MW Duolingo is making some changes to contend with the threat of AI. Its stock is sinking.
By Hannah Pedone
Following a slowdown in user growth, the language-learning company is stepping up investments and changing how it thinks about its tiers of service
Duolingo plans to invest more in its free tier of service and acknowledged it previously introduced too much friction for users.
Artificial intelligence is making it easier than ever for people to translate languages and communicate with people who speak different tongues.
And, increasingly, investors have been worried about what that means for Duolingo (DUOL), which calls itself the world's largest language-learning app.
Heading into Thursday's close, Duolingo's stock had fallen 78% from its peak close achieved last May. Management now seems to be acknowledging that it needs to make changes in a rapidly evolving landscape.
Read: Block plans to lay off nearly half its staff in 'deliberate and bold' embrace of AI
The company announced some of those Thursday afternoon, alongside fiscal-fourth quarter earnings results. Duolingo's management disclosed that the transition could weigh on financials in the near term but expressed confidence in a long-term payoff.
Some investors may not be waiting to see how things play out, however, with Duolingo shares off more than 20% in Thursday's extended session.
Duolingo has been trying to integrate AI into its own product offerings, including by letting customers video-chat with an AI-powered animated character and engage in more voice-based AI experiences to test their progress.
The company announced it will move its core AI product, "Video Call with Lily," to be part of the company's "Super Duolingo tier" subscription, down from its more exclusive "Duolingo Max" tier. It also announced new AI-powered lesson plans.
Further, Duolingo will try to respond to a growth slowdown in daily active users by increasing the value proposition of its free tier.
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"Up until now, the main way we've increased bookings per user is by adding small amounts of friction to encourage more people to subscribe, for example by increasing ad load or subscription upsells," Duolingo said in a shareholder letter. "Unfortunately, we believe that this extra friction is part of the reason our DAU growth has slowed, so we've decided to prioritize user growth over monetization."
The moves are expected to come with several financial tradeoffs. For one, the company said in the letter that it expects revenue growth will "step down sequentially" in the second and third quarters, before "stabilizing" in the fourth quarter.
Bookings, meanwhile, are expected to grow just 11% this fiscal year, versus an almost 20% growth rate the company said it expected it would see "if we operated like we have in past years."
Profits will also come under pressure as the new moves require heavy investment. Duolingo expects a 25% margin of earnings before interest, taxes, depreciation and amortization for the current fiscal year, versus the 29.5% margin it posted for its just-completed fiscal year.
CEO Luis von Ahn said in a video message that "this may seem a little strange if you just look at the next quarter."
"But here we're trying to build a company for a very long time," he added, and that in the long term, the company's goal is to educate "billions" of people.
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-Hannah Pedone
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February 26, 2026 18:49 ET (23:49 GMT)
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