Could Duolingo be in the portfolio?

Hello everyone,

Just got permission to post again because I have gone back and reviewed Duolingo as a possible investment. They only just recently IPO’d, and there wasn’t much I was super interested in with no public track record at the time. We are finally doing a couples trip internationally, so both of us are back to using the App again.

I really liked the app while I was testing it way back when, but with no set purpose, I kinda wandered off to other short term interests.

This is the one other post about Duolingo (DUOL) if found on the board. (WE CAN NOW SEARCH!!!))

First mention. No deep dive - Investment Analysis Clubs / Saul’s Investing Discussions - Motley Fool Community – Qazulight

Link to IR page - Investor Relations - Duolingo, Inc. (

First the numbers I can remember to look at, they look like decent SAAS type numbers for a young public company. (Percentages are yoy numbers it seems.)

Subscriber growth

2-'21 3-'21 4-'21 1-'22 2-'22
37.9 41.7 42.4 49.2 49.5
-3% 15% 31% 31%

Paid subscriber growth

2-'21 3-'21 4-'21 1-'22 2-'22
1.9 2.2 2.5 2.9 3.3
46% 49% 56% 60% 71%

Revenue growth

2-'21 3-'21 4-'21 1-'22 2-'22
58.8 63.6 73 81.2 88.4
47% 40% 51% 47% 50%


2-'21 3-'21 4-'21 1-'22 2-'22
71.60% 72.7 73.50% 73%

Thoughts – These margin numbers are pretty darn good and show that they are more like our SAAS companies on this board. They do not have “hardware” or anything that needs to sell with low margins (ie – TOST). They are growing both overall subscribers and paid subscribers each quarter they’ve been public. It is not blistering growth, but it looks solid. They even pointed out that negative impacts like the war in Ukraine have led people to the platform to learn Ukrainian. Interesting.

I find all of these numbers intriguing and with their share price coming back down from the heady IPO days, it seems like a decent price to start a small position to watch this one.

Now a few details I like from their presentations

Revenue mix:

  • Sub = 74%
  • Advert = 13%
  • English Lang Test (DET) = 10%*
  • Other = 3%**

*The DET is now used for international admissions by more than 3,600 higher education programs worldwide.

**Other primarily includes in-app sales of virtual goods

Other notes:

  • We’re proud of this outperformance, especially in light of the uncertain macroeconomic environment. Taking both of these factors into account, we’re raising our 2022 full year guidance, which now reflects 38% year over year growth in total bookings.

  • This year, we’re focused on expanding acceptance in institutions in four strategically important countries: US, Canada, UK, and Australia. As of the end of Q2, over 3,700 higher education programs accept the DET

Thoughts – I have now learned that they are not a one trick pony. That was a concern before we had a few quarters of information. Now they are actively expanding to areas related to their expertise of online education. Advertising on the platform is a way to monetize free users like me when I am just practicing. Growing subscriber numbers, regardless of churn would help make this worth more to advertisers. They have that last bullet in their shareholder letter, and it shows they are actively trying to expand beyond just the app, but using IP they already have and own. So they can get two income streams of that one instance.

Lastly, they raised guidance in this period, a period when everyone is so worried about spending slowdowns, inflation and interest rates. They are showing a lot of confidence here.

Wrap up – I am an investor that isn’t just focused on Sauldom stocks, so I have a few stocks in my smallest positions that don’t warrant conversation here. They are in my portfolio to make me follow the news and the earnings releases, but they are small enough that I could recoup that money on options (also not for discussion here) so it is money I am willing to risk. I think DUOL could be a Sauldom stock, but in a lower conviction level, and it might not grow at the blistering pace people got used to two years ago. I will open a test position, and I am (GASP) going to pull money out of Monday to do it. I have more confidence in DUOL level of execution risk than I do in one collaboration software to rule them all.


Hi. Thank you for bringing this up to the board. Its nice to noodle on some other companies and contrast/compare.

Their industry, market & moat weren’t clear to me. Also, while the growth acceleration looks pretty good, it wasn’t apparent to me if we’re talking about a very small company (comparable to MNDY) or a larger one.

