In the rapidly evolving landscape of technology-enhanced education, language-learning platform Duolingo has made a bold shift towards artificial intelligence (AI), fundamentally altering its operational model and setting new precedents in the industry.
Two years on from the initial burst of enthusiasm surrounding AI technologies, which began around early 2022, Duolingo, trading under NASDAQ, made a decisive move in 2024 by reducing its dependency on contract workers by 10%. This decision was part of a strategic pivot towards leveraging AI to generate app content, illustrating the company’s commitment to staying at the forefront of edtech innovations. By late April of the same year, Luis von Ahn, the CEO of Duolingo, declared a more radical strategy. In a bold announcement, he revealed that all contract roles would eventually be phased out in favor of AI-based solutions.
Moreover, Von Ahn posited a challenging criterion for the recruitment of new employees, asserting that additional hires would only be considered if the existing teams were unable to automate their workload. At this juncture, Duolingo boasted a workforce of 800 employees, collectively contributing to a significant market cap of $18.43 billion, equating to an impressive value generation of $23 million per employee.
As we advanced into the second quarter of 2025, Duolingo presented its earnings report for the period ending in June. This report showcased a remarkable 14% increase in the company’s stock price over the week, igniting conversations among investors about the potential merits of adding Duolingo’s shares to their watchlists.
The Capacity for Scaling through AI
The application of AI, despite ongoing debates around issues such as confabulation (the generation of fabricated facts or details), has proven particularly effective in language manipulation tasks. This is precisely the domain where large language models (LLMs) excel, predicting subsequent words in a sentence with a remarkable degree of accuracy, based on presented concepts.
One might initially wonder about the necessity of a platform like Duolingo when direct interaction with LLMs such as ChatGPT, Grok, or Gemini offers a direct route to language learning. However, the value proposition of Duolingo becomes clear when considering the significant engagement and time investment required from users to create their personalised lessons through these LLMs.
Duolingo’s strategy leverages its proprietary Birdbrain LLM, which is meticulously designed to craft language lessons and improve over time based on user interactions. This system not only delivers tailored learning experiences but also represents a synergy between AI efficiencies and the human oversight necessary to fine-tune lesson difficulty and focus on grammatical nuances.
During an earnings call, Von Ahn articulated his philosophy towards balancing speed and quality. He acknowledged the potential for minor dips in quality due to AI’s involvement but emphasized his preference for a proactive approach to leverage timely opportunities rather than delay advancements for perfection.
A Look into Duolingo’s Financial Health
Turning to Duolingo’s financial performance, the company operates a freemium model—providing a basic version for free while offering a premium subscription for enhanced features. This model has served Duolingo well, evidenced by a 37% increase in paid subscribers from 8 million to 10.9 million within a year.
The platform also witnessed a substantial increase in monthly active users (MAUs), growing 24% year-over-year to reach 128.3 million. The first half of 2025 saw net income soar by 55% compared to the first half of 2024, achieving a notable $79.9 million. A significant quarterly increase of 84% year-over-year in net income underscores Duolingo’s robust financial health.
Innovative Features and Expanded Offerings
Duolingo has been proactive in expanding its repertoire of learning tools, introducing courses such as Chess, which saw immediate success upon its launch in early June 2025. Alongside Chess, Duolingo has ventured into other educational terrains, including Math and Music, demonstrating the platform’s versatility and commitment to providing a comprehensive learning experience. The company also introduced a Video Call feature, allowing users to engage in spontaneous video conversations—a tool that has proven effective in enhancing speaking skills.
Furthermore, Duolingo has adeptly incorporated gamification into its learning model. The introduction of the Energy system serves as a “learning battery,” where users are rewarded for correct answers with Energy, while incorrect ones deplete this resource. This system, alongside the freemium model, underscores Duolingo’s strategy to make learning both engaging and accessible, with the option for users to access premium features for an enriched experience.
Future Outlook and Investment Considerations
With the impressive performance in the first half of 2025, Duolingo raised its full-year growth forecast to an ambitious 32% year-over-year growth. This optimism is reflected in improved profitability metrics, with the adjusted EBITDA margin witnessing a significant increase, demonstrating the company’s efficiency in translating revenue into profit.
The question of whether Duolingo’s stock should be a staple in an investor’s portfolio is now more relevant than ever. Considering the year-to-date appreciation in DUOL stock and the positive analysis from financial experts, the company presents an intriguing proposition for those looking to diversify into the edtech sector.
As the landscape of digital education continues to evolve, Duolingo’s journey from a simple language-learning app to a pioneering platform integrating AI for personalized, efficient learning experiences showcases the transformative power of technology in education. The company’s resilience in navigating the challenges of AI integration, coupled with its financial achievements, marks an exciting chapter in Duolingo’s narrative, offering valuable insights for investors and industry observers alike.
