One-glance verdict
Undervalued
$392.57 our estimate vs market $132.63
Wall Street consensus: $136.57 (-65.2% lower than our fair-value estimate)
66% below our estimate, below the bear case
Fundamentals snapshot
Duolingo, Inc.
DUOL · NMS · Technology · Software - Application
Current price
$132.63
52-week range
$87.89 - $279.98
Market cap
$6.18B
Balance sheet
Healthy
3.00x Stretched
Net cash $1.23B. Interest coverage shows how many times profit covers the interest bill.
What stands out
3 Rewards
2 Risks
3 rewards · 2 risks
- Reward Revenue grew 10.4% last year.
- Reward Returns 34.4% on equity, ahead of 80% of its peers.
- Risk Forward P/E (17.4x) is higher than trailing (15.8x) - earnings are expected to drop.
- Risk Insider ownership is only 1.5% (peer median: 3.4%).
What this company does
Duolingo, Inc.
Duolingo sells language learning courses through its app and offers a digital English test. Most of its money comes from people paying for extra features in the app or taking the test, which is important because it shows how well the company can make money from its users. This creates a steady stream of income, called recurring revenue (money that customers pay repeatedly over time), which helps the company plan for the future.
How the company got here
Duolingo was founded in 2011 by Luis von Ahn and Severin Hacker, who were inspired by their own experiences as immigrants and non-native English speakers to make education more accessible. They aimed to create an intelligent learning system that used data from a large number of users to improve learning outcomes. The company started with a focus on language learning, offering free courses through a mobile app and a website. Duolingo's early success was driven by its gamified approach, which made learning engaging and motivated users to continue their studies. Over time, Duolingo has expanded its offerings beyond languages to include subjects like music, math, and chess, all while maintaining its core mission of providing free, high-quality education to everyone.
What it actually does
Duolingo is an educational technology company that provides language learning services through its popular mobile app and website. It offers courses in dozens of languages, from widely spoken ones like Spanish and French to less common languages and even fictional ones. The learning experience is designed to be engaging and motivating, using game-like elements such as points, rewards, and daily streaks to encourage consistent practice. Duolingo's core offering is free, but it also provides paid subscription options for an enhanced experience and offers a digital English proficiency test that is accepted by many educational institutions.
Subscriptions
The primary way Duolingo makes money is through its subscription services, which account for the vast majority of its revenue. These subscriptions offer users an ad-free experience, unlimited 'hearts' (which prevent users from losing progress if they make mistakes), and personalized practice features. There are different tiers of subscriptions, including 'Super Duolingo' and a premium 'Duolingo Max' which incorporates advanced AI features like conversational practice and answer explanations. These paid options are designed to enhance the learning journey for users who want to deepen their studies beyond the free offering.
Advertising
For users who choose not to subscribe to a paid plan, Duolingo offers its services for free but includes advertisements. These ads are displayed between lessons and sometimes as banners within the app. Duolingo strategically limits the ad load to ensure a positive user experience and to encourage free users to eventually upgrade to a paid subscription. The revenue generated from these ads is a smaller portion of Duolingo's overall income compared to its subscription business.
Duolingo English Test
Duolingo also generates revenue through its Duolingo English Test, a digital exam that assesses English language proficiency. This test is accepted by thousands of universities and institutions worldwide, making it a valuable tool for students and professionals seeking to demonstrate their English skills. While a smaller revenue stream compared to subscriptions, it represents a growing area for the company, providing a standardized way for individuals to certify their language abilities.
What management is betting on now
Duolingo's management is focused on several key strategies to drive future growth. A major priority is expanding the use of Artificial Intelligence (AI) within the platform, offering more advanced AI-powered features to both free and paid users to personalize learning and improve engagement. The company is also investing in deepening its language courses to provide more comprehensive learning experiences. Furthermore, Duolingo aims to become the standard for language proficiency assessment, growing its Duolingo English Test business. Management is also looking to expand into new learning areas like music, math, and chess, leveraging their existing technology and user base. The company has set an ambitious goal of reaching 100 million daily active users by 2028.
Price history
How the share price has moved
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Earnings history
Last 8 quarters — what happened
Click any quarter to read the call summary and what the numbers say.