I did a bit of research and it looks like they help with learning a new language. Also, last quarter, their revenue was about 88M; so smaller than MNDY. Below I grabbed from Koyfin

I have a few hesitations about investing in this company.

  1. I don’t see a competitive advantage for them, moat. It seems to me, there are a lot of quality competitors.
  2. For a company this small, their growth seems low

Admittedly, I don’t really know their market landscape. In your research on them, what do you find compelling outside of the pure numbers and what makes you think they can and will be able to continue this growth rate for a long time or raise their growth rate significantly?

If I bought them, I’d probably have to sell some CRWD or DDOG or a bit of everything in my portfolio.


Hi dlbuffy
I have used 2 apps to learn English and another languages

  1. Duolingo, 2. Busuu

I only paid for Busuu, but Duolingo I used it for free.
Maybe Duolingo will be a good company, but for me, I can not find the moat of it.


Having been a language major in college, I tried out Duolingo several years ago. My biggest complaint, from the perspective of a user, was that the words and phrases it taught me were ridiculous. I can now say “I am a penguin” in Spanish. Really, that was one of the actual phrases.

It was of some help in helping me brush up on languages I had already learned but had waned due to lack of use. But until you hear “Yo soy un penguino” regularly on the streets–or perhaps in zoos–I don’t see how the company gains enough traction to really take off.


I read S-1 of Duolingo

Free Users:
They become advocates for Duolingo and provide word-of-mouth publicity for our product, which enables our growth and has allowed us to make very selective and efficient marketing investments.

Me: Yes, I agree with it. When my friends want to learn a language I will introduce it to them

Our subscription offering is called Duolingo Plus. It offers learners features such as an ad-free experience, along with additional learning and gamification features that enhance their learning experience. One such enhancement is unlimited Hearts, which gives learners more flexibility in how they move through course content.

Me: ad-free and unlimited Hearts. I have never subscription it and I have used it for free until now, with no ads, and have unlimited Hearts.

Just share my experience
I have used it for 2-3 years.


I don’t know about moat, but as paying user I find Duolingo addictive.

Cheers Qazulight


Hi dlbuffy

I was a language major in university, and learned another later in life, too. Both these were pre-internet. I began learning Spanish a few years ago (but didn’t continue), and tried out the free version of Duolingo then. I found it a possibly useful tool (but only one of many needed when learning a language), and also knew I would never pay for it.
I doubt they have a role in a saul-ish portfolio. Ymmv


I looked into DuoLingo (DUOL) a bit ago. I came to essentially the same conclusions as @dlbuffy, except with an added dose of confusion regarding potential competition.

I travel the world and have actively used several language learning platforms and talked to many travelers about what they use to learn languages. My conclusion is that the only thing special about DuoLingo is their marketing and brand name recognition.

Not only can DuoLingo be easily replicated, there are already platforms out there which arguably provide superior systems for language learning.

This is also a field where there will always be multiple winners because people learn languages in different ways. Some people will resonate with the DuoLingo methodology, other people will resonate with a different methodology on a different platform. Considering this, how do I even begin to evaluate the potential market for DuoLingo?

In favor of DuoLingo … ask travelers how they learn a new language and the majority say DuoLingo. The company has good marketing, good brand name recognition, and, as noted by @qazulight, it is an addictive platform to many people.

My end conclusion was that while this company might have potential as an investment in a wider scope, it has no place in my portfolio. Its prospects simply cannot match up to other companies we talk about on this board.


Well, Duolingo put up a pretty good quarter from what I can see. Compared to our super SAAS hyper growers, this was a positive earnings report and continued growth and innovation ahead.

