Duolingo Stock Plummets Even as User Growth Soars

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Duolingo reported strong Q4 results, including a 35% year-over-year revenue increase and a 30% jump in daily active users. However, the company's decision to invest in its free user experience to drive long-term growth has led to a slowdown in bookings growth and lower profitability in the near term, causing the stock to plummet 14% following the earnings release.

Why it matters

Duolingo's strategic shift raises concerns about the company's ability to maintain its premium valuation if the growth reacceleration takes longer than expected. Investors are worried that the stock's current price reflects near-perfect execution over the next several years, leaving little margin of safety.

The details

Duolingo reported strong Q4 results, with revenue rising 35% year-over-year to $282.9 million and net income surging to $42 million. However, the company is intentionally throttling its near-term financial results to chase a larger user base, investing more than $50 million in foregone bookings to improve the free user experience. This is expected to result in slower bookings growth and lower profitability in 2026, with revenue growth projected to slow to 15-18% and total bookings growth slowing to 10-12%.

• Duolingo reported its Q4 results on February 28, 2026.
• The company's stock fell 14% on the day following the earnings release.

What’s next

Investors will be closely watching Duolingo's progress in expanding its user base and reaccelerating bookings growth in the coming quarters to determine if the stock's current valuation is justified.