Download PDF

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.

Show Full description

1.b. Last Insights on DUOL

Duolingo's recent struggles can be attributed to weak bookings guidance, which overshadowed its strong Q3 revenue and EPS beats. The company's freemium model faces engagement risks, as users may switch to LLMs for language learning, potentially threatening future growth and ad revenue. Despite this, some investors see an opportunity, with Creative Planning and Artisan Partners Limited Partnership increasing their stakes in the company. Additionally, Duolingo's focus on user growth over monetization in Q3 2025 may set up long-term gains, driven by new AI-powered Max subscriptions.

1.c. Company Highlights

2. Duolingo's Q3 2025 Earnings: A Strong Performance with a Shift in Focus

Duolingo reported a robust financial performance in Q3 2025, with bookings growth and adjusted EBITDA margin coming in at 33% and 29%, respectively. The company's actual EPS of $0.95 beat estimates of $0.72, showcasing a significant improvement in profitability. Revenue growth was driven by a 36% year-over-year increase in daily active users, which reached 50 million. The company's guidance for the year is nearly $1.2 billion in bookings, indicating a strong finish to 2025. With a P/E Ratio of 23.81 and an EV/EBITDA of 63.53, the market is pricing in a certain level of growth, but Duolingo's ROE of 38.57% and ROIC of 19.44% suggest that the company is generating strong returns on its investments.

Publication Date: Nov -09

📋 Highlights
  • DAU Growth:: 50 million daily active users with 36% YoY growth in Q3.
  • 2025 Booking Guidance:: $1.2 billion bookings guidance, 33% growth, 29% adjusted EBITDA margin.
  • Chess Course Expansion:: Chess course now has millions of users, higher retention than language learning, PVP to launch fully soon.
  • Duolingo Max Performance:: 9% of subscribers, bookings doubled YoY, but underperforming; testing a half-price "super light" package.

User Growth and Engagement

Duolingo is prioritizing user growth over monetization, with a focus on long-term investments in AI-powered education. The company has seen significant growth in its chess course, with millions of users and slightly higher retention rates than language learning. The rollout of player versus player (PVP) chess to all users is expected to further boost engagement. As Luis von Ahn stated, "we're in a unique point in time with AI advancements, and it's essential to prioritize long-term growth and creating an app that can teach better than current solutions."

AI-Powered Education

Duolingo is investing heavily in AI-powered education, with a focus on adding content to its top 9 languages and creating smarter teaching modules that adapt to users. The company is also using AI to create new subjects, such as math. With the success of Duolingo Max, which has seen bookings double year-over-year, the company is well-positioned to capitalize on the growing demand for AI-powered learning. The company's focus on optimizing lifetime value (LTV) while testing new features and pricing strategies is expected to drive long-term growth.

Outlook and Valuation

Analysts estimate that Duolingo's revenue growth will slow to 23.4% in 2026, but the company's commitment to investing in product and marketing is expected to drive continued growth. With a P/S Ratio of 9.62 and a P/B Ratio of 7.03, the market is pricing in a certain level of growth, but Duolingo's strong financial performance and growth prospects suggest that the company is well-positioned to deliver long-term value to shareholders.

3. NewsRoom

Card image cap

Duolingo: A Long-Term Case Built on Future Free Cash Flow Potential

Dec -04

Source: zacks.com

Card image cap

Boston Family Office LLC Sells 310 Shares of Duolingo, Inc. $DUOL

Dec -02

Source: defenseworld.net

Card image cap

Creative Planning Grows Stock Position in Duolingo, Inc. $DUOL

Nov -29

Source: defenseworld.net

Card image cap

3 Black Friday Stock Deals: More Than 40% Off in 2025

Nov -28

Source: fool.com

Card image cap

Fidelity Stock Selector Mid Cap Fund Q3 2025 Performance Review

Nov -26

Source: seekingalpha.com

Card image cap

Where Will Duolingo Be in 1 Year?

Nov -22

Source: fool.com

Card image cap

Artisan Partners Limited Partnership Increases Stock Holdings in Duolingo, Inc. $DUOL

Nov -21

Source: defenseworld.net

Card image cap

Baron Opportunity Fund Q3 2025 Portfolio Update

Nov -18

Source: seekingalpha.com

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

Stock-Card
AppFolio

A-Score: 5.1/10

Value: 0.6

Growth: 9.7

Quality: 8.8

Yield: 0.0

Momentum: 7.0

Volatility: 4.7

1-Year Total Return ->

View Full Report
Stock-Card
Paylocity

A-Score: 4.9/10

Value: 2.0

Growth: 9.2

Quality: 7.8

Yield: 0.0

Momentum: 3.0

Volatility: 7.3

1-Year Total Return ->

View Full Report
Stock-Card
Lyft

A-Score: 4.7/10

Value: 2.9

Growth: 7.7

Quality: 6.1

Yield: 0.0

Momentum: 8.5

Volatility: 3.0

1-Year Total Return ->

View Full Report
Stock-Card
Guidewire Software

A-Score: 4.5/10

Value: 0.0

Growth: 8.3

Quality: 6.2

Yield: 0.0

Momentum: 7.5

Volatility: 5.0

1-Year Total Return ->

View Full Report
Stock-Card
Duolingo

A-Score: 4.4/10

Value: 0.3

Growth: 9.9

Quality: 8.0

Yield: 0.0

Momentum: 6.0

Volatility: 2.3

1-Year Total Return ->

View Full Report
Stock-Card
Clearwater Analytics

A-Score: 4.1/10

Value: 2.4

Growth: 8.7

Quality: 6.5

Yield: 0.0

Momentum: 1.0

Volatility: 6.0

1-Year Total Return ->

View Full Report

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

188.38$

Current Price

188.38$

Potential

-0.00%

Expected Cash-Flows