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Duolingo, Inc. (DUOL)

Undervalued
TechnologySoftware - ApplicationUnited States

Fundamental

79

Price

$142.40

Market Cap

$6.91B

Part 1 · What the company is worth

Overview

Duolingo makes a free language-learning app built around short, game-like lessons, streaks and leaderboards designed to make studying feel like a habit rather than homework. Beyond its original languages, it now teaches math, music and chess through the same format. Most users never pay: the free version carries ads and nudges toward a paid tier. Revenue depends on converting a fraction of a very large free user base into paying subscribers, plus a standardized English proficiency test increasingly accepted by universities and employers.

How it makes money

Subscriptions are the business: Duolingo charges a recurring fee for an ad-free experience with extra practice tools, and most of its revenue and nearly all of its growth come from converting free users into subscribers. The free tier itself generates advertising revenue from the users who never upgrade. Two smaller lines round it out: in-app purchases of virtual items, and the Duolingo English Test, a lower-cost alternative to traditional exams that schools and employers can accept for admissions or hiring.

Revenue by segment

Subscription84.2%

Recurring fees for an ad-free app with extra practice features — the large majority of revenue and nearly all of its growth.

Advertising7.7%

Ads shown inside the free version of the app to the large share of users who never convert to a paid subscription.

Duolingo English Test4.1%

A standardized English proficiency test taken online, priced below traditional exams and increasingly accepted by universities and employers.

In-App Purchases3.9%

One-off purchases of virtual items such as streak freezes and gems inside the app, separate from the subscription.

Competitive moat

Brand · Narrow

Duolingo's mascot and gamified format have built a level of brand recognition few education apps match, and its huge free user base generates usage data that helps tune course content and habit-forming mechanics. But the company itself warns that switching costs are low: a language learner unhappy with the app can move to a rival with little lost, so the brand has to keep re-earning attention.

What drives demand

Moderately cyclical

Language learning is a discretionary purchase, but at a low monthly price it tends to survive belt-tightening better than bigger subscription bills, and habit-forming design keeps engaged users paying month after month. Growth is currently driven less by macro conditions than by how many free users the company can convert to paid tiers and by expansion into new subjects and geographies.

Key risks

  • Dependent on Apple and Google's app stores — Nearly all subscriptions and purchases are collected through the Apple App Store and Google Play, which take a cut of revenue and control the rules for how the app can be distributed and priced.
  • Low switching costs in a crowded market — The company itself describes the language-learning market as one with low switching costs and a constant stream of new entrants, meaning a competitor's better feature or price can pull users away quickly.
  • Growth depends on converting free users — The overwhelming majority of users never pay; revenue growth depends on continuing to convert a rising share of a very large free user base rather than on the free base itself.
  • Revenue tied to daily engagement — The gamified format is built to keep users opening the app daily; if engagement habits fade or a new format proves more compelling, both subscription renewals and ad revenue would suffer together.

The case for

Buyers argue that Duolingo's brand and gamified format keep converting a growing share of an enormous free user base into paying subscribers, and that expansion beyond languages into math, music and testing gives the company more ways to monetize the same audience.

The case against

Sellers worry that the company's own filing describes low switching costs and a constant stream of new entrants in language learning, that almost all revenue still depends on turning free users into payers, and that dependence on Apple's and Google's app stores hands both companies a cut and a say over pricing.

Written by the editors, published on August 18, 2026

Direct competitors

Who this company fights with for the same customers

Generated on September 18, 2026 with claude-haiku-4-5 — shared with all users

Babbel (Lesson Nine GmbH)Not tracked

Babbel sells subscription language courses to the same adult self-learners on mobile and web, competing directly for the paid tier Duolingo monetizes.

Busuu Limited (owned by Chegg, Inc.)Not tracked

Busuu offers app-based language courses with native-speaker feedback to both individual subscribers and corporate clients, the same two revenue pools Duolingo targets.

Rosetta Stone (language division of IXL Learning, Inc.)Not tracked

Rosetta Stone sells immersion-method language subscriptions to consumers and to schools and employers, the same buyers Duolingo reaches with its consumer app and Duolingo for Schools.

Preply Inc.Not tracked

Preply competes for the same learning budget and study time by matching learners with paid human tutors instead of self-paced lessons.

ETS (Educational Testing Service)Not tracked

ETS's TOEFL is the established English-proficiency exam that the Duolingo English Test is sold against, competing for the same test-takers and the same accepting universities.

IDP Education Limited (co-owner and distributor of IELTS)IEL

IDP delivers the IELTS exam to students seeking to study or migrate abroad, the same certification demand the Duolingo English Test serves at a lower price and from home.

