Key Takeaways
- DUOL shares collapsed more than 20% following management’s decision to emphasize user expansion over immediate revenue generation.
- JPMorgan and BofA both cut DUOL to Neutral, with JPMorgan reducing its target to $95 and BofA to $100 from previous highs.
- Management set an ambitious goal of reaching 100 million daily active users by 2028, accepting near-term bookings slowdown and margin compression.
- A $400 million stock repurchase program was approved to provide support during the strategic transition period.
- Additional downgrades came from Morgan Stanley and Evercore ISI, reflecting concerns about decelerating momentum and strategic direction.
Shares of Duolingo (DUOL) experienced a dramatic selloff on Friday, plummeting over 20% during early market hours to $90.76 as Wall Street responded negatively to management’s newly unveiled strategic direction.
The language-learning platform revealed plans to de-emphasize aggressive monetization tactics in favor of expanding its user base. The ambitious objective: achieving 100 million daily active users by 2028, a substantial increase from present figures.
This strategic announcement was accompanied by disappointing forward guidance for 2026, which collectively sparked widespread selling pressure among investors.
Duolingo delivered better-than-anticipated Q4 2025 results, reporting $0.84 in earnings per share versus the $0.83 consensus. Revenue reached $282.9 million, surpassing expectations of $275.74 million. However, investors fixated on the company’s outlook rather than past performance.
For the previous two years, the platform had intensively pursued subscription conversions and advertising impressions. While this approach boosted profitability, it simultaneously degraded the free user experience. Consequently, user acquisition began decelerating in late 2025.
Management’s solution involves reducing monetization intensity. The platform will prioritize enhancing the free tier to create more satisfied users who will organically promote the service through word-of-mouth.
Artificial intelligence capabilities such as “Video Call with Lily,” previously exclusive to paying subscribers, will become accessible to all users. This decision increases operational expenses and will compress profit margins during the transition phase.
Wall Street Analysts React Negatively
JPMorgan analyst Bryan Smilek lowered his rating on DUOL to Neutral from Overweight, slashing the price target from $200 down to $95. His rationale centered on the user-growth strategy leading to reduced bookings and compressed margins, emphasizing that the investments require substantial time to yield returns.
BofA Securities analyst Omar Dessouky similarly downgraded shares to Neutral from Buy, dropping his target from $250 to $100. His primary criticism: Duolingo has shown minimal advancement in performance marketing capabilities, with management indicating no plans to build this competency.
BofA characterized this as a strategic error, particularly considering the significant improvements in ad targeting technologies at platforms like AppLovin and Google. The firm stated its original investment thesis had been invalidated.
Morgan Stanley revised DUOL from Overweight to Equalweight. Evercore ISI adjusted its stance to In Line from Outperform. KeyBanc maintained a Sector Weight rating.
D.A. Davidson analyst Wyatt Swanson offered a more understanding perspective, noting that previous aggressive monetization had created “disgruntled users and a meaningful negative impact to ‘word-of-mouth’ marketing.”
Company Initiates Stock Repurchase
To provide price stability during this strategic transformation, Duolingo approved a $400 million share repurchase authorization. Management is communicating confidence that current valuations represent an attractive entry point.
DUOL has declined approximately 69% over the trailing twelve months. The stock is currently trading near its 52-week low.
According to TipRanks, the consensus analyst rating stands at Hold, comprising five Buy ratings, 10 Hold ratings, and one Sell rating. The average price target of $139.64 suggests potential upside of approximately 49% from present levels.
The $400 million repurchase program remains in effect as management executes its plan to achieve 2028 user growth objectives.
