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.
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.
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%.
Those results arrived one day after Bank of America took a more cautious view of the stock.
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.
BofA questions what is behind Duolingo’s user growth
Dessouky’s concern centered on whether Duolingo can sustain the growth needed to support its valuation.
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.
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.
Duolingo’s earnings report added another wrinkle to that argument.
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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.
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.
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.
Duolingo’s valuation remains the bigger issue for BofA
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.
BofA cut its 2027 bookings growth forecast to 9% from 11% and lowered its 2027 EBITDA estimate to $338 million from $388 million.
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.
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.
The disagreement becomes more pronounced further out.
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.
For investors, the latest earnings report strengthened the near-term user-growth story. BofA’s downgrade argues that the harder question begins after that.