Balance Sheet & Liquidity

Revenue

$1.15B

Trailing 12 months (through 6/30/2026)

Net Income

$411M

Trailing 12 months (through 6/30/2026)

Free Cash Flow

$370M

Total Equity

$1.35B

Total Liabilities

$645M

Current Ratio

2.72

Interest Coverage

-

Debt/EBITDA

0.57

Earnings Per Share

Revenue & Net Income

Free Cash Flow

Income Breakdown

Historical statement

Margins over time

Debt over time

How heavy the debt is

Growth grid

Growth — Revenue

Fair Value Estimation

General caseUndervalued

Fair Value

$266.72

Current Price

$142.40

Margin of Safety

+46.6%

Fair Value Range

$173.37 - $360.07

Spread across the valuation methods used, not a statistically calibrated confidence interval.

Estimation Methods

Analyst price target:$134.29
Discounted cash flow (DCF):$397.69
Earnings multiple (P/E):$400.36
Graham growth formula:$137.73
Earnings power value (EPV):$24.23
Justified P/B:$103.11
Dividend discount (Gordon):Not enough data to compute it
P/FFO, funds from operations:$411.85
Mid-cycle earnings:Not enough data to compute it
Revenue multiple:$116.81
Analyst Consensus:Hold (11B / 18H / 2S)
Last Earnings Surprise:+7.49%

Valuation Metrics

P/E Ratio

16.77

ROE

30.7%

P/B Ratio

1.68

P/FCF

5.81

Gross Margin

72.7%

ROIC

8.3%

Profitability Radar

Value Creation (Economic Moat)

ROIC

8.3%

WACC

10.1%

ROIC − WACC

-1.8 pp

ROIC is below the cost of capital — the company is destroying value for every dollar invested.

Fundamental Analysis Criteria

Passed (19)

  • EPS shows upward trend
  • Price CAGR 6.59%
  • ROIC 8.3%
  • Gross Margin 72.7%
  • P/FCF 5.81
  • P/B Ratio 1.68
  • Debt/Equity ratio
  • Operating Margin 13.7%
  • Positive Free Cash Flow
  • CapEx intensity
  • Current Ratio
  • Debt/EBITDA
  • Return on Tangible Assets
  • Low reliance on intangibles
  • ROE 30.1%
  • Revenue Growth 5Y 45.0%
  • Earnings Surprise avg 173.4%
  • Earnings Quality (OCF/NI) 1.05
  • Net Margin Trend 35.9% vs 13.2%

Failed (5)

  • Price below Graham Number
  • DCF valuation (Fairly valued)
  • Analyst Consensus 35% Buy
  • Share Dilution 2.6%
  • Piotroski F-Score 4/9

Unavailable (3)

  • Dividend Payout NaN%
  • Interest Coverage
  • PEG Ratio (need PE > 0 and growth > 0)

Piotroski F-Score

4/9

Mixed signals: some areas need attention

score
criteria

Earnings Quality

1.05

High quality: earnings backed by cash

Share Dilution

2.6%

Issuing new shares, diluting ownership

Institutional Holdings

Governance

Executive Team

NameTitleAge
Dr. Luis Alfonso von Ahn Arellano Ph.D.Co-Founder, Chairman of the Board, President & CEO46
Ms. Gillian MunsonChief Financial Officer54
Mr. Stephen ChenGeneral Counsel50
Mr. Matthew SkaruppaAdvisor43
Mr. Robert MeeseChief Business Officer47
Dr. Natalie Glance Ph.D.Chief Engineering Officer56
Dr. Severin Benedict Hacker Ph.D.Co-Founder, CTO & Director39
Ms. Deborah Belevan CPAVP of Investor Relations-
Sam DalsimerGlobal Head of Communications-
Mr. Manu OrssaudChief Marketing Officer-

Audit Risk

1

Board Risk

8

Compensation Risk

8

Shareholder Rights Risk

10

Part 2 · The price and when to enter

This part won't tell you whether the company is worth owning: it helps you choose when to buy it, once the fundamentals have convinced you. Inside: technical analysis, potential, historical drawdowns, gamma exposure.

Documents

  • Annual Report (10-K)

    A yearly overview of the business, its financial results, and the risks it faces.

    Filed on 2026-02-27

    View document
  • Quarterly Report (10-Q)

    A snapshot of financial performance for the most recent three-month period.

    Filed on 2026-08-06

    View document
  • Current Report (8-K)

    An announcement of a major event, such as a leadership change or big news.

    Filed on 2026-08-19

    View document

via SEC EDGAR

Income History

via SEC EDGAR

Latest News

Recent headlines for DUOL, sourced from Markets Gazette.

  • 9/1/2026NEUTRAL
    Duolingo sale: i grafici lanciano l'allarme nella transizione da crescita a value

    Duolingo shares have seen a significant rebound, climbing 77% from their yearly low to reach $162. However, the popular online learning platform faces headwinds as AI tools disrupt its business model. Management is shifting focus to user growth, aiming to expand active users from 58.7 million to 100 million, by introducing new services like chess and math, and increasing marketing spend. This transition from a growth to a value-oriented strategy, coupled with AI challenges, introduces uncertainty for investors regarding the stock's future trajectory.

