Citizens has retained its Market Perform rating on Duolingo Inc. (NASDAQ: DUOL) even as the company moves to broaden its advertising capabilities and extract more value from free users. The stock is trading close to its 52-week low of $133.50 after sliding more than 63% over the past year, and InvestingPro data indicates the shares are currently trading below their assessed Fair Value.
Duolingo introduced character-led advertising in October 2025, using familiar brand characters - Oscar, Lily, and Falstaff - to deliver 15-second sponsored videos that include call-to-action buttons. Initial tests of the creative format produced notably strong engagement, with video completion rates of 96% and click-through rates as high as 30% in some cases.
Advertising contributes a modest share of the company’s revenue today, accounting for roughly 8% of total sales. Still, Citizens views better monetization of non-paying users as a meaningful lever for future revenue growth. The firm points to recent trends in ad monetization: ad revenue per monthly active user grew 25% year-over-year in the second quarter of 2025 and rose 22% year-over-year in the third quarter, signaling improvement in ad yields across the user base.
Underlying top-line performance has been strong. InvestingPro data shows Duolingo’s overall revenue rose 39.86% over the last twelve months, and the business reported gross profit margins of 71.99%, a level the analyst firm interprets as evidence of robust unit economics.
Citizens’ proprietary estimates imply Duolingo will generate $1.65 per daily active user or $0.61 per monthly active user from advertising in 2025. Those figures remain meaningfully lower than peer benchmarks, according to the firm, which suggests there is room for ad revenue to expand if the company can continue to improve monetization.
Despite the ad-related upside, Citizens left its Market Perform rating unchanged because it remains cautious about the company’s ability to sustain user growth. The firm nonetheless acknowledges Duolingo has several mechanisms to support ongoing bookings, revenue, and EBITDA expansion, particularly as advertising appears poised to scale through 2026.
Investors will have a nearer-term data point to assess progress when Duolingo reports earnings on February 26. Analyst consensus compiled ahead of the release calls for EPS of $12.45 for fiscal year 2025.
Additional analysis and proprietary research tools are available via InvestingPro, which provides deeper coverage including ProTips and comprehensive reports; the platform’s Pro Research Report on Duolingo is one among more than 1,400 deep-dive reports available to subscribers.
Duolingo also released preliminary fourth-quarter results ahead of the full report. The company said daily active users rose by 30%, and bookings were at or slightly above the top end of its previously disclosed guidance range of $335.5 million. These operational signals coincide with a leadership change at the finance function: CFO Matt Skaruppa will depart and board member Gillian Munson will assume the role.
Analysts tracking the transition have weighed in. KeyBanc and Truist Securities said they expect a smooth handoff given Munson’s long tenure with the company. In the broader analyst community, views are mixed: Truist reiterated a Buy rating with a $245 price target, citing material advances in artificial intelligence for product and content generation. In contrast, DA Davidson lowered its price target to $170 but kept a Neutral rating amid persistent concerns about user growth. KeyBanc Capital Markets maintained a Sector Weight rating, pointing to a balanced outlook in the context of the CFO change and preliminary results.
Taken together, these developments illustrate simultaneous strategic adjustments and technology-driven enhancements at Duolingo. Management change, early evidence of stronger ad monetization, and solid margin profiles form the backdrop against which investors and analysts are assessing the company ahead of the upcoming earnings release.