Duolingo's AI-First Strategy & Data Secures Dominance in Ed-Tech

Duolingo DUOL closed 2025 with solid momentum, exceeding the 50-million daily active user (DAU) thresholds, generating more than $1 billion in bookings and more than $300 million in adjusted EBITDA for the first time. In doing so, the company’s motive to leverage AI as a vital cog within its growth engine has become more pronounced.

In the fourth quarter of 2025, DUOL witnessed a 90-basis-point year-over-year expansion in the gross margin, fueled by high-tier subscriptions like Duolingo Max, which utilizes Gen-AI for immersive practice. Duolingo holds one of the world’s largest datasets, which enhances personalization and expands into verticals, including math, chess and music. It has allowed the company to spearhead the launch of 148 courses in a single year.

The company has strategically pivoted to user scale over profit maximization. The CEO, Luis von Ahn Arellano, remarked that the company expects 20% year-over-year growth in DAU throughout 2026. The primary objective is to focus on providing better teaching quality, which could clear the path to 100 million DAUs by 2028.

For 2026, the management expects revenues to grow 10-12%, a significant deceleration from the 39% year-over-year jump in 2025. On the same note, the adjusted EBITDA is expected to be 25% in 2026, a let-down from the 29.5% reported in 2025.

While this slowdown raises questions on the company’s ability to squeeze out full potential from AI and data, the $400-million share repurchase program underscores confidence in the long-term growth. The rising demand for quality digital learning requires Duolingo to utilize AI and its proprietary data to gain an edge in the ed-tech market, positioning it as a transformative leader.

DUOL’s Price Performance, Valuation & Estimates

The stock has plummeted 65.7% in a year against the industry’s 19.5% growth. Industry peer AirSculpt Technologies AIRS has dipped 45.5%, while Vontier VNT has moved up 17.9%.

1-Year Share Price Performance

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From a valuation standpoint, DUOL trades at a forward price-to-sales ratio of 3.66X, well above AirSculpt Technologies’ 0.7X and Vontier’s 1.73X.

Price/Sales F12M

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Duolingo, AirSculpt Technologies and Vontier carry a Value Score of D, B and A, respectively.

The Zacks Consensus Estimate for DUOL’s 2026 and 2027 earnings declined 24.9% and 31.9%, respectively, over the past 60 days.

Image Source: Zacks Investment Research

DUOL stock currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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