  • 9/1/2026POSITIVE
    Le azioni Duolingo +5%: un analista vede un potenziale di +42%

    Duolingo shares surged over 5% on Tuesday following an upgrade from Evercore ISI, which moved the language learning company from 'In Line' to 'Outperform' and raised its price target to $210 from $105. This new target suggests a potential upside of nearly 42% from Monday's closing price. The upgrade coincides with Duolingo's strategic focus on enhancing user engagement and subscriber growth through AI-powered products. Despite a year-to-date decline of over 10% attributed to challenges in paid subscriber growth and concerns over generative AI disruptions, the company's latest product developments signal a potential turnaround.

  • 8/18/2026POSITIVE
    Perché il titolo Duolingo sale del 6% oggi

    Duolingo Inc. shares surged 6.6% on Tuesday, outperforming a broader market downturn. This rally was triggered by DA Davidson upgrading the language learning company's stock to 'Buy' and increasing its price target. Despite investor concerns about user growth and monetization deceleration, the upgrade highlights ongoing product improvements and strategic developments. The S&P 500 fell 0.5% and the Nasdaq Composite lost 1.1%, underscoring Duolingo's individual stock strength amidst market headwinds. This analyst upgrade suggests a positive outlook on Duolingo's future performance.

  • 8/5/2026NEGATIVE
    Duolingo Shares Fall On Tepid Sales Outlook

    Duolingo Inc. experienced a significant stock price decline of up to 12% on Wednesday. This downturn was primarily triggered by the company issuing a conservative revenue outlook for the current quarter. Despite reporting strong user growth, the tepid sales forecast overshadowed these positive metrics. Investors reacted negatively to the guidance, suggesting concerns about future revenue generation and potential market saturation or increased competition. The market's reaction highlights the sensitivity of growth stocks to forward-looking financial projections, even when current operational metrics appear robust.

  • 6/8/2026POSITIVE
    Duolingo Stock Is Climbing Monday: What's Going On?

    Duolingo Inc. (NASDAQ: DUOL) shares experienced a notable upward trend on Monday, driven by an improved market risk appetite. This surge follows a prolonged year-long slide, suggesting a potential shift in investor sentiment towards the stock. The rebound indicates that buyers are actively re-engaging with the stock, possibly anticipating a turnaround or capitalizing on perceived undervaluation after the extended downturn. Investors will be watching to see if this positive momentum can be sustained.

  • 5/7/2026POSITIVE
    Duolingo Stock Is Climbing Thursday: What's Driving The Move?

    Duolingo Inc. (NASDAQ: DUOL) experienced a significant stock price increase on Thursday, fueled by the company's robust performance in the first quarter. Investors are responding positively to Duolingo's earnings beat and sustained profitability momentum. This upward trend suggests strong market confidence in the company's business model and future growth prospects, potentially indicating a favorable environment for shareholders.

  • 3/31/2026POSITIVE
    Why Is Duolingo Stock Surging Tuesday?

    Duolingo's stock experienced a significant surge of over 7% on Tuesday, indicating strong positive momentum. While the article mentions technical levels, short interest, and sector trends as potential drivers, the primary takeaway for investors is the substantial intraday price appreciation. This jump suggests renewed investor interest or positive sentiment surrounding the company, potentially fueled by recent performance, upcoming product launches, or favorable market conditions within the edtech sector. Further analysis of the specific catalysts would be needed to confirm the long-term implications.

  • 3/11/2026POSITIVE
    1 Glorious Growth Stock, Down 81%, You Might Regret Not Buying on the Dip in March

    Duolingo Inc. shares have experienced a significant decline of 81%, prompting speculation that the current dip may present a buying opportunity. The company's projected growth trajectory for the coming years suggests that the market's reaction might be an overcorrection. Investors are advised to consider the long-term potential of Duolingo's business model and its expansion plans as a key factor in evaluating the stock's current valuation.

  • 3/9/2026NEGATIVE
    Duolingo Stock Is Down Big This Year. Here's Why Things Could Get Even Worse

    Duolingo's stock has experienced a significant decline this year, with further deterioration possible as the company shifts its strategic focus towards user growth over immediate financial gains. This prioritization may lead to short-term negative impacts on its financial performance, potentially affecting revenue and profitability metrics. Investors are advised to monitor upcoming earnings reports closely for signs of how this strategy impacts the company's bottom line and its ability to meet market expectations.

  • 3/9/2026POSITIVE
    Arthedge Capital Doubles Down on Duolingo Stock, Adds Another $7 Million

    Artheadge Capital has significantly increased its stake in Duolingo, adding another $7 million to its holdings. This substantial investment by a known capital firm signals strong conviction in Duolingo's business model and future growth prospects. The company, which provides digital language-learning tools globally, relies on continuous product innovation and user engagement. Artheadge's increased exposure suggests they anticipate further positive developments, potentially including strong user acquisition, revenue growth, or successful expansion into new markets, making Duolingo an attractive prospect for investors.

via Markets Gazette