Duolingo, Inc.
Company: Duolingo, Inc.
Ticker: NASDAQ: DUOL
Sector: Educational Technology (EdTech) Key Narrative: Duolingo has reshaped—and is reshaping—how much of the world approaches learning language. With its gamifying of learning in 5-minute bursts, Duolingo is trying to be a company that is native to and used by the mobile-first generation to learn all sorts of things. However, the question is: can the company survive in an age where large language models like ChatGPT can teach you things better than a loud owl ever could?
This stock is a growth case. It currently leads the global mobile language learning market and has carved out its own niche with a unique user experience and a strong brand identity. The company has also shown growth in past years, with its revenue growing 50% YoY and the company recently becoming adjusted EBITDA positive. The only question is whether the company can maintain its momentum, scale its paid subscriptions, and innovate faster than some of its AI competitors.
The risk level is moderate to high. This is mainly due to a few things: firstly, the revenue of the company is dependent on the ability to convert free users to paid users, or they risk stalling revenue growth. There is also AI disruption risk, which could affect Duolingo's relatively static model. There might also be market saturation, meaning they may not have much room to grow in their category because they are already number one in language learning.
Duolingo is ultimately one of the few education companies that doesn’t feel like school, and for Gen-Z, it’s a very natural fit. Yet the company isn’t a totally stable, mature business but rather a growth-stage tech brand navigating an increasingly evolving landscape and market. So is this a disciplined investment? The answer is: it depends—if you believe that Duolingo can continue to stay ahead of the curve. Otherwise, it will be merely another company that rode the hype until the streak ran out.
Duolingo isn't merely a brand that markets to Gen-Z—it actually acts like Gen-Z. This can be seen in its TikTok marketing strategy, where the company has full-blown cultural fluency. Its trademark green owl is self-aware, unhinged, and completely meme-savvy on that platform. The product also fits perfectly into the generation’s behavioral patterns with its quick learning, streaks, and gamified content. And the app is usually on our phones not because we feel pressured to download it, but rather because it feels both easy and normal to use. Duolingo has ultimately embedded itself in our generation’s lifestyle—it’s not hype, it’s habit.
In terms of sustainability and ethics, Duolingo is very much ethics-focused. Duolingo offers free education to millions globally, which is a big social impact move. Its tests are also way more accessible and cheaper than standardized tests like TOEFL or IELTS. Lastly, the company’s leadership is very transparent and speaks on ethical AI usage and accessibility. All of these align with Gen-Z’s values and make Gen-Z even more likely to use the app.
Duolingo does have real demand; people genuinely love the product. This demand has been driven by the viral culture that surrounds the app. This can be shown in the 100M+ downloads and tens of millions of active users. Many people also have long streaks—sometimes over 1,000 days—showing that Duolingo has become a habit. While their TikTok marketing is viral, it does not create the demand. What creates the demand is the product and the idea that one can learn a language day by day in slow bursts.
Duolingo’s revenue has grown by 40%–50% YoY from 2021–2024, and that’s been driven by its growing user base, higher paid conversion, and expansion into new areas of teaching like math and music. However, that growth has, of course, decelerated as its base has grown. The language core of the company is now mature, so growth needs to come elsewhere—in places like expanding its ARPU, creating new products (like it did with math and music). Ultimately, the company’s growth rate was definitely real, not merely hype-driven. However, the company is approaching the "prove it" phase of the S-curve, meaning it must show that its growth is maintainable. What will define its ability to continue growth is whether the company can monetize habits. They already have the users—but can they make them pay?
Duolingo is not printing cash just yet, but it does have a very efficient business model. Firstly, its strong gross margins—being 70%–75% (2023–2024)—show the company’s strong scalability structure, which makes it very efficient for a consumer app. Its operating margins have not been great, but they are improving and are doing well now. That past struggle is mainly because in past years there was a lot of development, meaning there was a lot of money put towards marketing (to grow the brand), R&D (to add subjects), and content production (like AI features or courses). However, now that everything has been built, the operating costs have decreased. The adjusted EBITDA was positive in multiple quarters in 2024 and improved substantially in Q1 of 2025, showing how the cash burning has stopped. Duolingo has finally become profitable in 2025, which is a huge milestone. In prior years, losses were slowly shrinking, and in Q1 of 2025, the company reported a net income of $35M, which shows its efficient scaling. This marks a shift from a company that once burned cash every year into one that is going to be profitable. The base of this income—its subscription—is a pretty stable and predictable base. The company is also innovating, adding AI-driven premium features that draw subscribers and thereby increase the average revenue per user. Duolingo has clearly evolved from a fast-moving startup into a profitable high-margin platform, driving the risk to invest lower.
