TenQ

The Duolingo story

Duolingo runs a free language-learning app funded by subscriptions and ads, with the central question whether better lessons and faster user growth can sustain paid subscription growth.

Written from Duolingo's own filings with the SEC, and rewritten when it publishes a new earnings release. Updated 2026-09-30.

  • $134.30share price, last close
  • $6.3Bmarket value
  • 22/36TenQ Score checks passed
  • 7.5%growth a year the price assumes

The story in brief

  • User growth accelerated. Daily active users grew 23% from the prior year in the quarter to June 2026, accelerating from the first quarter.
  • Revenue growth slowed. Revenue reached $1.1 billion over the last twelve months, growing 29.4% against an annual pace of 41.1% over the last three years.
  • Cash supports expansion. Duolingo generated $408 million in free cash flow over the last twelve months and held $1.2 billion in cash and short-term investments against $0 in total debt.

What drives the business

  • Duolingo builds its business around free learning content, game-like lessons and word-of-mouth growth, reaching more than 130 million monthly active users as of December 31, 2025.
  • Approximately 9% of monthly active users were paid subscribers as of December 31, 2025, with Super Duolingo offering extra features and Duolingo Max adding premium AI-powered exercises.
  • Math, Music and Chess extend the app beyond languages, while the Duolingo English Test had acceptance from over 6,100 education programs as of December 31, 2025, including MIT and Stanford.
  • License and service revenue accounted for $258 million, or 86% of $298 million in revenue, in the quarter to June 2026, compared with $21 million from advertising.
  • Prepaid subscriptions totaled $505 million at the end of June 2026, meaning cash collected for lessons not yet delivered arrives before the associated revenue.

What the price assumes

At $134.30, the reverse DCF implies free cash flow after stock pay grows 7.5% a year for ten years, using a 10.2% discount rate.

That compares with delivered annual growth of 105.1% over the last 2 fiscal years and the TenQ check's 54.6% bar, which slows that record halfway toward 4%.

The price passes that growth comparison but fails TenQ's enterprise value relative to EBITDA check, with a reading of 29.50 against its fixed yardstick of 14.00.

Value DUOL on your own assumptions

What could change the story

  • The acceleration in daily usage has not erased the slower revenue growth record, and free users need not become paying subscribers.
  • Shares outstanding rose 22.4% over 3 years, while stock-based pay totaled $145 million over the last twelve months without share repurchases to offset issuance.
  • AI features require increased computing investment and related costs, making profitability an important counterweight to user growth, especially with gross margin of 72.7% below TenQ's sector comparison of 74.5%.
  • Reliance on third-party app distribution, cloud providers and AI vendors leaves product delivery and revenue collection exposed to outside platforms.

What to watch next

  • The August 2026 earnings release emphasized product improvements and an ambition to teach a billion people rather than numerical financial guidance, leaving paid subscriber growth and revenue growth as key measures of progress.
  • The next reported daily active user growth rate will put the 23% increase in the quarter to June 2026 alongside the estimated 27.4% increase for August 17, 2026, which was inadvertently displayed before normal review was complete.
  • Paid subscriber penetration, prepaid subscriptions, operating margin and free cash flow after stock pay will help show whether greater engagement is translating into durable cash generation.

Sources

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