Duolingo After the Crash: Is the Owl Cheap Enough Now?
Duolingo's growth has slowed down considerably, but its valuation is looking attractive again after the stock price plummeted.
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In December, I reanalyzed Duolingo after it had already experienced a significant decline. The title of my post at the time was: “Duolingo: Will History Repeat Itself?”
The question then was whether the market had punished the stock too harshly after it fell by about two-thirds from its high. I published the post on December 18, 2025, when the stock price was $184.
My conclusion at the time was:
“We still don’t see any bargain prices. Should technology stocks experience a prolonged period of weakness, I could see prices for such growth stocks dropping even further.
Less than six months later, Duolingo stock has lost nearly half its value again. The current price is around $100, and the market capitalization is now less than $5 billion. As a reminder, exactly one year ago, the company was valued at $24 billion.
The reason for this latest sell-off is clearer now than last time. It’s no longer just about abstract AI concerns or an overly high valuation. It’s about something much more concrete: growth has slowed at an alarming rate in recent quarters.
Q1 2026 was Good – But Growth is Collapsing
At first glance, Q1 of 2026 didn’t look bad. Revenue rose by 27% to $292 million. Daily Active Users (DAUs) grew by 21% to 56.5 million, and paying subscribers rose by the same percentage to 12.5 million. Adjusted EBITDA increased by 33% to $83.4 million. Free cash flow for the quarter was a robust $147.8 million, corresponding to an impressive FCF margin of over 50%.
For a high-growth company, however, it’s not just what’s visible on the income statement that matters. What matters are the insights provided by the leading operational indicators. In that regard, the picture looks significantly weaker.
Bookings grew by only 14% in Q1 of 2026 and by just 9% on a currency-adjusted basis. For Q2, management expects booking growth of just under 6%, or 4% on a currency-adjusted basis. For the full year of 2026, the company is guiding for 10% booking growth and 16% revenue growth.
This represents a sharp shift in momentum. Duolingo was long viewed by investors as an almost perfect consumer AI/EdTech company—one that was both highly profitable and experiencing strong growth. Now, however, the market must recalibrate. What is Duolingo worth if hypergrowth suddenly turns into slower, albeit still profitable, growth?
