From Nasdaq: 2025-06-02 05:02:00

Duolingo (NASDAQ: DUOL) has seen its stock soar from $139 per share in 2021 to over $520 per share in just four years, outpacing the S&P 500 by a wide margin. The company’s growth and profitability are driving its success, with revenue and free cash flow both showing impressive increases.

In the first quarter of 2025, Duolingo saw a 49% jump in daily active users to 46.6 million and a 40% increase in paid subscriptions to over 10 million. Generative artificial intelligence (AI) is playing a significant role in driving this growth, with the company using AI to create new features and products successfully.

While generative AI has been a key catalyst for Duolingo’s growth, there are also risks associated with this strategy. The company’s use of widely available large language models (LLMs) raises concerns about proprietary technology. Additionally, Alphabet’s AI advancements pose a potential challenge to Duolingo’s growth, with Google Meet offering real-time AI translation services.

Despite the rapid growth fueled by generative AI, Duolingo faces competitive, execution, and valuation risks that may impact its future performance. The stock’s high valuation, combined with the evolving AI landscape, makes it a risky investment, prompting caution among investors. While the company’s current success is undeniable, the potential risks warrant careful consideration before investing in Duolingo. Join Stock Advisor now to access the latest top 10 stock recommendations. With a total average return of 979%, Stock Advisor has outperformed the S&P 500’s 171%. Investing $1,000 at the time of their recommendation could have grown to $828,224. Don’t miss out on this opportunity to maximize your investments. (50 words)

Suzanne Frey, an executive at Alphabet, serves on The Motley Fool’s board of directors. Jon Quast, the author, has no position in the mentioned stocks. The Motley Fool recommends and has positions in Alphabet and Duolingo. Stay informed with their disclosure policy. The author’s views do not reflect Nasdaq, Inc.’s views. (50 words)



Read more at Nasdaq: Is AI Duolingo’s Biggest Risk or Biggest Catalyst?