2 weeks ago
16
David Jagielski, CPA, The Motley Fool
Mon, May 11, 2026 astatine 10:50 AM CDT 3 min read
Duolingo (NASDAQ: DUOL) banal has been successful a escaped autumn for immoderate time. Last year, it crashed by 46%, and already successful 2026, it's down different 39%. Things person gone from atrocious to worse for its shareholders.
Investors person been anxious to dump the banal adjacent though its underlying financials haven't been each that bad. The concern is growing, and its margins look strong. Here's wherefore I deliberation the marketplace is punishing the growth stock, and what it mightiness mean for investors.
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Are investors overly disquieted astir artificial quality (AI) destroying Duolingo's business?
A large inclination this twelvemonth has been the sell-off of bundle stocks owed to concerns that artificial quality (AI) volition cripple their underlying businesses. Thus acold successful 2026, the iShares Expanded Tech-Software Sector ETF has declined by 16%, portion the S&P 500 has risen by 8%.
Duolingo helps radical larn antithetic languages done its app, and it tin marque learning amusive and entertaining. It has proven to beryllium a hit, with the company's regular progressive users totaling 56.5 cardinal arsenic of its astir caller quarterly results (which went up until the extremity of March). But with AI chatbots being capable to construe and perchance assistance radical larn languages arsenic well, investors are apt acrophobic that Duolingo's semipermanent maturation prospects are questionable.
The communicative astir AI disrupting and possibly adjacent destroying bundle companies is wherefore I judge Duolingo's banal is down truthful overmuch implicit the past year. Investors are anxious to merchantability the banal contempt its beardown fiscal results, successful anticipation of worse performances ahead. However, that could beryllium a costly mistake fixed the company's beardown underlying numbers.
Why the marketplace whitethorn beryllium incorrect astir Duolingo
AI volition alteration and disrupt galore businesses, and it already has. But that doesn't mean that Duolingo's concern is doomed. Its app provides operation and a amusive learning acquisition that tin marque it highly appealing to radical who whitethorn not privation to larn done a chatbot. Its caller net numbers suggest that request is inactive there, with its paid subscribers rising by an awesome complaint of 21%, to 12.5 million. The concern whitethorn beryllium facing immoderate challenges and uncertainty ahead, but fundamentally, it remains solid.
If you're looking astatine the stock's slide, you whitethorn beryllium compelled to reason that it's doomed. However, I spot a imaginable script successful which the marketplace has grossly overreacted, and Duolingo's banal whitethorn person tremendous upside. It'll necessitate immoderate patience, but I'm optimistic that the banal tin and volition recover.
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