Reports emerged today that Duolingo has abandoned its policy of grading employees on how much they use AI tools, a reversal CEO Luis von Ahn confirmed after staff complained they were being pushed to use AI "for AI's sake." Employees felt the policy forced them to use AI when it wasn't necessary, leading the company to reassess its strategy. The stock rose 3.0% to $93.82 during Monday's session, though the bump tracked a broader NASDAQ rally (+0.72%) rather than any direct investor enthusiasm for the policy shift.
A Year of Zigzagging on AI Has Eroded Credibility. The scrapped policy originated in April 2025 under an AI-first strategy that measured how employees used AI and factored the metric into performance reviews.
That same memo told managers to "gradually stop using contractors to do work that AI can handle" and accept "occasional small hits on quality." Von Ahn has now walked back components of his own mandate twice—first after public backlash, now after internal pushback. For a company that needs to execute flawlessly on an AI transition, this pattern of announce-then-retreat raises execution-risk questions.
The Real Financial Story Is Slowing Growth, Not HR Policy. For 2026, Duolingo guided to bookings growth of just 10%–12% and revenue growth of 15%–18% —a stark deceleration from the +41.5% revenue growth posted a year earlier. User growth slowed too: daily active user growth fell from at least 40% year-over-year for three years straight to 30% in Q4 2025. The stock has collapsed from its 2025 highs, and today's price near $94 sits far below the levels implied by earlier premium valuations.
Productivity Gains Haven't Materialized Into Margin Expansion. Von Ahn has claimed AI lets the company produce "four or five times as much content" with the same headcount. Yet 2026 guidance calls for slower bookings and lower profitability as the company reinvests in user acquisition —meaning AI savings aren't flowing to the bottom line. Researchers have found actual time savings from AI tools were far smaller than expected, with users reporting only a 2.8% reduction in work hours.
Brand Risk Remains the Quiet Threat. The original AI announcement sparked such fierce user backlash that Duolingo went silent on social media, squandering years of goodwill.
Only about 10% of monthly active users currently pay for the service , meaning brand perception directly controls the conversion pipeline. Today's policy reversal is a sensible HR fix, but it doesn't address the deeper question investors should be asking: whether aggressive AI substitution is quietly degrading the product that 50 million daily users once loved.