Switzerland-based investor Jens Kruse presented his updated thesis on Duolingo (US: 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 all-time high to a low near $89 in April 2026, recently trading around $128, roughly 76% below its peak, with the market cap down to about $6bn from more than $24bn.
The freemium, gamified model holds 60% share among language apps, with 135m MAUs, 57m DAUs, and 12.5m paid subscribers; subscriptions are 83% of revenue exceeding $1bn, at a 73% gross margin. Jens’s first lesson concerns growth: the business kept growing, but the rate of change turned negative. DAU growth cooled from over 40% to about 21%, and by Q3 2025 bookings growth, a lead indicator, had slipped to 33%, below revenue growth near 41%, a lag indicator.
Whether the inversion is seasonal, as in 2022 and 2023, or structural remains open. AI is the swing factor: Jens now views it as more nuanced than the tailwind he first assumed, citing a JP Morgan survey of 1,250 learners in which 20% used their usual 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 adjusted EBITDA margin toward 26% from about 30%.
Von Ahn targets 100m DAUs by 2028, near a 23% CAGR, the metric Jens tracks quarterly for reacceleration. The wider call treats DUOL 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 $1bn-plus cash pile, and 20% short interest. Jens flags the February exit of CFO Matt Skarupa and co-founder Hacker’s silence.
His 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; reported 2025 GAAP EPS of $8.29 was flattered by a one-time $257m tax benefit. JP Morgan’s adjusted EPS of $6.68, adding back 15% SBC and interest income on the cash pile, cuts the multiple to about 19x, toward 16x and 12x. On that basis Jens sees a speculative buy, and warns that averaging down would be the worst response for holders.
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