Duolingo Inc (DUOL)

DUOL cpps 106.61

Duolingo Shares Drop Despite Earnings Beat as Outlook DisappointsMay 5, 2026 6:23 AM
IH Market News Duolingo Inc. (NASDAQ:DUOL) reported first-quarter results that topped analyst expectations, but its shares fell more than 12% in premarket trading on Tuesday after the company issued weaker-than-expected full-year revenue guidance and flagged declining margins.The language-learning group posted adjusted earnings per share of $0.89, surpassing the consensus estimate of $0.76 by $0.13. Revenue came in at $292 million, marking a 27% year-on-year increase and exceeding forecasts of $288.98 million. However, Duolingo projected full-year 2026 revenue of $1.205 billion, slightly below the $1.21 billion expected by analysts. For the second quarter, revenue is forecast at $295.5 million, modestly ahead of the $294.2 million consensus. Margins Expected to Narrow The company indicated that gross margin is likely to decline to around 69.0% by the fourth quarter, compared with 73.0% in the first quarter, as usage of AI-driven features expands. Adjusted EBITDA margin is projected at 25.7% for the full year, with a second-quarter margin of 24.0%. User Growth Remains Strong Daily active users increased 21% year-on-year to 56.5 million, while paid subscribers also rose 21% to 12.5 million by the end of the quarter. Duolingo generated $147.8 million in free cash flow, representing a margin of 50.6%.“The Duolingo story remains in a bit of a limbo period in 1H26, but we are eagerly waiting to get more constructive once we get closer to the “all clear” moment,” Barclays analysts led by Ross Sandler said in a note.In a separate report, analysts at Morgan Stanley commented, “~6 months into DUOL’s increased focus on user growth, it has not yet been able to meaningfully inflect DAUs. Although DUOL is launching more shots-on-goal, its unclear what & when could drive a turnaround.”They added that the post-earnings sell-off is “a reflection of offsides sentiment into earnings.” Outlook and Strategy Duolingo expects bookings to grow 10.5% for the full year 2026, with second-quarter bookings growth projected at 5.8% amid tougher year-on-year comparisons. Since February, the company has repurchased roughly 514,000 shares, offsetting more than 100% of expected 2025 dilution.“In Q1, we made progress on the strategy we laid out last quarter,” said Luis von Ahn, Co-Founder and CEO. “We’ve made speaking a core part of the learning experience, and we’ve added more features and content to continue to support learners.”Duolingo stock price Original: Duolingo Shares Drop Despite Earnings Beat as Outlook Disappoints

Have they said anything about the falling growth?

User growth has been falling in the last 3 years, from 50% to 20%. I am modelling it to stabilise here for a few years and then continue to fall to a terminal rate of 2%.
Revenue growth is still in the 40% range, but I think it will come down a lot in the next 12 months. I am modelling it to fall to 20% before trailing off to a terminal rate of 5%.
The good news margins have continued to steadily improve. EBIT is currently around 13%, I am modelling it to continue to improve to ~25%.
It is an asset light business. CapEx is < 3%. As they are turning cash flow positive, they have a 1 billion cash pile, which would be perfect to use to start buybacks. With a market cap of only 7 billion and no debt, that could make quite the impact.
Main risks are, 1. user growth may continue to fall without stablising. 2. Management has proven they are good at managing a high growth company. Will they be able to manage a mature high margin one?
I ran a DCF valuation on it, and I got a value of $309, which is 110% upside. At this price, there is too much upside to ignore it. I am taking a starter position, and will think about making it a more conviction play if I get clarity on my concerns.
I made a vid on this as well, I know people don't like links so just search 'The investing Fool Duolingo' if you are interested.

DUOL new 52 week high

Trump signs executive actions on education, including efforts to rein in DEI https://www.npr.org/2025/04/23/nx-s1-5374365/trump-signs-education-executive-actions $DUOL

$DUOL Trump administration clarifies stance on DEI in schools https://www.k12dive.com/news/education-department-clarifies-DEI-in-schools-QA-document-dear-colleague/741436/

Duolingo Inc. said in 2019 about DEI hiring practices, "We set a goal of 50% female representation, 50% people of color representation, and we also wanted to double our total number of hires from the previous year."

DUOL new 52 week high

DUOL new 52 week low