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1. Company Snapshot

1.a. Company Description

Duolingo, 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.

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1.b. Last Insights on DUOL

Duolingo's recent performance was negatively impacted by slowing user growth, cooling revenue outlook, and high valuation. An insider's sale of shares led to a new 52-week low. A class-action investigation was launched against the company, and structural AI risks and decelerating user growth have raised concerns. The company's Q4 earnings showed strong sales and free cash flow, but daily and monthly active user growth are rapidly decelerating, signaling saturation. FY2026 guidance forecasts limited growth, undermining the prior profitability thesis.

1.c. Company Highlights

2. Duolingo's Strong 2025 Results and Ambitious 2026 Guidance

Duolingo reported a robust financial performance for 2025, with bookings exceeding $1 billion and adjusted EBITDA surpassing $300 million. The company's daily active users surpassed 50 million, a testament to its strong user growth. The actual EPS came out at $0.848, beating estimates of $0.79. Revenue growth is expected to be 15-18% in 2026, with bookings growth guided at 10-12%. The adjusted EBITDA margin is expected to be around 25%. The company's financial performance is a reflection of its successful business model, with a strong focus on user engagement and monetization.

Publication Date: Mar -02

📋 Highlights
  • DAU & Financials 2025:: Surpassed 50 million daily active users; 2025 bookings exceeded $1 billion, adjusted EBITDA over $300 million.
  • 2026 Guidance:: Bookings growth 10-12%, revenue 15-18%, adjusted EBITDA margin ~25%; long-term target of $2.5 billion revenue and $700 million+ EBITDA by 2028.
  • User Growth Strategy:: 20% YoY DAU growth in 2026; 2028 goal of 100 million DAUs to drive higher bookings and profit.
  • Product & Monetization Shifts:: Introduced Super Duolingo video calls, chess app (7 million DAUs), and A/B testing for pricing; free-user experience improvements to boost 10% paid conversion rate.
  • Capital Allocation:: $400 million share buyback authorization; focus on scaling math and music courses, alongside refining social marketing for virality.

Financial Performance and Guidance

The company's guidance for 2026 implies an acceleration to much higher growth rates in the next couple of years, with a potential $2.5 billion business and over $700 million in adjusted EBITDA. The guidance assumes some modest results towards the end of the year, with the introduction of new features such as video calls in Super Duolingo. The company's focus on user growth, with a 20% year-over-year growth expected throughout 2026, is expected to drive long-term growth.

Valuation Metrics

Duolingo's current valuation metrics indicate a strong market position. The P/S Ratio is 4.5, and the EV/EBITDA is 21.63. The ROE is 36.6%, indicating a strong return on equity. The Free Cash Flow Yield is 8.07%, suggesting a healthy cash generation capability. These metrics suggest that the market has priced in a certain level of growth, but the company's guidance suggests that there is still room for upside.

User Growth and Engagement

The company is prioritizing user growth in 2026, with a focus on teaching languages better, improving the free user experience, and investing in new subjects like math, music, and chess. The company believes that its market lead and user engagement make it well-positioned, with a large pool of users due to its popular product and word-of-mouth. The company's goal is to reach 100 million daily active users by 2028, which would result in a more resilient brand and significantly higher bookings and profit.

Innovation and Competitive Advantage

Duolingo is innovating and expanding its offerings, with a focus on AI-powered features and new subjects. The company believes that its app is like a game, and text-based chatbots can't match its engagement. The company's focus on creating a beautiful, visual experience that keeps users engaged is expected to drive long-term growth. CEO Luis von Ahn noted that Duolingo has always tried to adopt AI quickly and will continue to take the next steps, with a focus on becoming AI-native.

3. NewsRoom

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INVESTOR ALERT: Faruqi & Faruqi, LLP Continues Investigation of Potential Securities Claims Against Duolingo (DUOL)

Mar -20

Source: newsfilecorp.com

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ONGOING INVESTIGATION NOTICE: Faruqi & Faruqi, LLP Continues Investigation of Potential Securities Claims Against Duolingo (NASDAQ: DUOL)

Mar -19

Source: globenewswire.com

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DUOL Trades Higher Than Industry: Is It Worth the Premium Valuation?

Mar -18

Source: zacks.com

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Danica Pension Livsforsikringsaktieselskab Makes New $5.78 Million Investment in Duolingo, Inc. $DUOL

Mar -18

Source: defenseworld.net

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Duolingo, Inc. (DUOL) Laps the Stock Market: Here's Why

Mar -17

Source: zacks.com

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CHAOS Economics Is No Longer a Theory

Mar -17

Source: investorplace.com

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Stock Market Today (LIVE): Adobe CEO Steps Down; Iran and Oil Turmoil Spells A Volatile Friday

Mar -13

Source: fool.com

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Blair William & Co. IL Has $2.47 Million Stock Holdings in Duolingo, Inc. $DUOL

Mar -13

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (22.65%)

6. Segments

Subscription

Expected Growth: 23.13%

Duolingo's subscription growth of 23.13% is driven by increasing demand for online language learning, fueled by a growing global workforce, travel, and education. The app's gamification, AI-powered learning, and freemium model attract users. Strong brand recognition, user engagement, and retention also contribute to the growth, as well as the company's expansion into new markets and languages.

