DUOLINGO: The Two Game Changers
$DUOL Q3 2025 ER Update
What investors are seeing now is a growth that is slower and slower, as reflected in MAU (Monthly Active Users), DAU (Daily Active Users), Bookings and Revenue: it cannot be denied.
How Luis von Ahn, Co-founder and CEO of Duolingo, is explaining it, at least for the Q3 numbers, is crystal clear:
Growth was slightly slower than Q2 in part because we posted less “unhinged” content on our English-speaking social media accounts as we listened to community feedback and prioritized building long-term brand sentiment.
And
In Q3 we decided to shift the balance towards longer-term initiatives. In particular, we’re investing proportionally more in teaching better, and we’re prioritizing user growth over monetization in the A/B tests that get launched.
But even if growth reaccelerates to Q2 rate, it is still relatively slow – the slowest YoY MAU growth since Q2 2022. And MAU is a leading indicator for DAU, Bookings and Revenue, in this order.
That said, I still think the picture is positive.
In Q2 2025 we had a YoY MAU growth of 24% and a DAU YoY growth of 40%, which are not bad in absolute terms. If we consider that eventually DAU growth will converge to MAU growth (it cannot be indefinitely higher), we are likely talking about a sustainable DAU growth between 20 and 25% for the long term.
Although I understand that investors can be frustrated with these numbers, as they got used to higher growth over the last quarters, I think it is not bad at all if kept for a decade or longer.
Indeed, if we project a 23% MAU growth over 10 years, Duolingo would have more than 1 billion users which, if monetised at the current ~$8 per MAU, corresponds to an annual revenue of $8 billion — around 8× the current TTM revenue. With a low 5× revenue multiple, that already means a ~$40 billion market cap, roughly five times the current one.
I understand that for investors looking for high asymmetrical opportunities this is not exciting enough, but I consider this the worst-case scenario because it assumes “slow” MAU growth and zero improvement in monetization per user. For example, Duolingo still isn’t meaningfully monetizing users who follow multiple courses (they pay the same flat subscription as someone learning just one language), nor has it fully captured the value of the new verticals it will keep launching over time (math, music, chess, and whatever comes next).
There is a ton of low-hanging monetization fruit that hasn’t even been touched yet.
But essentially I think there are two underrated factors which can really move the needle in the Duolingo story.
First: Multi-user engagement and the social network effect
So far most of the growth came from viral social media posts and word-of-mouth of satisfied users. But as Luis confirmed, a relevant part of the recent slowdown is precisely because they dialed back the most unhinged content, which they can easily get back.
Word-of-mouth, if enhanced, is what makes the difference. And the area with the biggest potential is user-to-user interaction.
Management is now explicitly attacking this:
We’ve introduced player-vs-player on our chess course.
Chess is already the fastest-growing course ever launched on the platform, with millions of daily active users and retention higher than language courses. PvP is rolling out fast (50% of iOS already has it, Android coming in weeks).
This is the game changer I have been waiting for: the first real social lock-in feature. Users will invite friends to play against them, the viral coefficient jumps, and the app finally gets the same network effect that made Facebook or Instagram unstoppable.
If Duolingo manages to replicate the same player-vs-player logic for languages (speaking battles, tandem practice, competitive leaderboards, etc.), the platform becomes a true social learning network with a deep moat.
Second: Becoming the best teaching method in the world
Duolingo is already, in my view, the best way to learn languages at beginner level. The goal now is to become the best way to learn any topic, at any level — something that was impossible before generative AI and that Luis now sees as reachable:
We have line of sight now to create an app that can teach really, really well, much better than anything that humanity has seen before. As good as a human tutor, but that is also more engaging. And if we’re able to do that… we will be talking about billions of users.
Guided video calls for beginners, full K-12 math rollout, top-9 languages to job-ready proficiency, adaptive AI that speaks thousands of words per session — all coming in the next few months.
When Duolingo becomes the obvious choice for lifelong learning in a world where skills change every few years – and in a world increasingly dominated by AI, where productivity skyrockets, people will need to work less and will increasingly look to learning new things for pleasure, fulfillment and self-realization – the total addressable market simply explodes.
A great opportunity ahead
YTD Duolingo is down 45%, and it could go lower.
And $DUOL is pivoting from aggressive monetization to user growth because management sees a much larger long-term opportunity than anyone expected.
When great companies do this, it usually creates the best buying opportunities: short-term-focused investors (the vast majority) don’t get it, the stock gets cheap for a few quarters, then explodes an order of magnitude higher once growth reaccelerates and monetization kicks back in.
I see no good reason why Duolingo should fail in executing this plan, given the track record and the trust the management deserves for what it has done so far.
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Conclusion - my strategy
MAU → I want to see it re-accelerating no later than Q1 2026 (six months of the new strategy should be enough).
DAU/MAU ratio → I am happy if it stays at current levels or improves.
After the recent drop my $DUOL position is about 3% of my portfolio, a quite small part which I can grow at a certain point by taking liquidity from other positions. If across the next couple of quarters I see above KPIs trending in the right direction and the price keeps falling or stays here, I will likely double down on my allocation, as a minimum.
The story is getting very interesting here.
As always, here is the “Deep Dive To Date” (DDTD), that is how the DUOL -0.58%↓ stock is performing since my initial deep dive on the January 11th 2025, when the price was $318.15.
-47% DDTDSee you in the next update!
The content of this analysis is for entertainment and informational purposes only and should not be considered financial or investment advice. Please conduct your own thorough research and due diligence before making any investment decisions and consult with a professional if needed.
Great write up I completely agree, Duolingo is simply another baby Amazon, focused on innovation, the user experience and importantly the long term picture, small sacrifices in the short term during these periods but the market still doesn’t catch on
The shift toward user growth over monetizaton in the short term makes sense given the long-term opportunity. The player vs player feature in chess could be huge if they roll it out to languages. That kind of social engagement is exactly what the platorm needs to move from just another app to something people actually invite friends to use.