Subscriber Growth
2-'21 3-'21 4-'21 1-'22 2-'22 3-'22 4-'22
37.9 41.7 42.4 49.2 49.5 56.5 60.7
-3.00% 15.00% 31.00% 31.00% 35.00% 43.00%
Paid Subscriber Growth
2-'21 3-'21 4-'21 1-'22 2-'22 3-'22 4-'22
1.9 2.2 2.5 2.9 3.3 3.7 4.2
46.00% 49.00% 56.00% 60.00% 71.00% 68.00% 67.00%
Revenue Growth
2-'21 3-'21 4-'21 1-'22 2-'22 3-'22 4-'22
58.8 63.6 73 81.2 88.4 96.1 103.8
47.00% 40.00% 51.00% 47.00% 50.00% 51.00% 42.00%
2-'21 3-'21 4-'21 1-'22 2-'22 3-'22 4-'22
71.60% 72.7 73.50% 73.00% 72.60% 73.30%

That is two more quarters of growth from when I first posted here on this company. The biggest concern from replies was about paid subscribers, and those continue to grow even through this supposed recession.

Another big note from their earnings release was around their innovations. They are leaning into AI (yeah, a buzzword in most places) and creating a new subscription level…

While we have been investing in AI since 2013 to power both the Duolingo language learning app and the
Duolingo English Test, the technology has advanced to a level that is within striking distance of our vision to
teach as well as a human tutor. As such, we’ve begun testing a higher subscription tier (above Super Duolingo)
with new generative AI features, called Duolingo Max, that is the next step on this path. We worked closely with
OpenAI to develop Max features, using an advanced system that is optimized for language learning.

They have aimed at making learning as adaptive to users from the start. The testing of A/B processes has been a manual effort, but if they can get AI to crack this and add more interactivity.

Explain My Answer will provide in-depth explanations, generated by AI, to help learners understand their mistakes in a Duolingo lesson.

Roleplay will give learners a chance to chat with Duolingo characters in order to help build critical conversation skills.

This is still in a test position size for me, but I did add today even though it is now setting new 52wk highs. I rarely buy at the highs, but I also like to add on good reports, so I went ahead and added just a bit for now.


I first heard about Duolingo from a podcast with Kathy Donnelly, who co-authored a book on the IPO lifecycle. It was on her watch list because she had been using it and liked it. More on that later.

I have a 71 day streak going, trying to learn some Spanish. I find it pretty good and it seems to apply the tried-and-true “spaced repetition” approach. I have not noticed too many useless phases (e.g. Soy un penguino), but it does a lot of woke stuff with same sex couples. Don’t care, just quite obvious. I have also paired it with the podcast “Coffee Break Espanol”, which synchs up pretty well - same basic path (introducing yourself, where are you from, talk about your family, talk about your job).
I use the free version, but there are plenty of ads. After each lesson their either remind me I can upgrade our show me an add. Every hour, you get an opportunity to watch and ad for “gems”, which can be used for in app purchases. FYI, the adds mostly say “unity ads” and most are for other apps. So, they are making plenty of ad money off cheap people like me. The other thing is, they have done a good job “gamifying” the app. You get put in a group with 20-30 other people and the top 7 advance at the end of the week, those under 20 or so get demoted and the others stay (bronze, silver, gold, platinum, etc). This works to motivate me and I have only missed promotion once. Which means I am watching lots of ads.

Moat - yes, probably pretty low, but it seems to be quite popular and it does work well.
HyperGrowth: I can’t imagine it reaches growth potentials like DDOG, SNOW, etc, but it has a chance of doing well outside of Sauldom.

Earnings - no positive earnings yet, but as seen above, good revenues

Kathy Donnelly “The Lifecyle Trade”: you can find YouTube videos on her approach.
Lifecycle Phases:

  • IPO advance phase (IPO-AP)- when it first comes out, it builds an IPO base in the early days or weeks. Or just shuts up.
  • Institutional Due Diligence (I-DDP) phase (watch phase). Going sideways, can last months or a couple years.
  • Institutional Advance Phase (I-AP) - when institutions have completed their due diligence and they start to buy. The best place to make money.

DUOL is in the due diligence phase and has just broken out of a first stage base (which is where she buys in), so imagine she just got in.

Here is the daily chart…

And the weekly…


I use the free version, but there are plenty of ads. After each lesson their either remind me I can upgrade our show me an add. Every hour, you get an opportunity to watch and ad for “gems”, which can be used for in app purchases.

I pay. I find the ads distracting and a paid family I have my eldest son, my grandson and two of my nieces as well as my wife on the app.