Advertising

Expected Growth: 19.9%

Duolingo's 19.9% advertising growth is driven by increasing mobile usage, gamification-based engagement, and effective user acquisition strategies. The platform's freemium model, with a large user base, provides a lucrative opportunity for advertisers. Additionally, Duolingo's AI-powered ad targeting and measurement capabilities enhance ad effectiveness, attracting more advertisers and driving revenue growth.

Duolingo English Test

Expected Growth: 23.33%

Duolingo English Test's 23.33% growth is driven by increasing demand for online language learning, fueled by globalization and remote work. The platform's gamification, AI-powered adaptive technology, and free access attract a large user base. Strategic partnerships with universities and governments, as well as the test's acceptance by top institutions, further boost its popularity.

In-app Purchases

Expected Growth: 20.47%

Duolingo's 20.47% growth in in-app purchases is driven by its gamification approach, making language learning engaging and fun. The app's freemium model, offering a limited free version and a premium subscription, encourages users to upgrade. Additionally, Duolingo's AI-powered chatbots and interactive exercises provide a personalized learning experience, increasing user retention and willingness to pay.

Other

Expected Growth: 11.67%

Duolingo's 11.67% growth in 'Other' segment is driven by increasing adoption of its language learning platform in emerging markets, expansion of its B2B offerings, and growing demand for its AI-powered language assessment tools. Additionally, the company's strategic partnerships and investments in new technologies, such as augmented reality, are contributing to its growth momentum.

7. Detailed Products

Duolingo Language Learning Platform

A free language-learning platform that offers courses in over 30 languages, with interactive lessons, quizzes, and games.

Duolingo English Test

A standardized English proficiency test that evaluates reading, writing, listening, and speaking skills, accepted by universities and institutions worldwide.

Duolingo for Schools

A platform that provides language learning resources and tools for teachers and students, including lesson plans, progress tracking, and classroom management features.

Duolingo Events

A feature that allows users to participate in live, interactive language learning sessions, led by certified teachers or native speakers.

Duolingo Podcast

A podcast that explores real-life stories and conversations in different languages, with accompanying language learning exercises and quizzes.

8. Duolingo, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Duolingo's gamification and interactive approach to language learning makes it difficult for substitutes to emerge, as users are highly engaged and loyal to the platform.

Bargaining Power Of Customers

While customers have some bargaining power due to the availability of alternative language learning platforms, Duolingo's free and high-quality content reduces the likelihood of customers switching to competitors.

Bargaining Power Of Suppliers

Duolingo's business model is not heavily reliant on suppliers, and the company has a high degree of control over its content creation and distribution, reducing the bargaining power of suppliers.

Threat Of New Entrants

While there are barriers to entry in the language learning market, new entrants can still emerge, especially with the rise of AI-powered language learning tools. However, Duolingo's established brand and user base provide a competitive advantage.

Intensity Of Rivalry

The language learning market is highly competitive, with many established players and new entrants vying for market share. Duolingo must continue to innovate and improve its offerings to maintain its market position.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 3.68%
Debt Cost 3.95%
Equity Weight 96.32%
Equity Cost 8.01%
WACC 7.86%
Leverage 3.82%

11. Quality Control: Duolingo, Inc. passed 7 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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AppFolio

A-Score: 4.7/10

Value: 0.8

Growth: 9.7

Quality: 8.9

Yield: 0.0

Momentum: 4.0

Volatility: 5.0

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Paylocity

A-Score: 4.7/10

Value: 2.0

Growth: 9.2

Quality: 8.0

Yield: 0.0

Momentum: 1.5

Volatility: 7.3

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Duolingo

A-Score: 4.5/10

Value: 1.9

Growth: 9.9

Quality: 9.0

Yield: 0.0

Momentum: 4.5

Volatility: 2.0

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Lyft

A-Score: 4.5/10

Value: 3.4

Growth: 7.4

Quality: 5.5

Yield: 0.0

Momentum: 8.0

Volatility: 2.7

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Guidewire Software

A-Score: 4.4/10

Value: 0.0

Growth: 8.3

Quality: 5.8

Yield: 0.0

Momentum: 7.0

Volatility: 5.3

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Clearwater Analytics

A-Score: 4.0/10

Value: 1.8

Growth: 8.7

Quality: 6.7

Yield: 0.0

Momentum: 1.5

Volatility: 5.3

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

98.05$

Current Price

98.05$

Potential

-0.00%

Expected Cash-Flows