Duolingo is also financially quite strong. It can definitely withstand economic downturns and is not overly reliant on investor optimism. Its financial strength is mainly due to a few key factors. Firstly, the company has a lot of cash and equivalents—with over $885 million in cash and another $115 million in short-term investments. This large amount of cash allows the company to invest, innovate, or get through economic downturns without fear. Secondly, the company has only $54.6 million in debt, which is far outweighed by the cash it has, and it has no heavy interest rates hurting cash flow. Lastly, the company is generating strong cash flow with great margins and capital efficiency. This supports investment into various areas without worrying about raising more capital. This strong financial standpoint gives the company the opportunity to continue to innovate and stay ahead of the curve, lowering risk for the investor.
Metric Duolingo Coursera Babbel
Revenue Growth (YoY) ~39% ~7–9% ~31% (2022)
Gross Margin ~72–75% ~54% Not disclosed
Price-to-Sales Ratio ~26× ~1.9× N/A
These metrics display a few things. Firstly, they show that Duolingo is a very high-growth outlier in this industry, with its revenue growing four times faster than Coursera’s and even faster than Babbel’s (whose numbers are outdated since it’s a private company). Its gross margins are also top-class—at the very top of EdTech—far outperforming its competition. Its price-to-sales ratio does look ridiculous; however, when you consider the company’s rapid growth, high-margin product, and expansion into new verticals, it doesn’t look so ridiculous. Coursera’s price-to-sales ratio shows how the market doesn’t really reward EdTech unless they scale like a software company—which Duolingo did.
Duolingo is also benefiting from a few broader macro trends. Firstly, they are benefiting from direct-to-consumer learning that both Gen-Z and Millennials prefer. Secondly, Duolingo is benefiting from the new age of short-form content because its education is bite-sized and quick—perfect for the short attention spans of Gen-Z. Thirdly, Duolingo is benefiting from the new trend of AI-enhanced learning because the company is integrating AI into certain features within the app. Lastly, Duolingo benefits from the global demand for English fluency, as English is still the dominant language for trade, education, and work—and Duolingo helps people learn it easily.
Duolingo’s moat and differentiation come from a few different places. Its first moat comes from its brand marketing. The Duolingo green owl is an icon with deep Gen-Z relevance and is a complete marketing moat that no one in all of EdTech has come close to. And the green owl is especially hard to copy without it seeming forced. There is also brand stickiness in the user experience, with all the streaks, gamification, and notifications pushing you to continue learning. Competitors can theoretically copy these features—but not the behavioral design history of the Duolingo experience. Ultimately, the biggest moat is their scale. This company is hard to replicate mainly due to their sheer size, user base, and the app’s ability to be part of so many people’s habits.
Duolingo has one of the stickiest brands in Gen-Z culture, with Duo the meme owl being a meme engine and a complete TikTok icon. Duolingo isn’t just a brand—it’s a vibe. Secondly, because Duolingo’s product essentially creates habit for many, it creates ritual-based loyalty among users, making it hard for them to leave the product due to a sort of emotional loyalty. However, trends do change fast, so Duolingo will have to continue to innovate and reinvent itself to stay on top.
Duolingo’s very high valuation is not merely hype, but the price does assume flawless future execution. First off, if you look at the numbers, Duolingo has a 26x price-to-sales ratio, which is one of the highest in consumer tech, and its market cap is greater than $20 billion based on only ~$810 million in revenue. So its high pricing is mainly based on high past growth. The fundamentals are also quite strong, with the company having:
YoY Revenue Growth: ~39%
Gross Margin: ~72–75%
Free Cash Flow Margin: ~45%
These metrics show that Duolingo is more than just an app—but rather a very profitable revenue machine. However, the market does have very high expectations. This kind of valuation expects the company to continue full steam ahead and successfully expand into new verticals, defend against AI commoditization, and continue to churn out high subscriber conversions and revenue growth. Basically, the market expects Duolingo to become the Netflix of learning—which means that there are very, very high expectations. However, as you can see in those numbers, the valuation is definitely not only hype.
My investment thesis is definitely not about a short-term momentum gimmick stock, but rather a high-margin, great learning platform with very high upside. However, it’s only worth holding long-term if you believe in the stock—and believe that the company can stay relevant, that learning will stay mobile and personalized, and that Duolingo can expand beyond language into the broader education vertical. All this makes the stock a moderate risk with a high upside.
Duolingo fits into a disciplined investor’s strategy as one of those rare tech companies that is both culturally sticky and has the financials to back up the stickiness. With its software-level gross margins (~73%), reliable recurring revenue, strong free cash flow, and a moat built on brand, data, and habit formation—Duolingo is not a value stock mainly due to its high price. However, it’s the kind of stock that fits into a long-term, growth-focused portfolio, only if you’re careful about your entry position and sizing.
With Duolingo trading at a premium of ~$470, watch for a pullback to the $420–$450 range to enter. However, on the flip side, if it goes up to $530–$550, that could signal investor confidence and new momentum, so an entry there could also be favorable. Some key catalysts to watch out for are: deeper adoption of AI features like Roleplay and Explain My Answer, successful traction in new verticals, rising institutional use of the Duolingo English Test, and improving ARPU through subscription tier upgrades.
