Duolingo Stock Is Down Big This Year. Here's Why Things Could Get Even Worse

It's proving to be a challenging year for stocks as the S&P 500 is down 2% so far in 2026. Between geopolitical headwinds, economic uncertainty, and now also rising oil prices, there have been multiple factors affecting the markets as a whole. And that's on top of the risk that some stocks are already facing.

Duolingo (NASDAQ: DUOL), which has an app that helps users learn new languages in fun and easy ways, has been under significant pressure due to artificial intelligence (AI). Concerns are growing about whether Duolingo's business can survive and if its app is needed, as people can just turn to AI to translate and to learn languages.

This year, shares of Duolingo have been in a free fall and are down a whopping 41%. What's even more troubling is that the decline may not necessarily be over. Here's why things could get even worse as the year goes on.

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Duolingo is altering its strategy

Duolingo recently reached a milestone: 50 million daily active users (DAUs). It's a great sign of the company's growth. It also generated a record $1 billion in revenue last year, which is nearly double the $531 million it reported just a couple of years earlier.

But despite its successful growth strategy, the company says it will prioritize user growth and making its free tier better. Management believes this will put it on track to get to 100 million DAUs in the medium term, while also positioning it for better growth in the long term. The company's growth in users has been slowing, and it believes that offering a more attractive free tier can help bring on more users to its platform. The company admitted, in a letter to shareholders, that its focus up until now has been on upselling, but that will change.

By taking on a less aggressive strategy and focusing more on user growth, that should help improve the DAU number. However, it comes with a potentially large trade-off: worse financial results.

Why Duolingo's stock may do even worse this year

The company admits that in its move to focus on growth, its revenue growth will worsen in the upcoming quarters, but expects that it will stabilize toward the end of the year. Its earnings will also come under pressure, and thus, its margins will deteriorate by a few percentage points.

Focusing on user growth could be costly for Duolingo and result in some underwhelming quarterly numbers this year, which could give investors even more of a reason to be bearish on the tech stock. Until there's proof that its strategy is paying off, I'd avoid Duolingo stock, as there's still significant risk.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Duolingo. The Motley Fool has a disclosure policy.