Duolingo Is One of the Most Interesting AI Plays Nobody's Talking About

While there's ample discussion among investors about artificial intelligence (AI) stocks, much of it centers around chipmakers, cloud companies, and large language model (LLM) developers. There's a different type of company that rarely appears in those conversations: Duolingo (NASDAQ: DUOL), maker of the most popular language-learning app.

Duolingo's AI push initially drew significant criticism. In June 2025, CEO Luis von Ahn made a controversial announcement that Duolingo would be an AI-first company. He later clarified that he doesn't see AI replacing what Duolingo employees do. Despite the initial backlash, the focus on leveraging AI has made a positive impact on Duolingo's business.

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Scaling up course production via AI

One area where AI has made a difference for Duolingo is course content. Using generative AI, the company has drastically scaled up production. In April 2025, von Ahn announced that the company had developed 148 new language courses in a year. Its first 100 courses took 12 years to develop.

This production growth is accelerating, according to metrics from its first-quarter shareholder letter. In Q1, Duolingo published 20,500 course units, up from an average of 7,100 per quarter in 2025 and 1,800 per quarter in 2024.

Every additional course and language combination expands Duolingo's market, and the increase in courses has corresponded to an increase in users. Daily active users hit 56.5 million in the first quarter, up 21% year over year. Paid subscribers at the end of the quarter also increased by 21% to 12.5 million, indicating that the app is continuing to convert users into paying customers at the same rate.

Duolingo's financials are following suit

While Duolingo management is prioritizing user growth, earnings are also moving in the right direction. Revenue in Q1 increased 27% year over year to $292 million, and net income increased 24% to $43.5 million.

Duolingo has an efficient business with high margins (gross margin was 73% in the first quarter), and that means it has excellent cash flow. Free cash flow (FCF) for the quarter was $147.8 million, putting the company in a strong financial position.

Duolingo stock trades at a reasonable 13 times trailing earnings. It's worth noting that the share price has plummeted nearly 80% since May 2025, when it peaked at $541, which is why it's so affordable now. Several factors contributed to the decline, including the AI backlash, a focus on user growth over monetization, and worries about AI's impact on software stocks.

The AI backlash seems overblown at this point, given how many other tech companies have announced layoffs amid AI pivots. Even with the focus on user growth, Duolingo is still growing financially. The biggest concern is AI acting as a headwind to software companies like Duolingo. Still, I think it's more likely that Duolingo and many other software businesses will use AI to their advantage.

Duolingo is different from most AI stocks, and that's what makes it interesting as an investment. The company isn't selling chips or spending hundreds of billions of dollars on data centers. It's using AI to improve what it already does. At Duolingo's current valuation, AI-focused investors may want to consider picking up some shares.

Lyle Daly has positions in Duolingo. The Motley Fool has positions in and recommends Duolingo. The Motley Fool has a disclosure policy.