1 Glorious Growth Stock, Down 81%, You Might Regret Not Buying on the Dip in March

Duolingo (NASDAQ: DUOL) operates the world's largest digital language-education platform. Unfortunately, that hasn't kept its stock from plummeting by 82% from its mid-2025 all-time high. The drop is primarily tied to two reasons:

1. Investors are worried that artificial intelligence (AI) will disrupt its business.
2. Management plans to target faster user growth, which is likely to affect sales and profits.

I think those concerns are overwrought. Regarding the first issue, Duolingo has actually proven that AI can be a tailwind for its business, rather than a serious threat. As for the second, while the shift in its business strategy could temporarily result in slower revenue and earnings growth, the company believes it can almost double its daily active users (DAUs) between now and 2028.

If I'm right, the sharp decline in Duolingo stock presents a great long-term buying opportunity, especially because the stock is trading at the cheapest valuations it has ever been since going public in 2021.

Image source: Getty Images.

AI is reshaping the learning experience

Duolingo takes a mobile-first approach to education, so it can provide interactive and highly engaging lessons to anybody with a smartphone or tablet computer. Its platform had 52.7 million DAUs at the end of 2025, which was a 30% increase from the year-ago period, so its strategy is clearly resonating.

The company monetizes its platform by showing ads to free users, and by offering a series of subscription options for eager learners who want to accelerate their progress by unlocking extra features. A record 12.2 million users were paying for a subscription at the end of 2025, a figure that was up 28% year over year.

AI has been a major drawing card for subscribers. In 2024, Duolingo launched a feature called Video Call, which enables users to practice their foreign-language speaking skills with a digital avatar named Lily, and it's only available to users who pay for Super Duolingo or Duolingo Max subscriptions.

Subscribers who choose the more expensive Max subscription option also gain access to other AI features like Roleplay, which challenges them to solve different problems through a chatbot-style interface to improve their conversational skills.

Duolingo plans to integrate AI into the free learning experience, too, as part of its broader goal to attract more users. Most free lessons are completed by typing or tapping answers, but the company wants to make spoken language a more prominent medium, which is only now possible thanks to AI.

Duolingo's new business strategy could yield big rewards

In 2025, Duolingo generated a record $1.04 billion in revenue, a 39% increase from the prior year. The company also had a record year at the bottom line, producing $414.1 million in net income based on generally accepted accounting principles (GAAP), an amount that was up by an eye-popping 367%.

But as mentioned above, investors worry that those blistering growth rates are now on the chopping block as monetization becomes a secondary priority to user growth. Management believes investing more aggressively in acquiring users will lead to much better financial results in the long run, which makes sense because the platform will have more prospects to convert into paying subscribers. Plus, a larger user base will make Duolingo's "position as the leading education app in the world" more defensible and harder to disrupt.

On a positive note, Duolingo is a capital-light business, and its soaring 2025 profit suggests it has plenty of room to invest more money in growth. In fact, the company spent just $125.7 million on marketing last year, a mere 20% of its total operating costs.

Boosting marketing spending would be a surefire way to supercharge user growth. By 2028, management believes Duolingo could be serving 100 million DAUs, which would be almost double the 52.7 million it serves today.

Duolingo stock looks like a bargain

Following the 82% sell-off from last year's all-time high, Duolingo stock has landed at a very attractive valuation. Its price-to-sales (P/S) ratio is now just 4.8, which is not only the cheapest level since going public, but also a whopping 70% discount to its average of 16.3.

Data by YCharts.

Moreover, based on Duolingo's 2025 earnings of $8.31 per share, its stock now trades at a price-to-earnings (P/E) ratio of just 12.1. For some perspective, that's half the P/E of the S&P 500, which is 24.6 as I write this.

With that said, Duolingo's earnings could take a hit during 2026 as part of management's strategy shift, so its P/E might actually be higher later this year even if its stock doesn't produce any upside. Wall Street's consensus estimate (provided by Yahoo! Finance) suggests the company's 2026 earnings will shrink to $7.23 per share, but that places its stock at a forward P/E of 13.9, which is still extremely attractive.

Data by YCharts.

Although prospective shareholders might have to endure a period of slower revenue and earnings growth, they appear to be getting a fantastic price for Duolingo stock right now. If the company does reach 100 million DAUs by 2028, and investors look back on this moment, they might be very glad they bought the stock today.

Anthony Di Pizio 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.