Duolingo (DUOL) AI Stock Analysis

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Duolingo

(NASDAQ:DUOL)

Rating:61Neutral

Price Target:

$420.00

▲(11.02%Upside)

Duolingo's strong financial performance is a major positive, supported by impressive user and revenue growth. However, the high valuation and technical indicators suggest caution, with the stock appearing overbought. Challenges with gross margin and monetization of new subjects also temper the outlook.

Positive Factors

AI and Innovation

AI is accelerating Duolingo's product innovation, potentially leading to higher user growth, monetization, and margins over the next several years.

User Base Growth

New product offerings could potentially add tens of millions of monthly active users and contribute to a doubling of the user base by 2028.

Negative Factors

Social Media Backlash

US trends are in focus given social media pushback to DUOL's 'AI-First' memo, which is believed to be the primary driver behind US DAUs decline.

User Growth Deceleration

Investor concern has been driven by 3P data suggesting greater than expected user growth deceleration & Subscription Bookings growth deceleration and an uptick in Max churn.

Duolingo (DUOL) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$17.11B

Dividend YieldN/A

Average Volume (3M)896.12K

Price to Earnings (P/E)188.9

Beta (1Y)1.76

Revenue Growth39.14%

EPS Growth103.72%

CountryUS

Employees830

SectorTechnology

Sector Strength94

IndustrySoftware - Application

Share Statistics

EPS (TTM)0.72

Shares Outstanding39,260,630

10 Day Avg. Volume782,188

30 Day Avg. Volume896,124

Financial Highlights & Ratios

PEG Ratio23.77

Price to Book (P/B)19.40

Price to Sales (P/S)0.00

P/FCF Ratio59.40

Enterprise Value/Market Cap0.96

Enterprise Value/Revenue5.68

Enterprise Value/Gross Profit27.99

Enterprise Value/Ebitda64.08

Forecast

1Y Price Target

$502.27

Price Target Upside32.77% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering14

Duolingo Business Overview & Revenue Model

Company DescriptionDuolingo, Inc. develops a language-learning website and mobile app in the United States and China. The company offers courses in 40 different languages, including Spanish, English, French, Japanese, German, Italian, Chinese, Portuguese, and others. It also provides a digital language proficiency assessment exam. The company was incorporated in 2011 and is headquartered in Pittsburgh, Pennsylvania.

How the Company Makes MoneyDuolingo generates revenue through a multifaceted business model. The primary revenue stream is its subscription service, Duolingo Plus, which offers users an ad-free experience, offline access, and other premium features. Additionally, Duolingo earns money through in-app advertisements shown to free-tier users. The company also capitalizes on the Duolingo English Test, an online, convenient, and widely accepted English proficiency assessment that serves educational institutions and individuals. Moreover, partnerships with educational entities and institutions contribute to its financial growth by integrating its platform into formal learning environments. These revenue streams, along with strategic investments in technology and content expansion, drive Duolingo's financial performance.

Duolingo Key Performance Indicators (KPIs)

Any

Users

Users
Tracks the total number of users engaging with Duolingo, indicating the platform's reach and popularity as a leading language-learning app.

Chart InsightsDuolingo's user base is experiencing robust growth, with daily active users increasing by 49% year-over-year. This surge is supported by strategic initiatives like AI-driven content creation and the expansion of language courses, including new offerings like chess. Despite challenges with gross margin declines and monetization of new subjects, the company's focus on enhancing user engagement and exploring app store payment optimizations could sustain this momentum. The introduction of the Duolingo Max plan is also contributing positively, though pricing adjustments in certain markets may be necessary to maximize adoption.

Data provided by:

Main Street Data

Duolingo Earnings Call Summary

Earnings Call Date:May 01, 2025

(Q1-2025)

% Change Since: -5.42%|

Next Earnings Date:Aug 06, 2025

Earnings Call Sentiment Neutral

Duolingo's earnings call highlighted strong growth in daily active users and successful expansion of language courses, aided by AI. However, the company faces challenges with declining gross margins and monetization of new educational subjects. The introduction of new offerings like chess and AI-driven efficiencies are promising, but pricing issues in certain markets persist.

Q1-2025 Updates

Positive Updates

Strong Daily Active User Growth

Duolingo reported a 49% year-over-year growth in daily active users, continuing strong growth trends from previous years.

Expansion of Language Courses

Duolingo added 148 new language courses using AI, significantly speeding up content creation compared to the previous 12 years.

AI-Driven Content Creation

AI has allowed Duolingo to create nearly 100% of its content automatically, enhancing the speed and efficiency of course development.

Introduction of Chess Course

Duolingo is set to launch a chess course developed with a small team using AI, expanding its educational offerings beyond language.

Impressive Max Subscription Growth

Max subscriptions make up about 7% of total subscribers, contributing to strong Q1 performance.

Negative Updates

Gross Margin Decline

Duolingo reported a 200 basis point decline in gross margin for Q1, though better than the expected 300 basis point decline.

Challenges in Monetizing New Subjects

While new subjects like math and music are growing, their contribution to overall revenue remains smaller compared to language learning.

High Price of Max in Certain Markets

Max subscription pricing remains high in markets like India, limiting adoption despite plans to lower prices in the future.