I really did not want my grandson and nieces watching the commercials. Also, my wife and I are able to encourage each other. We are looking forward to immersion training next year.

I should have already invested. Maybe I will look for some quarters in the couch and buy a little.



Quick update on DUOL - they did it again. There looks to be the slightest slow down in %'s, but then most of the other education related stocks have taken BIG hits this season. Last week there was a large price drop on DUOL because Chegg had a bad report.

I really do not think they are in the same game, but still hit the price and made me wonder:
Why Duolingo Stock Was Sliding Today | The Motley Fool

The numbers:

**Subscriber Growth – YOY **
1-'22 2-'22 3-'22 4-'22 1-'23
49.2 49.5 56.5 60.7 72.6
31.00% 31.00% 35.00% 43.00% 47.00%
Paid Subscriber Growth – YOY
1-'22 2-'22 3-'22 4-'22 1-'23
2.9 3.3 3.7 4.2 4.8
60.00% 71.00% 68.00% 67.00% 63.00%
Revenue Growth – YOY
1-'22 2-'22 3-'22 4-'22 1-'23
81.2 88.4 96.1 103.8 115.6
47.00% 50.00% 51.00% 42.00% 42.00%
Gross Margins
1-'22 2-'22 3-'22 4-'22 1-'23
73.50% 73.00% 72.60% 73.30% 72.80%

Lots of talk on this board about what AI can and can’t do to help reduce overhead, but it seems that DUOL has found a way that works:

"In addition, we’re using AI to accelerate the pace of adding intermediate and advanced in our language learning app. In the past, it would take our experts a lot of time to create the thousands of sentences and exercises we add to each course over time. Now, GPT-4 can generate these in seconds, freeing our experts to focus on even more impactful ways of improving our courses. "

They have changed report from gross margin to EBITDA, so had to do my own math to keep my numbers tracking. But, on the EBITDA side of the coin. They got a 13.1% Adjusted EBITDA margin, and they say,

“putting us well on the path to our long-term target of 30-35% Adjusted EBITDA margin”

This is no longer a test position for me, not sure if that came up last quarter, but I have a position here in my 3rd out of 5 tiers (Fifth is just for watch and see and funsies stocks). I’ll be adding today as market opens and next week when one of my options expires worthless.


Thanks, @dlbuffy, for the original post and for continuing to post follow-ups. I’ve been following the stock after learning more about it from Stock Market Nerd (free). Here is their deep dive and here is their analysis of the most recent earnings report.

One point that Stock Market Nerd makes that hasn’t been made here yet is about the company’s flywheel:

  • More data = more split testing (A/B testing) = better products = more word-of-mouth growth.

Unlike competitors which conversely lean on…

  • More ad dollars = more external customer acquisition = more growth.

This is why Duolingo’s 2022 revenue growth rate was more than double its sales & marketing growth rate. This continues to pave the way for more operating leverage as can be visualized in the image below:


(I hope that formats the way I intend!)

I’ve used the app at the free level on a casual basis and was not impressed at how well it did for me. OTOH, my daughter and her boyfriend are both avid users, paying, and using it simultaneously for several languages. They are both into the gamification approach DUOL uses, which is always a turn-off for me. This is a huge global market, and they don’t have to serve everyone well to do very well as a business.

Their growth potential, from new products such as their english test and their new AI product, Max, helps me continue to be comfortable owning the stock.



I think it passed the test (in dollars)! I saw you bought in October…you probably have close to a double from those levels. Congrats!

I am more than impressed with the conversion to paid users…astounded! Still, I don’t think I’ll be adding this one to the watchlist. It reminds me a bit of Wix, which I owned for a while back in 2017-2018. Here are the total users and paid users while I followed it:


Duolingo is converting more paid users even though they have roughly half as many total users. Truly amazing. But Wix was no slouch either, in its day…yet the stock has done very poorly. Obviously I see Wix as a cautionary tale here. In my experience consumer apps (even ones that like Wix have many shots on goal to be more) make difficult stocks. I honestly don’t know if the problem is churn, or the struggle to be profitable, or something else. I would guess that churn will become very relevant very quickly as growth slows, but I’m really just guessing. And profitability has always eluded Wix despite a top-notch gross margin, too…again, I’m not sure why. I’ll be the first to admit this might be a bad comparison…and even if it is apt, I could just be missing the secret sauce for Duolingo.

