on any bad news.
In this case, the stock started to fall after Duolingo CEO Luis von Ahn announced that Duolingo would be an “AI-first company,” just a couple of months ago. This would typically bode well for the stock at a time when the mere mention of AI often sends stocks skyrocketing even when there’s little substance to the claims.
However, this wasn’t the case with Duolingo. The company had cultivated a friendly, quirky image that earned it many fans who loved its widely recognized mascot, a cute green owl, but quite a few of these fans took offense at the idea of their beloved platform becoming “AI-first” and presumably laying off employees.
This unexpectedly led to a significant backlash on social media as users called for a boycott of Duolingo and threatened to cancel their subscriptions. The CEO walked back his comments and even sat down for a somewhat bizarre interview where he was taken to task about the comments by someone wearing a mask of Duolingo’s green owl mascot. It didn’t do much to help the stock price as investors still feared that the boycott could impact the company’s results.
Answering the Bell
Whatever concerns were out there, Duolingo addressed them, and then some, by announcing blowout Q2 earnings results.
Duolingo’s revenue soared by a stunning 41.5% year-over-year during a period that encompassed the bulk of the backlash. Management also ramped up its full-year guidance from ~$987 million to $1.02 billion. Simultaneously, Duolingo increased net income by 84% year-over-year to $45 million.
Perhaps even more importantly for long-term investors, Duolingo also expanded its user base significantly. Daily active users increased from 34 million last year to 48 million this quarter, representing a 40% gain. By definition, these are the users most engaged with Duolingo’s offerings, so this bodes quite well for the stickiness and long-term growth of the platform.
Encouragingly, management attributed some of these gains to enhancements made possible by AI, including a video-call practice feature. This daily active user growth was actually at the lower end of the company’s guidance, which the CEO attributed to the controversy, but ultimately, 40% revenue growth is still excellent, and the results instill confidence that the social media backlash was overblown and had little impact on the company’s long-term trajectory.
Long Runway Ahead for DUOL
The company is exhibiting phenomenal daily active user growth, but there is still a significant runway for growth ahead. It’s often said that over a billion people around the world have learned English (as non-native speakers) or actively want to learn English.
Duolingo will not capture all of these users, but with 48 million active customers already, they currently have just a tiny sliver of this massive cohort. Furthermore, this is just people wanting to learn English, and doesn’t even account for people who want to learn Spanish, Chinese, or any of the other many languages on Duolingo’s platform.
DUOL Looks Beyond Languages
The language market is vast, but Duolingo is also spreading its wings beyond languages and expanding its total addressable market even further. Duolingo is now bolstering its core language offerings with new areas for learning like chess, math, and music.
Users who enjoy learning a new language on Duolingo may decide they want to use it for music or chess as well, and it can also put Duolingo in front of entirely new audiences who have no interest in learning a new language but want to learn guitar or math. If successful in these new frontiers, Duolingo can eventually become a superapp synonymous with all areas of online learning.
Valuation Concerns Begin to Surface
At this point, my only genuine concern about Duolingo is valuation. The stock trades at an extremely high valuation of nearly 115x 2025 earnings estimates. However, with analysts expecting earnings per share to accelerate from $2.99 in 2025 to $4.44 in 2026, the stock trades for 77x 2026 earnings estimates. This is obviously still on the high side, but it illustrates that the stock should become less expensive over time as earnings increase.
Furthermore, looking at it from a price-to-sales perspective, based on the company’s new revenue guidance, DUOL stock trades at roughly 15x 2025 revenue projections, which is not cheap but not unreasonable given the company’s rapid revenue growth and impressive user growth.
Is Duolingo Stock Worth Buying?
Turning to Wall Street, DUOL earns a Strong Buy consensus rating based on 10 Buys, three Holds, and zero Sell ratings assigned in the past three months. DUOL’s average stock price target of $501.82 implies 28% upside potential over the coming year.
DUOL Investors Should Buckle Up for the Ride
I’m bullish on Duolingo and believe it represents an attractive long-term growth opportunity for risk-tolerant investors who are willing to buckle up and endure some volatility along the way. With a higher valuation and plenty of attention online, the stock is bound to be volatile.
However, I’m bullish based on its strong revenue growth and impressive daily active user growth. Over the long term, I like the immense opportunity the company has in potentially capturing even more of the massive market of people looking to learn English, as well as in moving into exciting new verticals like math and music.
The valuation is not for the faint-hearted, but it is not excessive from a price-to-revenue perspective based on Duolingo’s revenue and user growth. This is a sticky platform with a passionate and growing user base, meaning it could grow into a truly massive stock over the next few years.