Company Guidance

In the recent call, Duolingo provided detailed guidance on their financial performance and strategic initiatives. The company anticipates a full-year gross margin decline of about 150 basis points year-over-year, with a sequential decline of 50 basis points expected in Q2, followed by an increase in Q3 and Q4, ultimately ending the year at levels similar to the prior year. As of the end of Q1, 7% of subscribers were utilizing the Duolingo Max plan, contributing to strong financial results. The company continues to focus on expanding their offerings, including the recent addition of 148 new language courses, which were developed using AI. This AI-driven approach also enables the creation of content more efficiently, allowing Duolingo to enhance user engagement through features like the Video Call with Lily. These advancements are expected to drive user growth, particularly among English learners, who currently constitute around 50% of Duolingo's user base—a figure the company hopes will eventually reach closer to the global average of 80%. Additionally, Duolingo is exploring the potential benefits of recent legal developments regarding app store payment structures, which may offer new opportunities for cost optimization.

Duolingo Financial Statement Overview

Summary

Duolingo exhibits strong revenue growth, improved profitability, and solid cash flow generation. The balance sheet is healthy with manageable debt levels and a strong equity position, indicating sustainable growth potential in the competitive software application industry.

Income Statement

Very Positive

Duolingo shows strong revenue growth with a remarkable increase from $748.0 million in 2024 to $811.2 million in TTM 2025. Gross and net profit margins have improved significantly, indicating enhanced profitability. The EBIT and EBITDA margins reflect positive operational efficiency, showcasing the company's ability to convert revenue into earnings effectively.

Balance Sheet

Positive

The balance sheet is stable with a healthy equity ratio and relatively low debt-to-equity ratio, indicating prudent financial leverage. Return on equity has improved, reflecting increased shareholder value. The company's strong cash position further underscores its financial stability.

Cash Flow

Very Positive

Duolingo's cash flow statement demonstrates robust operating cash flow generation and positive free cash flow growth. The operating cash flow to net income ratio is strong, indicating efficient cash earnings. Consistent free cash flow growth supports future investments and financial flexibility.

Breakdown	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	748.02M	531.11M	369.50M	250.77M	161.70M
Gross Profit	544.38M	389.00M	270.06M	181.59M	115.71M
EBITDA	74.66M	-5.83M	-60.03M	-57.28M	-13.76M
Net Income	88.57M	16.07M	-59.57M	-60.13M	-15.78M
Balance Sheet
Total Assets	1.30B	953.96M	747.35M	661.31M	175.74M
Cash, Cash Equivalents and Short-Term Investments	877.64M	747.61M	608.18M	553.92M	120.49M
Total Debt	54.66M	25.04M	28.41M	29.12M	9.24M
Total Liabilities	477.18M	298.46M	205.27M	148.25M	256.43M
Stockholders Equity	824.55M	655.50M	542.08M	513.06M	-80.69M
Cash Flow
Free Cash Flow	273.40M	139.93M	43.53M	2.96M	13.69M
Operating Cash Flow	285.51M	153.61M	53.66M	9.17M	17.71M
Investing Cash Flow	-217.33M	-13.58M	-14.17M	-6.21M	-4.01M
Financing Cash Flow	-30.00M	2.13M	14.78M	430.47M	46.95M

Duolingo Technical Analysis

Technical Analysis Sentiment

Negative

Last Price378.31

Price Trends

50DMA

469.32

Negative

100DMA

399.85

Negative

200DMA

365.84

Negative

Market Momentum

MACD

-26.47

Positive

RSI

24.49

Positive

STOCH

19.09

Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DUOL, the sentiment is Negative. The current price of 378.31 is below the 20-day moving average (MA) of 407.57, below the 50-day MA of 469.32, and above the 200-day MA of 365.84, indicating a bearish trend. The MACD of -26.47 indicates Positive momentum. The RSI at 24.49 is Positive, neither overbought nor oversold. The STOCH value of 19.09 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for DUOL.

Duolingo Risk Analysis

Duolingo disclosed 55 risk factors in its most recent earnings report. Duolingo reported the most risks in the "Finance & Corporate" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Duolingo Peers Comparison

Overall Rating

UnderperformOutperform

Sector (63)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SPT	64 Neutral	$1.13B	―	-36.95%	―	17.79%	16.49%
Sector *	63 Neutral	$34.16B	5.47	-11.67%	1.85%	5.30%	-18.30%
DUOL	61 Neutral	$17.11B	188.95	12.06%	―	39.14%	103.72%
NUKK	―	$43.47M	0.44		―	―	―
DSP	70 Outperform	$840.89M	451.50	4.15%	―	30.64%	―
FRGE	58 Neutral	$208.10M	―	-27.44%	―	16.03%	30.99%
NRDY	48 Neutral	$285.45M	―	-104.69%	―	-1.64%	9.99%

* Technology Sector Average

Performance Comparison

DUOL

Duolingo

361.35

180.40

99.70%

SPT

Sprout Social

18.63

-18.78

-50.20%

NUKK

Nukkleus

7.90

5.21

193.68%

NRDY

Nerdy

1.58

-0.25

-13.66%

FRGE

Forge Global Holdings

16.97

-6.73

-28.40%

DSP

Viant Technology

13.59

2.77

25.60%

Duolingo Corporate Events

Executive/Board ChangesShareholder Meetings

Duolingo Holds 2025 Annual Stockholders Meeting

Neutral

Jun 13, 2025

On June 11, 2025, Duolingo, Inc. held its 2025 Annual Meeting of Stockholders, where approximately 97.64% of the company’s voting power was represented. During the meeting, three Class I directors were elected, and the appointment of Deloitte & Touche LLP as the independent registered public accounting firm was ratified. Additionally, the compensation of the company’s named executive officers was approved on an advisory basis.

The most recent analyst rating on (DUOL) stock is a Hold with a $183.00 price target. To see the full list of analyst forecasts on Duolingo stock, see the DUOL Stock Forecast page.

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Jun 26, 2025