But I’m also not tempted by Duolingo’s ~$6 billion market cap. Even if they can start printing profits, that valuation assumes more durability than seems possible – they can’t overcome churn forever. And just my gut? I can’t see this as a potential $20 billion company or anything close.

I would not presume to tell you that now is the time to take your gains. That’s what I would do, but if you decide to ride it out, I hope I’m wrong, and I wish you great success! And I hope my bearish thoughts are helpful either way. (I always like for others to challenge my investment decisions…I really hope that goes for you too, since I’ve done so!)



They are helpful to me. I love Doulingo. I am not convinced that I want own it though.



Totally appreciate well thought out feedback. Churn has not come up in any of their reporting, that I recall. I can see that one thing about retaining users is that when people get started, they really have multiple languages they end up trying. So that would expand the timeline for users.
Another thing that is impressive is the number of people I know that post their daily learning streaks. So that part of gamification is working.
We start to get into ‘story land’ next, but they are making steps to not be solely a niche language game. They are expanding into other areas. If the math stuff and other experiments don’t start growing their addressable market, then I will start to trim because they would lack optionality at some point.


I tried the math app. I found it too simple. However, I am probably not the target demographic as I am 63 and have gone to pre calculas with Khan Academy. (Wish I had the time to restart. I would love to get a degree in mathematics) So Duolingo has a challenge in the math area because Khan Academy is free and supported by people like me. It has a huge library of content, a well developed pedagogy has a broad course catalog including programming, history, and probably others now, (I have not explored Khan Academy in a couple of years.) Additionally emails I have received indicates that Khan Academy has integrated Large Language Models into itself.



Go for it Qaz! At 63 you likely have 20 years and you would only need four or five for a math degree. :grinning:


Still going. The gross margins are amazingly staying in the 70%'s and subscriber growth had a big move up to 63%.

Paid subscribers are kind of plateauing, so not sure what is up with that at the moment. They do tout their online marketing as going well, but three quarters of flat paid sub growth is worrying.

Overall, I started to trim this one as all stocks were going down. I kinda worried that I was the only one following it, and that I am NOT that smart. I would pull profits out to put into other Sauldom stocks. The worst part of doubting myself is that this position never went red once in the last year while every other position has.

Sigh, so going to suck it up and add some more soon. Maybe I can make up for some of the losses in Aehr after their last report.

Subscriber Growth – YOY
4-'22 1-'23 2-'23 3-'23
60.7 72.6 74.1 83.1
43.00% 47.00% 50.00% 63.00%
Paid Subscriber Growth – YOY
4-'22 1-'23 2-'23 3-'23
4.2 4.8 5.2 5.8
67.00% 63.00% 59.00% 60.00%
Revenue Growth – YOY
4-'22 1-'23 2-'23 3-'23
103.8 115.6 126.8 137.6
42.00% 42.00% 44.00% 43.00%
Gross Margins
4-'22 1-'23 2-'23 3-'23
73.30% 72.80% 73.30% 73.60%

That’s me quoting me. And I stand by all of that except that now it’s an $8b+ market cap. So congrats to anyone who ignored my bearishness back in May and is up ~30% since then!

Being wrong notwithstanding…This company kind of fascinates me. It’s an app. I know it’s a very popular one, but almost 6 million paid users? Amazing. And yet…I just don’t get it. You’re telling me roughly one out of every 1,000 people worldwide is a paid Duolingo subscriber? I’m just surprised. This isn’t Netflix. And you can, of course, just use it for free. How much time are people spending on Duolingo?

The founder is an interesting guy. Got rich by creating reCAPTCHA and selling it to Google. That’s impressive. Now an app that has become an $8b+ company. Revenues will top 500m this year. Can that get to a billion? 2 billion? I don’t see it. That said, I didn’t see it becoming this big, or generating this much cash flow, etc.