Duolingo stock is falling off a cliff, continuing a dramatic collapse. You can’t just blame that ‘AI first’ memo

It’s a horrible day for investors in Duolingo. Shares of the language learning app with the green owl mascot are falling off a cliff after the company reported its fourth quarter results.

Yet it’s not the results themselves that are causing investors to dump the stock. Rather, it’s more about forward guidance the company has issued. Here’s what you need to know.

Duolingo’s Q4 by the numbers

Yesterday, after market close, Duolingo (Nasdaq: DUOL) reported its fourth quarter 2025 results. On the surface, many of the company’s most critical metrics saw decent gains for the quarter, including:

• Daily Active Users: 52.7 million (up 30% year-over-year)
• Paid Subscribers: 12.2 million (up 28% year-over-year)
• Revenue: $282.9 million (up 35% year-over-year) 
• Total bookings: $336.8 million (up 24% year-over-year) 
• Net income: $42 million

The company also reported its full-year 2025 financials, revealing that for the first time in its history, it crossed the $1 billion revenue mark for a fiscal year.

In 2025, Duolingo recorded $1.03 billion in revenue, along with total bookings of $1.15 billion, the latter figure representing 33% year-over-year growth. Net income for the year totaled $414.1 million.

“We closed 2025 with strong momentum,” Duolingo CEO Luis von Ahn said in a statement, “surpassing 50 million daily active users and generating more than $1 billion in bookings for the first time.”

Yet it was von Ahn’s next comments, along with the company’s 2026 guidance, that caused investors to turn negative on the stock.

What’s the plan for 2026?

Announcing its Q4 2025 results, von Ahn went on to explain the company’s battle plan for 2026—and it’s a plan investors seem to be deeply unhappy with.

“In 2026,” von Ahn stated, “we are deliberately prioritizing user growth and teaching better. We’ll focus on improving the free learner experience to grow word of mouth and feed our next user growth engines like chess, math and music, even though that moderates near-term financial growth.”

That moderation of near-term financial growth essentially means the company is willing to make less money in order to increase its user base.

Von Ahn says the company’s goal is to achieve 100 million daily active users in the medium-term, essentially doubling its existing monthly active users (MAU).

Efforts to double its MAU will, in large part, focus on giving subscribers of some of its lower-cost subscription plans access to artificial intelligence tools and services that would otherwise be limited to higher-cost, premium paid plans.

By doing this, Duolingo essentially risks leaving money on the table in order to attract additional subscribers to its low-cost options.

When companies do this, they ultimately hope that it will increase not just the user base but brand loyalty, which could translate into greater sales down the road.

Why are investors dumping Duolingo?

Leaving subscription money on the table is one thing. What seems to have freaked Duolingo investors out even more is the company’s Q1 2026 and full-year 2026 guidance. 

For Q1 2026, Duolingo says it expects to bring in around $301.5 million in bookings, representing about 11% year-over-year growth. For full-year fiscal 2026, the company says it expects to see about 10%-12% bookings growth to between $1.274-$1.298 billion.

On the revenue front, Duolingo says it expects about 25% revenue growth in Q1 to $288.5 million, and full-year 2026 revenue growth of 15%-18%, to $1.197-$1.221 billion.

As Reuters notes, that guidance is well below estimates. Visible Alpha data shows that analysts were expecting Q1 bookings of $329.7 million and fiscal 2026 bookings of $1.39 billion.

LSEG analysts were expecting full-year 2026 total revenue of $1.26 billion.

DUOL shares have crashed since the company proclaimed to be “AI-first”

Primarily as a result of its weaker-than-expected guidance, Duolingo shares have plummeted since its earnings were announced.

Currently, as of this writing, DUOL shares are down a staggering 26% in premarket trading to below $85 per share. Yesterday, DUOL shares closed at $117.45.

Today’s early-morning drop continues an extended slide for Duolingo’s stock price.

In May 2025, DUOL shares were trading at an all-time high of above $544 per share.

It was around that time (late April 2025) when the company put out a now-infamous “AI-first” memo in which it said it would gradually stop using contractors for work that AI can do. The memo was widely criticized and faced heavy backlash from the platform’s users, particularly on social media.

Speaking at the Fast Company Innovation Festival in September, von Ahn said the memo was misinterpreted and that the company had not fired any full-time employees.

Still, DUOL shares have fallen more than 78% from their May 2025 high, and that’s before its nearly 25% fall in premarket trading today.

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