Duolingo (DUOL 1.09%) operates the world’s most popular digital language education platform, and the company continues to deliver stellar financial results. Duolingo is elevating the learning experience with artificial intelligence (AI), which is also unlocking new revenue streams that could fuel its next phase of growth.

Duolingo stock set a new record high in May, but it has since declined by 26%. It’s trading at a sky-high valuation, so investors might be wondering whether the company’s rapid growth warrants paying a premium. With that in mind, is the dip a buying opportunity, or should investors completely avoid the stock?

AI is creating new opportunities for Duolingo

Duolingo’s mobile-first, gamified approach to language education is attracting hordes of eager learners. During the first quarter of 2025 (ended March 31), the platform had 130.2 million monthly active users, which was a 33% jump from the year-ago period. However, the number of users paying a monthly subscription grew at an even faster pace, thanks partly to AI.

Duolingo makes money in two ways. It sells advertising slots to businesses and then shows those ads to its free users, and it also offers a monthly subscription option for users who want access to additional features to accelerate their learning experience. The number of users paying a subscription soared by 40% to a record 10.3 million during the first quarter.

Duolingo’s Max subscription plan continues to be a big driver of new paying users. It includes three AI-powered features: Roleplay, Explain My Answer, and Videocall. Roleplay uses an AI chatbot interface to help users practice their conversational skills, whereas Explain My Answer offers personalized feedback to users based on their mistakes in each lesson. Videocall, which is the newest addition to the Max plan, features a digital avatar named Lily, which helps users practice their speaking skills.

Duolingo Max was launched just two years ago in 2023, and it’s the company’s most expensive plan, yet it already accounts for 7% of the platform’s total subscriber base. It brings Duolingo a step closer to achieving its long-term goal of delivering a digital learning experience that rivals that of a human tutor.

Duolingo’s revenue and earnings are soaring

Duolingo delivered $230.7 million in revenue during the first quarter of 2025, which represented 38% growth from the year-ago period. It was above the high end of the company’s forecast ($223.5 million), which drove management to increase its full-year guidance for 2025. Duolingo is now expected to deliver as much as $996 million in revenue, compared to $978.5 million as of the last forecast. But there is another positive story unfolding at the bottom line.

Duolingo generated $35.1 million in GAAP (generally accepted accounting principles) net income during the first quarter, which was a 30% increase year over year. However, the company’s adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) soared by 43% to $62.8 million. This is management’s preferred measure of profitability because it excludes one-off and non-cash expenses, so it’s a better indicator of how much actual money the business is generating.

A combination of Duolingo’s rapid revenue growth and prudent expense management is driving the company’s surging profits, and this trend might be key to further upside in its stock from here.

Duolingo stock is trading at a sky-high valuation

Based on Duolingo’s trailing 12-month earnings per share (EPS), its stock is trading at a price-to-earnings (P/E) ratio of 193.1. That is an eye-popping valuation considering the S&P 500 is sitting at a P/E ratio of 24.1 as of this writing. In other words, Duolingo stock is a whopping eight times more expensive than the benchmark index.

The stock looks more attractive if we value it based on the company’s future potential earnings, though. If we look ahead to 2026, the stock is trading at a forward P/E ratio of 48.8 based on Wall Street’s consensus EPS estimate (provided by Yahoo! Finance) for that year. It’s still expensive, but slightly more reasonable.

Data by YCharts.

Even if we set Duolingo’s earnings aside and value its stock based on its revenue, it still looks quite expensive. It’s trading at a price-to-sales (P/S) ratio of 22.9, which is a 40% premium to its average of 16.3 dating back to when it went public in 2021.

Data by YCharts.

With all of that in mind, Duolingo stock probably isn’t a great buy for investors who are looking for positive returns in the next 12 months or so. However, the company will grow into its valuation over time if its revenue and earnings continue to increase at around the current pace, so the stock could be a solid buy for investors who are willing to hold onto it for the long term. A time horizon of five years (or more) will maximize the chances of earning a positive return.

Redazione RHC : 8 July 2025 09:11

The chairman of the American car company Ford, Jim Farley, has released a statement sharp on the future of the job market in the age of artificial intelligence. According to him, new technologies are capable of literally depriving half of white-collar workers of their jobs, that is, employees who work in the office and perform intellectual tasks.

At the international forum Aspen Ideas Festival, Farley noted that artificial intelligence has an asymmetric impact on the economy. He emphasized that, on the one hand, new technologies help and facilitate many processes, but on the other hand, they deal a severe blow to some professions. This is especially true for those who work in information processing, document flow and other office tasks.

Farley noted that advances in artificial intelligence will inevitably leave behind many workers who have been the backbone of the corporate world for decades. He noted that technology is improving the lives of many, but it also raises a serious question for society: What will happen to those left behind? He said the global community still doesn’t have a clear plan for how to support these people.

The conversation also touched on the future of manufacturing workers. Farley acknowledged that automation and robotics are gradually replacing people, but so far this is in a limited number of operations. He said that about 10% of processes in Ford plants are already performed by machines, and with the advent of humanoid robots, this percentage could rise to 20%. However, it will not be possible to completely replace people in production in the near future: according to Farley, human work remains a unique and in-demand activity.

However, the announcement of the cut of half of employees sounds particularly alarming in light of other forecasts. Previously, the CEO of Anthropic, Dario Amodei, accused companies and politicians of exaggerating the consequences of the introduction of artificial intelligence. He is convinced that the real picture is much bleaker and that unemployment in the United States could reach 20%. Amodei stressed that technology manufacturers are required to be honest and transparent about the future consequences.

There is no doubt about the severity of the changes taking place. Even Amazon CEO Andy Jassy admitted that the company is already preparing to reduce staff due to the widespread implementation of artificial intelligence. Amazon has already laid off around 30,000 employees this year and Jassy said that these measures will continue, as new technologies ensure high efficiency.

Fiverr CEO Micha Kaufman noted in his speech to employees that artificial intelligence threatens jobs in almost every category, from programmers to lawyers to support specialists. Kaufman called what’s happening a warning sign for everyone, regardless of profession.

The largest U.S. bank, JPMorgan Chase, hasn’t stood aside either. The bank’s chief executive, Marianne Lake, said that over the next few years, the company plans to cut up to 10% of its staff, replacing them with artificial intelligence algorithms. Shopify changed its hiring approach in the spring. Now, management requires managers to prove that tasks cannot be performed using AI before agreeing to expand the team.

Microsoft is also confirming the trend: the company announced the reduction of 9,000 employees, equivalent to 4% of the total staff. At the same time, the company continues to actively invest tens of billions of dollars in the development of artificial intelligence technologies. The threat of mass layoffs does not only concern the private sector. The Australian government, for example, is already implementing a policy on the responsible use of AI in government agencies. Australian Finance Minister Katy Gallagher has noted that it is important to consider people’s rights, interests and well-being when using AI in public services.

All events confirm a growing trend: AI is increasingly influencing the labor market, reducing the need for people and forcing companies and governments to look for new ways to adapt to inevitable changes.

Redazione
The editorial team of Red Hot Cyber consists of a group of individuals and anonymous sources who actively collaborate to provide early information and news on cybersecurity and computing in general.

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