Duolingo DUOL shares jumped after Evercore ISI upgraded the language-learning company to Outperform and doubled its price target to $210 from $105, arguing that fears of ChatGPT disrupting the business are proving overstated. The call challenges one of the biggest bear cases surrounding Duolingo: that free generative-AI tools could eventually make a dedicated language-learning subscription unnecessary.
Duolingo operates a gamified education platform best known for language learning, while expanding into math, music and chess. It monetizes its large free audience primarily through paid subscriptions and advertising, with AI increasingly embedded into premium learning features.
Evercore’s proprietary survey found 36% of language learners use ChatGPT, making it the third-most-popular tool behind Duolingo and YouTube. But more than half of those ChatGPT users also use Duolingo, and 63% of that overlap group uses Duolingo daily.
“It’s there, with 36% of language learners using ChatGPT (3rd most popular tool after DUOL and YouTube), but here are the really pivotal nuances,” analyst Mark Mahaney said.
The findings suggest ChatGPT may be more complementary than substitutionary. Evercore found AI chatbot usage skews toward casual, travel-related learning, while Duolingo continues attracting users seeking structured lessons and recurring engagement.
Recent operating trends reinforce that argument. Duolingo’s second-quarter daily active users climbed 23% to 58.7 million, paid subscribers increased 17% to 12.7 million, and revenue grew 18% year over year.
Evercore now expects 2027 and 2028 EPS to run 10% and 25% above Wall Street consensus, respectively, and values the company at roughly 20 times projected 2028 EBITDA.
Investors Takeaway
The most important metric is daily active-user growth. Evercore sees a path toward roughly 99 million DAUs by 2028, making sustained engagement critical to its bullish thesis.
Investors should also watch paid-subscriber conversion, revenue growth and AI-feature adoption. If Duolingo can use AI to improve teaching while converting its expanding free audience into subscribers, ChatGPT could become less of a competitive threat than feared. Slowing DAU growth or rising user attrition, however, would quickly undermine that argument and make Duolingo’s premium valuation harder to defend.