Duolingo: AI Threat or Tailwind for the Category-Leading Language App

Switzerland-based investor Jens Kruse presented his updated thesis on Duolingo (Nasdaq: DUOL) at Wide-Moat Investing Summit 2026.

Thesis summary:

Duolingo is the dominant consumer language-learning app, founded in 2011 by Luis von Ahn and Severin Hacker and public since 2021. Jens revisited a thesis he first presented in June 2025. The stock has since fallen from a $541 ATH to a low near $89 in April 2026, recently trading around $128, roughly 76% below its peak. The freemium, gamified model holds 60% share among language apps, with 135M MAUs, 56.5M DAUs, and 12.5M paid subscribers; subscriptions are 83% of revenue exceeding $1B, at a 73% gross margin.

Jens’s first lesson concerns growth: the business kept advancing, but the rate of change turned negative. DAU growth cooled from over 40% to about 21%, and in Q2 2025 bookings growth, a lead indicator, fell below revenue growth, a lag indicator, for the third time since 2022. Whether the inversion is seasonal or structural remains unresolved. AI is the swing factor: Jens now views it as more nuanced than the tailwind he first assumed, citing a JP Morgan survey in which 20% of learners used their prior tool less because of AI.

Management has designated 2026 an investment year, redirecting over $50M of bookings into a stronger free product and compressing the EBITDA margin toward 26% from roughly 30%. Von Ahn targets 100M DAUs by 2028, near a 23% CAGR, the metric Jens tracks quarterly for reacceleration. The wider call treats DUOL not as a language app but as an “Amazon for learning,” with a TAM of global smartphone users rather than language students; optionality rests on new verticals beyond math, music, and chess, plus Duolingo Max, a $400M buyback against a $1B-plus cash pile, and 20%-of-float short interest. Jens flags the February exit of CFO Matt Skarupa and co-founder Hacker’s silence.

Valuation is the second lesson: look through the headline. On $2.86 of 2026E GAAP EPS, DUOL recently traded near 45x, not a buy in Jens’s view. JP Morgan’s adjusted EPS of $6.68, adding back 15% SBC and interest income on the cash pile, lowers the multiple to about 19x, toward 16x and 12x further out; reported 2025 GAAP EPS of $8.29 was flattered by a one-time $257M tax benefit. On that adjusted basis, with vertical optionality and a possible short squeeze, Jens frames DUOL as a speculative buy, and warns that averaging down would be the worst response for holders

Replay Jens’s presentation on Duolingo from 2025.

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About the instructor:

Jens Kruse is Chief Representative based in Zurich, Switzerland. In addition to build relationships for Jifu Investments he is responsible to manage an inhouse global equity portfolio. Prior to joining Jifu Investment Group, he was the Director and Country Head Switzerland within Franklin Templeton for over 10 years. In that capacity, he oversaw the increase of Swiss client assets from USD 4B to 24B at the peak, joining the top ten Swiss investment managers. His team conducted sophisticated, technology driven campaigns, covering all sales channels, including pension funds, private banks, insurance companies, family offices and independent asset managers. Jens was instrumental in executing state-of-the-art sales processes with the team in a pilot project, subsequently followed by all international offices. Jens has 30 years of investment experience, selling financial products to European institutional investors. He lived and worked in the UK, Italy, France, Germany and Switzerland and acquired the local languages. He holds a master’s in political sciences with a focus on macroeconomics from the University of Berne, Switzerland.

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