Duolingo, Inc.

NASDAQ Global Select
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Bullish +75

Here's Why I Bought This Glorious Growth Stock After Its 83% Plunge

AI-generated analysis

🏫 Duolingo operates the world's largest digital language-education platform with over 52 million daily active users.

💸 Investors recently sold off the stock after management revealed a plan to nearly double its user base by 2028.

📉 The company has fallen 83% from its peak value over the past year as fears grew about AI disruption and short-term revenue headwinds.

🤖 AI features like an avatar named Lily and roleplay chatbots are integrated into paid subscriptions to enhance learning.

🚀 Total revenue hit a record $1.04 billion in 2025, representing 39% growth from the previous year.

💰 GAAP net income soared 367% year over-year to a record $414.1 million during the same period.

🎯 Management aims to reach 100 million daily active users by 2028, prioritizing user acquisition over immediate monetization.

📊 The stock trades at a price-to-earnings ratio of 10.2, marking its cheapest valuation since going public in 2021.

📉 Wall Street expects earnings to decline to $7.07 per share in 2026, yet the forward P/E remains attractive at 12.9.

💰 The price-to-sales ratio is 4.1, which is also the lowest since IPO and a 74% discount to its long-term average.

🛡️ A larger user base is seen as a strategic advantage that makes the platform harder to disrupt in a competitive AI landscape.

🔄 Subscribers gain access to exclusive AI features like Video Call and Duolingo Max through paid tiers.

📈 User base grew 30% year over-year to 52.7 million daily active users with 12.2 million paid subscribers.

⚠️ Analysts at The Motley Fool Stock Advisor list have identified ten better stocks for investors to buy instead of Duolingo.

🤝 The article argues that concerns about AI replacing the platform are overblown given its gamified education approach.

Bullish Signals
  • Duolingo operates the world's largest digital language-education platform with over 52 million daily active users.
  • The company achieved record revenue of $1.04 billion in 2025, representing a strong 39% year-over-year growth.
  • Net income reached a record $414.1 million in 2025, soaring by an impressive 367% year over year.
  • Duolingo has over 12.2 million paid subscribers, with this number growing by 28% to hit a record high.
  • Artificial intelligence features like 'Video Call' and 'Roleplay' are successfully enhancing the user experience and driving value.
  • The company plans to nearly double its user base to 100 million daily active users by 2028, creating significant long-term upside potential.
  • Duolingo stock is trading at an attractive forward P/E ratio of 12.9 based on Wall Street's 2026 expectations, which is still a bargain valuation.
  • The current price-to-sales ratio of 4.1 is well below the company's long-term average of 16.1, representing a 74% discount.
Risk Factors
  • The stock has lost 83% of its peak value over the past year, indicating significant recent downside pressure.
  • Investors remain concerned that artificial intelligence (AI) will disrupt the business model.
  • Management's plan to target faster user growth is expected to act as a headwind for revenue and profits in the short term.
  • Wall Street expects Duolingo's annual earnings to decline to $7.07 per share during 2026 due to management's focus on acquiring new users.
  • The company plans to nearly double its user base by 2028, which could result in slower revenue and earnings growth in the short term.
  • Duolingo was not included in The Motley Fool Stock Advisor analyst team's list of 10 best stocks for investors to buy now.
Full Analysis
Duolingo operates the world's largest digital language-education platform, currently serving over 52.7 million daily active users (DAUs) at the end of 2025, which represents a 30% year-over-year increase. The company reported record financial performance last year, generating $1.04 billion in total revenue—a 39% growth from the previous year—and achieving $414.1 million in GAAP net income, up 367%. Despite this strong performance, Duolingo stock has fallen by approximately 83% from its peak value over the past year, primarily due to investor concerns regarding potential disruption from artificial intelligence (AI) and management's strategy to prioritize user acquisition over short-term monetization. To address AI-related fears, Duolingo has integrated advanced features into its paid subscription tiers. Users purchasing Super Duolingo or Duolingo Max gain access to an AI-powered video call feature with a digital avatar named Lily, which adapts to individual fluency levels while maintaining the platform's playful tone. Additionally, the more expensive Duolingo Max subscription includes AI-driven Roleplay tools that facilitate conversational skill improvement through chatbot interfaces. The author argues that rather than threatening the business, AI acts as a valuable asset enhancing user engagement and retention, evidenced by paid subscribers reaching 12.2 million users, an increase of 28%. Looking ahead to 2028, Duolingo management plans to nearly double its daily active user base from 52.7 million to 100 million users, expecting that aggressive growth in the user base will eventually lead to superior long-term revenue and earnings through conversion opportunities. The article notes that while Wall Street expects annual earnings to decline to $7.07 per share during 2026 due to this focus on user acquisition, Duolingo stock remains undervalued, trading at a price-to-earnings ratio of 10.2 based on 2025 earnings—a record low since its 2021 IPO—and a forward P/E of 12.9. At a price-to-sales ratio of 4.1, which is significantly lower than its long-term average of 16.1 and a 74% discount compared to the S&P 500's 23.5 P/E, the stock presents a potential buying opportunity for investors willing to hold through the short-term growth phase until 2028.