<\/p>\n
Duolingo’s latest quartergave investors fresh evidence that user growth is accelerating, but one Wall Street firm still sees a problem with what the market is paying for the language-learning company.<\/p>\n
Duolingo (DUOL) reported second-quarter revenueof $298.5 million, up 18% from a year earlier, while total bookings rose 8% to $289.1 million. Daily active users increased 23% to 58.7 million, and paid subscribers rose 17% to 12.7 million.<\/p>\n
The company also reaffirmed its full-year targets for 10% to 12% bookings growth and 15% to 18% revenue growth, while raising its adjusted EBITDA margin outlook to about 26.5%.<\/p>\n
Those results arrived one day after Bank of America took a more cautious view of the stock.<\/p>\n
In a note given to TheStreet, BofA analyst Omar Dessouky downgraded Duolingo to Underperform from Neutral and cut his price objective to $93 from $103. Based on the $135.80 share price listed in the note, that target implied roughly 31.5% downside.<\/p>\n
Duolingo (DUOL) reported second-quarter revenue of $298.5 million, up 18% from a year earlier, while total bookings rose 8% to $289.1 million.<\/p>\n
Cheng Xin via Getty Images<\/p>\n
BofA questions what is behind Duolingo’s user growth<\/p>\n
Dessouky’s concern centered on whether Duolingo can sustain the growth needed to support its valuation.<\/p>\n
The analyst said the stock had rallied more than 20% since early June alongside an improvement in monthly active users. June MAUs rose about 6% from May, following 3% growth in May and a 2% decline in April, according to the note.<\/p>\n
BofA argued that the June acceleration did not appear to be driven by major product improvements. The firm instead pointed to a June promotion tied to Airbnb that offered users a free month of Super Duolingo without requiring a credit card.<\/p>\n
Duolingo’s earnings report added another wrinkle to that argument.<\/p>\n
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Management said Q2 user growth accelerated because of product changes, marketing, and a one-time Streak Revival event. The June campaign allowed eligible users to restore their longest-ever streak by completing three lessons, and 15.4 million learners participated. Nearly 8 million of them did not have an active streak when the event began.<\/p>\n
That disclosure gives some support to BofA’s broader concern that part of June’s acceleration came from a temporary event, although Duolingo pointed to a different one-time factor than the analyst did.<\/p>\n
The company also said its current-user retention rate reached an all-time high of 84%, up about one percentage point from a year earlier. Management expects DAU growth to remain above 20% for the rest of 2026, arguing that product improvements and marketing should provide more durable support.<\/p>\n
Duolingo’s valuation remains the bigger issue for BofA<\/p>\n
The firm said Duolingo was trading at roughly 16 times its 2027 EBITDA estimate, compared with about 10 times for a group of mid-cap subscription companies with similar expected EBITDA growth. Dessouky said that premium was difficult to justify without more confidence in Duolingo’s longer-term product-market fit.<\/p>\n
BofA cut its 2027 bookings growth forecast to 9% from 11% and lowered its 2027 EBITDA estimate to $338 million from $388 million.<\/p>\n
The analyst had expected second-quarter bookings to reach $294 million, above the $284 million Street estimate and company guidance cited in the note. Duolingo ultimately reported $289.1 million, still above that comparison point but below BofA’s forecast.<\/p>\n
Management guided to $307 million of bookings in the third quarter, representing about 8.9% year-over-year growth. That figure is nearly identical to BofA’s $307 million estimate.<\/p>\n
The disagreement becomes more pronounced further out.<\/p>\n
Duolingo has been expanding AI-powered learning features such as Video Call and has laid out a longer-term vision for a more conversational learning experience. BofA said it is not yet willing to assume those changes will produce the growth required to justify today’s premium valuation.<\/p>\n
For investors, the latest earnings report strengthened the near-term user-growth story. BofA’s downgrade argues that the harder question begins after that.<\/p>\n
Related: Duolingo CEO issues stark forecast for 2026<\/p>\n
#Duolingo #earnings #put #Wall #Street #warning #test<\/p>\n","protected":false},"excerpt":{"rendered":"
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