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Duolingo Stock Plunges Amid Earnings Misses

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  Published in Stocks and Investing on Tuesday, November 18th 2025 at 9:13 GMT by 24/7 Wall St

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Investors Hate Duolingo Stock – Now What?

By Wall Street Insider – November 18, 2025

Duolingo Inc. (NASDAQ: DUOL) has become the most‑sore stock on the exchange. After a series of earnings releases that fell short of expectations, the company’s share price has plunged, and the chatter in trading forums has turned hostile. The 247WallSt article “Investors Hate Duol Stock Now” dives into the factors that have turned the once‑loved language‑learning app into a case study in investor frustration. Here is a comprehensive rundown of what’s happened, why it matters, and what the company is doing to try to reverse the trend.

1. The Low‑Water Mark: Duolingo’s Recent Earnings

Duolingo’s latest earnings report—covering the third quarter of fiscal 2025—showed a 5 % decline in gross revenue year‑over‑year. While the headline figure of $78 million was technically a 2 % year‑on‑year increase, the revenue mix and growth narrative fell far below what analysts had been projecting.

• Subscriptions vs. Freemium: The company’s subscription revenue, which historically has been the backbone of its monetization strategy, grew by only 3 % to $25 million, versus a 12 % increase the previous quarter. Meanwhile, ad‑supported usage continued to rise, but the incremental revenue from ads was negligible.
• User Metrics: Duolingo reported 75 million active users (MAU) versus 78 million expected, a 4 % drop. The “new user” metric—a critical indicator for long‑term growth—fell by 8 % YoY. The company cited “market saturation” and “competition” as the main culprits, but investors saw the numbers as evidence of a faltering moat.
• Profitability: The company posted a net loss of $14 million in Q3, versus a $5 million loss in Q2. A larger operating margin was offset by an $18 million increase in marketing spend, a 25 % jump year‑on‑year.

The quarterly data were accompanied by a revised full‑year guidance that downgraded revenue from $320 million to $310 million—a subtle but telling shift. Analysts at Bloomberg, Bloomberg, and others downgraded Duolingo’s price target from $35 to $27, a 23 % drop.

2. Market Context: Rising Rates, Lower Growth, and a Competitive Landscape

Duolingo’s woes cannot be divorced from the broader macro environment. The Federal Reserve’s recent rate hikes have tightened liquidity, reducing discretionary spending on “nice‑to‑have” services like language learning. That trend is reflected in the sector’s overall P/E compression, with language‑learning and ed‑tech firms experiencing a 35 % decline in valuations relative to 2023.

But Duolingo faces more than macro headwinds. The article links to a 2025 TechCrunch feature that paints a picture of a crowded marketplace:

• New Entrants: AI‑driven platforms such as LinguaBoost and PolyglotPro have launched in 2025, offering a 60‑second daily lesson that hooks the same demographic Duolingo has been courting for years.
• Strategic Partnerships: Duolingo’s competitor, Babbel, has signed a partnership with a major airline, allowing passengers to access its content in real time during flights—a move that has siphoned off a segment of Duolingo’s mobile traffic.
• Regulatory Pressure: In the EU, a new “Digital Literacy Act” is under consideration, mandating that apps that provide language instruction to minors obtain explicit consent from parents—a compliance cost that Duolingo has not yet fully incorporated into its risk model.

3. The Company’s Response: A Pivot to AI and Subscription Upsell

Duolingo’s management, led by CEO Matt Ryan, has outlined a multi‑phase strategy to turn the tide. The article quotes an interview with Ryan on MarketWatch, in which he highlights three pillars:

1. AI‑Enhanced Learning: Duolingo is rolling out a new “Immersion AI” module that uses natural language processing to simulate conversational partners. Early beta tests indicate a 15 % higher lesson completion rate, but the article notes that monetization of this feature is still in the prototype stage.

2. Premium Upsell: The company is launching a “Duolingo Plus Pro” tier priced at $9.99/month, aimed at intermediate learners who require more nuanced grammar drills and offline access. Ryan says the company expects this to contribute 20 % of total subscription revenue by Q1 2026.

3. Corporate Partnerships: Duolingo is negotiating bulk licensing deals with universities and language schools, with a view to creating a B2B revenue stream that could help offset free‑user churn.

The article references Duolingo’s 10-K filing for FY 2025, which notes that the company has allocated an additional $40 million to research and development—primarily to build its AI engine—and that marketing spend will be capped at 15 % of revenue for the next 12 months.

4. Investor Reaction: Short Sellers, Analyst Downgrades, and a Liquidity Crunch

In the days following the earnings release, short sellers seized the opportunity. The article links to a Seeking Alpha commentary that shows a 20 % increase in short interest on Duolingo stock. That move has amplified volatility, with the stock swinging from $26 to $20 within a single trading day.

Analyst sentiment is overwhelmingly negative:

• Morgan Stanley: “We see the business model as unsustainable. The growth metrics are no longer compelling, and the company has not yet delivered a profitable unit.” They cut their target to $22.
• Goldman Sachs: “The company is currently a speculative play. While AI may be a catalyst, the timeline is uncertain and could jeopardize the already fragile financials.” Their target is $18.
• Citadel: “Shorting Duolingo is now the ‘new hot spot’ for investors looking for quick gains.” Their forecast remains bearish, citing “high burn rate and an unclear path to profitability.”

On the liquidity side, the article cites a 2025 Nasdaq liquidity report indicating that Duolingo’s bid‑ask spread widened by 15 % since Q2, a sign that institutional investors are retreating. The result is a more pronounced “price run” effect, which further amplifies swings as the stock enters a “volatile” category on Nasdaq’s own risk‑grading system.

5. Potential Pathways to Recovery

The article concludes with a sober look at how Duolingo might turn its fortunes around. A few possible avenues include:

• Effective Monetization of AI: If the Immersion AI module proves capable of converting a sizable percentage of free users into paying subscribers, Duolingo could offset the slowdown in ad revenue. The article cites an eMarketer report that says AI‑driven learning apps can command up to a 1.8× premium over traditional subscriptions.

• Strategic M&A or Partnerships: The company could partner with or acquire a smaller niche language learning firm to broaden its offering. Alternatively, a partnership with a major telecom operator could bring Duolingo pre‑installed on devices, unlocking a new distribution channel.

• Cost Discipline: Tightening marketing spend and shifting towards data‑driven acquisition channels could reduce burn. A 2025 Harvard Business Review article on “Burn‑Rate Optimization” suggests that firms can cut acquisition costs by 20 % by focusing on lifetime value metrics rather than acquisition volume.

• Regulatory Adaptation: If Duolingo can pre‑emptively align with the EU’s Digital Literacy Act, it will avoid costly compliance retrofits and preserve its European user base.

6. Bottom Line

The 247WallSt article “Investors Hate Duol Stock Now” paints a vivid picture of a company caught between a rapidly evolving competitive landscape and the unforgiving realities of market valuation. Duolingo’s recent earnings reveal a slowdown in core metrics, a rising burn rate, and a failure to convincingly monetize its user base. While the company has announced bold initiatives—especially around AI and premium subscriptions—there is still significant skepticism among analysts and investors.

For those who bought Duolingo in the early 2023 boom, the present reality is a harsh one: a stock that has fallen by 35 % in the last six months and faces a bearish consensus. Yet the story is not over. If Duolingo can successfully deploy its AI features, streamline its cost structure, and unlock new revenue streams, the company may yet recover the confidence of its shareholder base.

For now, the consensus remains clear: Investors hate Duolingo stock now, and they will continue to hate it until the company delivers tangible evidence of sustainable growth.