Duolingo (DUOL) concluded 2025 with impressive growth metrics, exceeding 50 million daily active users (DAUs) for the first time while generating over $1 billion in bookings and more than $300 million in adjusted EBITDA. This performance underscores the company’s commitment to integrating artificial intelligence (AI) as a core component of its business strategy.
In the fourth quarter of 2025, Duolingo reported a 90-basis-point year-over-year increase in gross margin, driven by higher-tier subscriptions such as Duolingo Max, which employs generative AI to provide immersive language practice. The company has access to one of the world’s largest educational datasets, allowing for enhanced personalization and expansion into various verticals, including math, chess, and music. This rich data pool facilitated the launch of 148 new courses within a single year.
Duolingo’s strategy has shifted toward prioritizing user growth over immediate profit maximization. CEO Luis von Ahn Arellano noted that the company anticipates a 20% increase in DAUs throughout 2026, with a longer-term goal of reaching 100 million DAUs by 2028. The focus remains on enhancing the quality of education provided, which the company believes is critical to sustaining this growth trajectory.
For 2026, management forecasts revenue growth of 10% to 12%, a notable slowdown compared to the 39% increase experienced in 2025. Adjusted EBITDA is also projected to decline to 25% from the 29.5% reported in the previous year. Despite these forecasts raising concerns about the company’s ability to fully capitalize on its AI and data resources, the approval of a $400 million share buyback program reflects management’s confidence in Duolingo’s long-term prospects. This move signals an intention to bolster shareholder value amid rising demand for high-quality digital learning solutions.
In terms of market performance, Duolingo’s stock has suffered a significant downturn, plummeting 65.7% over the past year, a stark contrast to the 19.5% growth seen in the broader industry. Comparatively, peers such as AirSculpt Technologies (AIRS) and Vontier (VNT) have experienced declines of 45.5% and gains of 17.9%, respectively. This divergence illustrates the challenges Duolingo faces as it navigates market sentiment.
From a valuation perspective, Duolingo trades at a forward price-to-sales ratio of 3.66, considerably higher than AirSculpt Technologies’ 0.7 and Vontier’s 1.73. The disparity in valuation points to investor skepticism about Duolingo’s growth sustainability in light of recent performance metrics. The company’s Value Score stands at D, in contrast to AirSculpt’s B and Vontier’s A ratings, reflecting broader market perceptions of value and growth potential.
Over the past 60 days, earnings estimates for Duolingo have been revised downward, with expected earnings for 2026 and 2027 declining by 24.9% and 31.9%, respectively. Currently, DUOL carries a Zacks Rank of #5 (Strong Sell), indicating a lack of market confidence in its near-term prospects. As the company strives to maintain its competitive edge in the educational technology sector, the successful deployment of AI and data analytics will be crucial in shaping its trajectory.
Looking ahead, Duolingo’s commitment to leveraging AI and a robust dataset may provide the necessary tools to adapt to the evolving ed-tech landscape. As it pursues ambitious user growth targets, the balance between enhancing educational quality and achieving revenue goals will likely remain a critical area of focus.
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