FY2024 Q3
$53.09M
FY2024 Q4
$81.38M
FY2025 Q1
$104.32M
FY2025 Q2
$89.48M
FY2025 Q3
$79.38M
FY2025 Q4
$96.55M
FY2026 Q1
$150.64M
FY2026 Q2
$81.36M
Revenue
$298.45M
Net income
$33.16M
Diluted EPS
0.66
Operating cash flow
$88.26M
Free cash flow
$81.36M
Fetching…
Sources
Revenue
$291.97M
Net income
$43.46M
Diluted EPS
0.89
Operating cash flow
$150.77M
Free cash flow
$150.64M
Fetching…
Sources
Revenue
$282.87M
Net income
$41.95M
Diluted EPS
0.99
Operating cash flow
$107.28M
Free cash flow
$96.55M
Fetching…
Sources
Revenue
$271.71M
Net income
$292.19M
Diluted EPS
5.95
Operating cash flow
$84.24M
Free cash flow
$79.38M
Fetching…
Sources
Revenue
$252.26M
Net income
$44.78M
Diluted EPS
0.91
Operating cash flow
$90.67M
Free cash flow
$89.48M
Fetching…
Sources
Revenue
$230.74M
Net income
$35.13M
Diluted EPS
0.72
Operating cash flow
$105.63M
Free cash flow
$104.32M
Fetching…
Sources
Revenue
$209.55M
Net income
$13.91M
Diluted EPS
0.31
Operating cash flow
$83.34M
Free cash flow
$81.38M
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Sources
Revenue
$192.59M
Net income
$23.36M
Diluted EPS
0.49
Operating cash flow
$56.27M
Free cash flow
$53.09M
Fetching…
Sources
Is it cheap or expensive?
Fair value $392.57 vs current price $132.63
Wall Street consensus is the average analyst price target: $136.57 (-65.2% lower than our fair-value estimate).
Our most-likely fair value is $392.57 a share — about 196.0% above today's price of $132.63, so the stock currently looks cheap (undervalued).
Is it drowning in debt?
Healthy
Net cash $1.2B - more cash than debt. Interest coverage 3.0x.
Net debt
$-1.23B
Interest coverage
3.00x
Duolingo, Inc.'s profit covers its interest bill about 3.0 times over. which is stronger than most peers shown here and 1 peers sit below 1x, which is the danger zone where profit does not fully cover the interest bill.
Healthy
Worse cushion
Baseline
Better cushion
DUOL
BASELINE
Duolingo, Inc.
Total debt $86.14M Interest coverage 3.00x This is the baseline the peer rows are being compared against.
Total debt $50.72M Interest coverage -194.67x -100% vs DUOL This peer has almost no interest-payment cushion compared with DUOL.
Total debt $619.04M Interest coverage 38.27x +1,177% vs DUOL Carries about 12.8x more debt cushion than DUOL.
What you should know
The case for and against DUOL
3 Rewards
2 Risks
Rewards
-
Revenue grew 10.4% last year.
-
Returns 34.4% on equity, ahead of 80% of its peers.
-
Free cash flow was positive in 6/10 years.
Risks
-
Forward P/E (17.4x) is higher than trailing (15.8x) - earnings are expected to drop.
-
Insider ownership is only 1.5% (peer median: 3.4%).
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
15.75x
Forward P/E
17.36x
P/B
4.40x
P/S
5.40x
EV/EBITDA
27.53x
PEG ratio
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Profitability
How much profit each dollar creates
Gross margin
72.7%
Operating margin
11.7%
Net margin
35.9%
ROE
34.4%
ROA
5.6%
Health
Liquidity and balance-sheet strength
Debt / equity
0.06x
Current ratio
2.72x
Quick ratio
2.51x
Total debt
$86.14M
Total cash
$1.31B
Growth
How the business has been compounding
Revenue TTM
$1.15B
Revenue 5Y CAGR
42.6%
EPS TTM
8.42
EPS 5Y CAGR
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Cash flow
How much cash the business throws off
Operating CF TTM
$430.55M
Free CF TTM
$369.73M
FCF margin
32.3%
Dividend
Shareholder payout
Yield
0.0%
Payout ratio
0.0%
Last ex-div date
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