Many progress shares have executed rather well in my portfolio in 2025, together with Rolls-Royce, Uber, Cloudflare, Roblox, and Crowdstrike.
Nonetheless, essentially the most disappointing by far has been Duolingo (NASDAQ:DUOL). Since I invested, my complete paper loss is now round 50%. Ouch!
Sticky platforms
Each time a inventory collapses like this, it’s vital to revisit the unique funding thesis. If that is damaged, it’s higher to resist actuality as a result of the inventory might preserve falling and by no means get well.
After I first explored Duolingo, I used to be sceptical the language studying app had any sturdy aggressive benefit (moat). But it rapidly jogged my memory of Netflix (NASDAQ:NFLX). Each are scalable, international client platforms monetised by subscriptions (primarily) and adverts.
As with Duolingo right now, it wasn’t apparent again in 2009 that Netflix had a sturdy moat. Its streaming mannequin may simply be replicated, and certainly has been since by the likes of Amazon, Apple, Disney, Paramount, and ITV. Ever extra competitors is a danger to progress.
But Netflix has endured due to its model energy, widespread reveals, and complicated AI/algorithms used to advocate content material.
Likewise, Duolingo has a powerful model, extremely engaged consumer base, and robust AI credentials. Its Birdbrain AI system processes over 1.25bn day by day workouts, serving to feed machine-learning fashions that personalise customers’ studying experiences.
Crucially, each even have distinct company cultures targeted on long-term worth creation over short-term income.
Our long-term objectives stay unchanged: To be an awesome Web film service…and to develop subscribers and earnings yearly whereas
persevering with to spend money on streaming.Netflix CEO Reed Hastings, 2009 annual report.
One in all our 5 working ideas is ‘take the lengthy view’. The chance forward of us is to show billions of individuals, and whereas we’ve made unimaginable progress, we all know we’re early in our journey.
Duolingo CEO Luis von Ahn, 2025.
Damaged thesis?
Duolingo’s Q3 outcomes, I see no proof the expansion story’s unravelling. Each day lively customers hit a file 50.5m whereas month-to-month customers topped 135m.
Income jumped 41% yr on yr to $271.7m and adjusted EBITDA surged 68% to $80m.
Wanting forward although, administration will shift focus from rising paid subscribers (monetisation) to enhancing educating high quality to drive long-term consumer progress. And this dangers some margin stress and, presumably, lower-than-expected bookings.
| Netflix in 2009 | Duolingo in 2025 | |
| Market-cap | $3.1bn | $8.9bn |
| Income | $1.7bn | $1bn (forecast) |
| Internet revenue | $116m | $245m (forecast, normalised) |
| Whole subscribers | 12.3m | 11.5m (as of Q3) |
Being life like
Now to be clear, I’m not saying Duolingo will grow to be a world juggernaut price $480bn like Netflix. The streaming chief’s shares are up roughly 14,000% since 2009, and such returns are exceptionally uncommon. Therefore why I stated it solely jogs my memory of a younger Netflix.
Additionally, I don’t need to downplay AI threats or dwell translation from Google and Meta glasses. Though it’s price remembering that individuals use Duolingo usually to study a second language, not translate conversations.
In the meantime, ChatGPT has no structured curriculum and/or gamified options like streaks to maintain customers engaged.
Of Duolingo’s 135m customers, solely 9% (11.5m) right now are paid subscribers. Contemplating there are 1.5bn folks studying a international language, the market alternative stays large, particularly in Asia. And this excludes maths, music, chess and different future topics.
With the inventory buying and selling at a far cheaper valuation than six months in the past, I feel it’s price assessing. I feel the crashing share value doesn’t mirror the precise energy of the underlying enterprise.
