Duolingo (DUOL) AI Stock Analysis

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Duolingo

(NASDAQ:DUOL)

68Neutral

Duolingo's stock score reflects its robust financial health, driven by strong revenue growth and efficient cash flow management. The technical analysis shows upward momentum, though caution is warranted due to high volatility and potential overbought conditions. While the valuation appears stretched with a high P/E ratio, the company's strategic focus on AI and new offerings could support long-term growth. Overall, Duolingo presents a balanced opportunity but faces short-term challenges in profitability and valuation metrics.

Positive Factors

Financial Performance

First-quarter total bookings and revenue showed significant year-over-year growth, exceeding expectations.

Monetization

Monetization shows meaningful upside with the Max subscription expanding from 5% to 7% of subscribers, exceeding estimates.

User Growth

Duolingo's viral marketing strategy resulted in a record quarter of monthly active user additions.

Negative Factors

Cost Management

Faster than expected success on cost optimization initiatives led to an adjusted EBITDA outperformance.

Market Saturation

User growth continues to show DUOL is far from total addressable market limits, evidenced by 14 million monthly active user net additions in one quarter.

Product Investment

DUOL has made outsized investments in product quality with cumulative R&D spend more than twice marketing.

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

Market Cap

$24.58B

Dividend YieldN/A

Average Volume (3M)1.01M

Price to Earnings (P/E)265.0

Beta (1Y)2.01

Revenue Growth39.14%

EPS Growth103.72%

CountryUS

Employees830

SectorTechnology

Sector Strength82

IndustrySoftware - Application

Share Statistics

EPS (TTM)0.72

Shares Outstanding39,260,630

10 Day Avg. Volume1,286,483

30 Day Avg. Volume1,008,887

Financial Highlights & Ratios

PEG Ratio32.14

Price to Book (P/B)26.22

Price to Sales (P/S)0.00

P/FCF Ratio80.32

Enterprise Value/Market Cap0.91

Enterprise Value/Revenue7.80

Enterprise Value/Gross Profit38.44

Enterprise Value/Ebitda88.01

Forecast

1Y Price Target

$439.23

Price Target Upside-17.21% Downside

Rating ConsensusModerate Buy

Number of Analyst Covering16

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 primarily through a freemium model, where the core language-learning app is free to use, but users can pay for a premium subscription called Duolingo Plus. This subscription offers features such as ad-free learning, offline access, and additional benefits to enhance the learning experience. Additionally, the company earns money through advertisements displayed to free users. Duolingo also partners with educational institutions and other organizations to provide customized language-learning solutions, which further contributes to its revenue. The combination of subscription fees, advertising, and partnerships constitutes the key revenue streams for Duolingo.

Duolingo Key Performance Indicators (KPIs)

Any

Users

Users
Shows the total number of people using Duolingo, highlighting its reach, market penetration, and potential for monetization.

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 Financial Statement Overview

Summary

Duolingo exhibits a robust financial profile marked by strong revenue growth, improved profitability, and solid cash flow generation. The balance sheet is healthy, with manageable debt levels and a strong equity position. Overall, the company is well-positioned for sustainable growth 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.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
811.21M	748.02M	531.11M	369.50M	250.77M	161.70M
	Gross Profit
584.81M	544.38M	389.00M	270.06M	181.59M	115.71M
	EBIT
70.09M	62.59M	-13.26M	-65.19M	-60.01M	-16.01M
	EBITDA
80.07M	74.66M	-5.83M	-60.03M	-57.28M	-13.76M
	Net Income Common Stockholders
96.75M	88.57M	16.07M	-59.57M	-60.13M	-15.78M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
829.71M	877.64M	747.61M	608.18M	553.92M	120.49M
	Total Assets
1.07B	1.30B	953.96M	747.35M	661.31M	175.74M
	Total Debt
56.64M	54.66M	25.04M	28.41M	29.12M	9.24M
	Net Debt
-773.07M	-731.13M	-722.57M	-579.77M	-524.80M	-111.25M
	Total Liabilities
357.62M	477.18M	298.46M	205.27M	148.25M	256.43M
	Stockholders Equity
711.05M	824.55M	655.50M	542.08M	513.06M	-80.69M
Cash Flow		Free Cash Flow
290.20M	273.40M	139.93M	43.53M	2.96M	13.69M
	Operating Cash Flow
307.63M	285.51M	153.61M	53.66M	9.17M	17.71M
	Investing Cash Flow
-222.86M	-217.33M	-13.58M	-14.17M	-6.21M	-4.01M
	Financing Cash Flow
-30.49M	-30.00M	2.13M	14.78M	430.47M	46.95M

Duolingo Technical Analysis

Technical Analysis Sentiment

Positive

Last Price530.52

Price Trends

50DMA

360.38

Positive

100DMA

357.92

Positive

200DMA

314.65

Positive

Market Momentum

MACD

52.66

Negative

RSI

80.50

Negative

STOCH

90.78

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DUOL, the sentiment is Positive. The current price of 530.52 is above the 20-day moving average (MA) of 438.41, above the 50-day MA of 360.38, and above the 200-day MA of 314.65, indicating a bullish trend. The MACD of 52.66 indicates Negative momentum. The RSI at 80.50 is Negative, neither overbought nor oversold. The STOCH value of 90.78 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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 (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
DSP	72 Outperform	$1.00B	532.56	4.15%	―	30.64%	―
DUOL	68 Neutral	$24.58B	264.97	12.06%	―	39.14%	103.72%
SPT	65 Neutral	$1.41B	―	-36.95%	―	17.79%	16.49%
FRGE	61 Neutral	$188.62M	―	-27.44%	―	16.03%	30.99%
Sector *	60 Neutral	$11.64B	10.63	-6.94%	2.93%	7.63%	-11.15%
NRDY	48 Neutral	$322.29M	―	-104.69%	―	-1.64%	9.99%

* Technology Sector Average

Performance Comparison

DUOL

Duolingo

529.05

349.91

195.33%

SPT

Sprout Social

23.75

-6.18

-20.65%

NUKK

Nukkleus

15.93

8.73

121.25%

NRDY

Nerdy

1.69

-0.35

-17.16%

FRGE

Forge Global Holdings

14.35

-12.50

-46.55%

DSP

Viant Technology

16.03

5.84

57.31%

Duolingo Earnings Call Summary

Earnings Call Date:May 01, 2025

(Q1-2025)

% Change Since: 32.63%|

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 Corporate Events

Executive/Board Changes

Duolingo Welcomes Bonnie Ross to Board of Directors

Positive

Dec 9, 2024

Duolingo, the leading mobile learning platform, has appointed gaming industry veteran Bonnie Ross to its Board of Directors. With 30 years in the gaming sector, including key roles at Microsoft, Ross brings expertise in creating engaging experiences and expanding global franchises like Halo. Her appointment aligns with Duolingo’s mission to make learning fun and accessible, leveraging her passion for innovative and entertaining educational experiences.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

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.