Morgan Stanley acknowledged that it misjudged Duolingo’s ability to expand revenue per user alongside audience growth, adding that management now plans to ramp up spending while easing its focus on revenue growth.

Duolingo’s earnings beat, AI strategies, and monetization momentum have boosted Wall Street's confidence.

The investment bank said Duolingo has the rare combination of rapid user growth, strong and expanding margins, and a clear generative artificial intelligence upside.