Duolingo, Inc. (DUOL): A Bull Case Theory

Ricardo Pillai

Tue, May 13, 2025, 7:05 AM 4 min read

We came across a bullish thesis on Duolingo, Inc. (DUOL) on Substack by Lorenzo Bastianelli. In this article, we will summarize the bulls’ thesis on DUOL. Duolingo, Inc. (DUOL)'s share was trading at $503.57 as of May 8^th. DUOL’s trailing and forward P/E were 248.06 and 178.57 respectively according to Yahoo Finance.

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Duolingo's Q1 2025 results are a testament to the company’s ability to leverage its unique brand and marketing strategies, with the “Dead Duo” campaign becoming a viral sensation that significantly boosted its performance. Revenue for the quarter reached $230.7 million, marking a 38% year-over-year increase and exceeding analyst expectations. This surge is reflective of Duolingo’s business model, which continues to benefit from a well-oiled flywheel of user growth, engagement, and paid subscriber conversion.

The company’s Monthly Active Users (MAUs) surged to 130.2 million in Q1 2025, a 33% increase compared to the same period last year. This growth was propelled not only by Duolingo’s freemium model and the network effects of its global reach but also by the marketing success of its “Dead Duo” campaign, which generated 1.7 billion organic impressions. This viral event attracted new users and re-engaged lapsed ones, further fueling Duolingo’s MAU growth. Beyond language learning, Duolingo’s expansion into new verticals, such as math, music, and chess, provides additional growth opportunities and broadens its user base. CEO Luis von Ahn emphasized the potential of these new subjects, noting the massive demand for skills like chess and the platform’s ability to scale content quickly, especially with the help of AI.

Duolingo’s engagement metrics are also impressive, with Daily Active Users (DAUs) reaching 46.6 million, up 49% year-over-year. The DAU/MAU ratio’s surge highlights how users are increasingly engaged, with features like Friend Streaks, streak freezes, and AI-driven enhancements keeping users committed. The “Dead Duo” campaign’s interactive component also played a key role in driving daily participation. The integration of generative AI into content creation has significantly boosted Duolingo’s ability to scale and personalize its offerings. AI has enabled faster and more cost-effective content production, contributing to both user retention and feature innovation. For instance, the new “Video Call with Lily” feature has made practicing conversation with a computer more feasible, and AI has streamlined the development of Duolingo’s chess course.

Paid subscriber penetration continues to rise, with 10.3 million premium subscribers in Q1 2025, a 40% year-over-year increase. This growth is closely linked to Duolingo’s product enhancements, particularly Duolingo Max, which has shown strong retention rates. The company’s AI-driven features and new courses, such as 148 newly added language courses, have made the platform more appealing to a global audience. These developments are accelerating user conversions from free to paid subscriptions, which now contribute significantly to Duolingo’s revenue, which reached $191 million for the quarter, up 45% from the previous year.

Overall, Duolingo’s Q1 2025 performance reaffirms the long-term investment thesis that the company’s strategic use of AI, coupled with a powerful user growth engine and engaging brand, positions it for sustained success. As Duolingo continues to expand its content and refine its product offerings, it is moving beyond a language-learning app to become a platform for lifelong learning. With AI enabling faster content creation and scaling, Duolingo is well-positioned to capitalize on its growth opportunities, including expanding into new educational verticals. The company’s strong performance in Q1 2025 sets the stage for continued outperformance as it executes on its ambitious vision.

Duolingo, Inc. (DUOL) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 52 hedge fund portfolios held DUOL at the end of the fourth quarter which was 31 in the previous quarter. While we acknowledge the risk and potential of DUOL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DUOL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

Disclosure: None. This article was originally published at Insider Monkey.

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