Duolingo Defies AI Casualty Narrative with Strong User Growth
Despite market skepticism that artificial intelligence would render Duolingo obsolete, the language learning app has seen strong user engagement. Daily active users (DAU) grew by 23% to 58.7 million in Q2 2026, and paid subscribers increased by 17%. DA Davidson upgraded Duolingo's stock rating to Buy with a target price of $160, leading to a 7% jump in share value. The company is leveraging AI as a cost-saving tool rather than a threat. Open-source models have reduced the costs for features like Video Call and boosted gross margins to 72.6%. However, net income fell by 26% due to higher operating expenses, indicating that profitability has not yet caught up with user growth. Despite recent positive developments, Duolingo remains heavily shorted at nearly 20.72%, and most analysts still rate it as a Hold. While DAUs are rising sharply, revenue is growing more slowly—bookings increased just 8% in Q2 compared to the previous year.
Tickers: $DUOL
Topics: AI DAU margin improvement upgrade user growth