Duolingo Stock Crashes over 20% as Management Chooses User Expansion over Immediate Profits

Duolingo stock DUOL -17.07% ▼ plummeted by 23% in early trading on Friday to $90.76. This drastic sell-off happened after the company revealed it would actively slow down its efforts to make money from users in order to keep those users happy and engaged. The goal is to reach 100 million daily active users by 2028, but shareholders are worried about what this means for the company’s bank account right now.+1

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Duolingo Is Sacrificing Revenue to Fix User Growth

For the past two years, Duolingo has been very successful at getting users to pay for subscriptions or watch ads. While this made the company profitable, it also made the app less enjoyable for free users. As a result, the number of new people joining the app started to slow down in late 2025.

Management aims to fix this issue by reducing the friction for free learners. Instead of constantly asking users to pay, the company will focus on making the app more fun, which they hope will lead to more people recommending it to friends. Analysts like Wyatt Swanson from D.A. Davidson believe this is a necessary move, writing that previous efforts to monetize had led to “disgruntled users and a meaningful negative impact to ‘word-of-mouth’ marketing.”

Duolingo’s Soft Guidance Worries the Market

Investors did not take the news well because Duolingo also lowered its financial outlook for 2026. The company now expects revenue to be lower than what Wall Street analysts previously predicted. Even though the company beat revenue estimates for the final quarter of 2025, the promise of slower growth in 2026 was enough to cause the stock crash.

Analysts on Wall Street are split on the strategy. While some understand the long-term goal, others are punishing the stock for the short-term pain. KeyBanc analyst Justin Patterson noted that “While we believe this is the right long-term move, the near-term effect is clear.” Because of this uncertainty, multiple firms cut their price targets for the stock by a significant amount.

Duolingo Plans to Offer More AI Features

To achieve its goals, Duolingo plans to offer more of its AI features, like the popular “Video Call with Lily,” to all users rather than keeping them locked behind a paywall. While this will help attract new users, it also costs more money to run those AI servers, which will reduce the company’s profit margins this year.

To support the stock price during this transition, the company authorized a $400 million share buyback program. This shows leadership believes the stock is undervalued, but it may not be enough to stop the bleeding if the user growth targets are not met quickly.

**Is Duolingo a Good Stock to Buy? **

On TipRanks, Duolingo stock (DUOL) has a Hold consensus rating based on five Buys, 10 Holds, and one Sell rating. The average 12-month DUOL price target of $139.64 implies 48.9% upside potential from current levels. Over the past year, DUOL shares have fallen 69%.

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