Duolingo
Founder-led compounding machine in mobile learning with rising cash economics
Duolingo is the dominant global mobile learning platform, with a large, engaged user base that converts into a fast-growing, high-margin subscription and bookings engine.
The company finished 2024 with record engagement and carried strong momentum into 2025. In Q2 2025 it reported revenue of 252.3 million, up 41 percent year over year, and free cash flow of 86.3 million for the quarter.
Trailing twelve months free cash flow is approximately 330 million, implying a robust near-40 percent FCF margin on a roughly 885 million TTM revenue base. Qualitatively, Duolingo’s moat rests on brand, data and content scale, product prowess in engagement mechanics, and efficient distribution through the app stores.
Quantitatively, the balance sheet is fortress-like with roughly 976 million in cash and equivalents and no financial debt, plus 121.7 million in short-term investments and 75.4 million in long-term investments.
Dependency on Apple and Google for distribution and payments remains a key structural risk, as those platforms processed about 85 percent of total revenue in Q2 2025. Execution on AI-powered premium tiers and new subjects is improving monetization while maintaining capital-light reinvestment.
Does Duolingo have a strong competitive moat?
Moat sources include brand strength as the top-grossing Education app globally, engagement mechanics that raise switching friction via streaks, leagues and social features, and a large proprietary corpus of learning data that improves course quality and AI-driven features over time.
Scale advantages in content creation and A-B testing lead to faster iteration and higher conversion. Efficient app store distribution reinforces discovery and rankings. Weaknesses are relatively low contractual switching costs and the presence of credible alternatives in language learning.
Platform dependency on iOS and Android introduces take-rate and policy risk that can compress margins or alter acquisition funnels over time. The Duolingo English Test adds an additional, somewhat more defensible niche with institutional relationships and rising acceptance, but it is still exposed to policy shifts by universities and regulators.
Does Duolingo have pricing power in its industry?
Pricing power is good and improving. Revenue mix is predominantly subscription, which grew 46 percent year over year in Q2 2025 to 210.7 million, aided by premium tiers such as Super and Max. ARPU is rising modestly as users trade up, while ads and DET provide ancillary monetization.
The business demonstrates capacity to expand take per user via tiering, bundles and family plans rather than broad price hikes. Risk factors include app store fee structures, competitive freemium pressure, and the possibility that AI-native alternatives could cap willingness to pay.
How predictable is Duolingo's business?
Engagement and conversion trends are consistent, with DAUs up 40 percent and MAUs up 24 percent year over year in Q2 2025. Subscription revenue is recurring-like with growing deferred revenue of 431.2 million recognized within the next 12 months, supporting near-term visibility.
Still, the model carries some cyclicality around promotional periods and macro, and it remains sensitive to app store policy changes and social traffic. Geographic diversification helps but revenue processing is concentrated through a few platforms. Overall predictability is solid for a consumer app but below that of classic tollbooths.
Is Duolingo financially strong?
The company is very well capitalized with approximately 976 million in cash and cash equivalents at June 30, 2025, plus 121.7 million of short-term and 75.4 million of long-term investments. There is no financial debt on the balance sheet; lease liabilities are modest relative to liquidity.
Operating cash flow for the first half of 2025 was 196.3 million and free cash flow 189.3 million, highlighting strong cash generation and low capital intensity. This balance sheet and cash profile provide ample resilience in downturns and flexibility to invest through cycles.
How effective is Duolingo's capital allocation strategy?
Management prioritizes product development and engagement over heavy marketing or acquisitions. Capex requirements are minimal and mostly for software and small equipment. The company has not engaged in material, dilutive M&A.
Stock-based compensation is meaningful but trending in line with high-growth software peers; diluted weighted-average shares were about 49.0 million in Q2 2025, up modestly year over year, and should be watched. We would prefer opportunistic repurchases if and when the share price trades below intrinsic value.
Does Duolingo have high-quality management?
Duolingo is founder-led by CEO Luis von Ahn with co-founder leadership and a product-centric culture. The company has a track record of shipping effective engagement mechanics, expanding premium tiers, and using AI to accelerate content creation and new learning experiences.
The dual-class structure aligns with long-term product investment but concentrates control. Execution around growth with expanding profitability through 2024 and 1H 2025 supports management quality.
Is Duolingo a quality company?
Duolingo is a good quality company with a quality score of 84/100
- Scale and engagement lead in education apps with 47.7 million DAUs and 128.3 million MAUs in Q2 2025, supporting durable conversion to paid tiers and ads.
- Strong unit economics and cash conversion: TTM FCF about 330 million on ~885 million TTM revenue, with quarterly FCF margin of 34 percent in Q2.
- Founder-led, product-first culture compounding through AI features and content velocity; disciplined capex and minimal reliance on M&A.
- Platform concentration is the primary structural risk: Apple and Google processed roughly 61 percent and 24 percent of revenue respectively in Q2 2025.
- Optionality from Duolingo English Test acceptance growth and new subjects can extend the runway while maintaining an asset-light model.
What is the fair value of Duolingo stock?
Is Duolingo a good investment at $178?
The following analysis is provided for informational and educational purposes only. It does not constitute financial advice, investment advice, or a recommendation to buy or sell any security. The opinions expressed are based on publicly available information and historical data. Beanvest and its contributors may hold positions in the securities mentioned. Investors should conduct their own due diligence or consult a licensed financial advisor before making any investment decision.