In February 2025, Duolingo killed its mascot (the little green owl) on TikTok.
The stunt generated 1.7 billion impressions in two weeks and brand mentions spiked by 250x in a single day.
However last night, the stock fell 14.4% after their earnings release… and is now down 80% over the past year.
These two things are connected…
And understanding why tells you something important about what growth investing requires you to believe.
You see, Duolingo… the language learning app… had built a second identity as a social media phenomenon.
The unhinged owl era, which began around 2021, turned a utility app into a cultural event.
It drove users in by the millions, from platforms like TikTok and Instagram
At the peak of that tailwind, daily active users (DAUs) grew 59% in a single quarter. monthly active users (MAUs) grew 40% in the same period.
Wall Street took note and the stock was priced for perfection.
The problem is that most of those users didn’t end up sticking around.
They downloaded Duolingo because of a funny moment on social media, not because they had a genuine desire to learn Italian or Esperanto.
But viral curiosity and sustainable product engagement are not the same thing.
So in Q1 2026, DAU growth had moderated to 21%… and management guided for "around 20%" going forward.
But the tough part was that Top-of-funnel growth (the number of new people signing up for the app) was described by the CEO as "about flat."
The underlying business is still robust with $1 billion in cash, no debt and $350 million in free cash flow expected this year. But the comps created by a one-time viral stunt made it almost impossible to give clean guidance.
This same dynamic played out with Netflix during COVID. They pulled forward roughly 20 million subscribers during lockdown. The years that followed looked like the company had stopped growing. Because it had, against an artificially inflated base.
Management struggled to read their own metrics. Investors couldn't tell organic growth from lockdown noise. And the stock got obliterated before eventually recovering on a completely different business model.
if Duolingo had grown steadily at 20–25% per quarter and metrics were more predictable… that allows analysts to model the business with confidence. The same goes for investors.
When people say they want 10 baggers and 100 bagger stocks… what they really mean is 25% growth year in year out with no drawdowns (25% CAGR for 20 years is a 100x)… but it doesn’t work like that in reality.
A few years back I ran an analysis on every single 10 bagger in the public markets between 2011 and 2021. The average drawdown (peak to trough) was 65%…
So even for stocks that eventually end up becoming big winners… volatility is a feature, not a bug.
And that’s what makes growth investing so hard. Because, just like real business… it’s never a straight line.
Duolingo may well figure it out… and I wouldn’t bet against them… but if you’re along for the ride… prepare for more volatility ahead.
Oliver
P.S.