Michigan Pension Fund Sues Duolingo Amid 23% User Growth in Second Quarter
Key Facts
A Michigan public pension fund filed a proposed securities lawsuit against Duolingo on October 7, 2026, in the U.S. District Court for the Western District of Pennsylvania, accusing the company and its executives of misleading investors about user growth and the product experience. The 32-page complaint names co-founder and CEO Luis von Ahn, former CFO Matthew Skarupa and the company. The plaintiffs say Duolingo increased advertising and upselling and expanded AI-generated content, harming the product experience and daily active user growth. They also allege the company did not adequately disclose to investors the effect of these choices on the metrics they track. These remain allegations in a proposed lawsuit, and no ruling has established them.
The company’s reported second-quarter 2026 results put allegations of slowing user growth in the context of figures showing continued growth, albeit at a slower pace than the previous year. Daily active users reached 58.7 million, up 23% year over year, compared with 47.7 million in the second quarter of 2025, when annual growth was 40%. Von Ahn said daily active user growth accelerated in the second quarter compared with the first quarter, describing the 23% annual increase as an acceleration from the previous quarter. In its shareholder letter, the company linked the results to a strategy of improving the product and prioritizing user growth. The plaintiffs center their allegations on the growth trajectory and product experience, while the reported figures show the user base continued to expand during the quarter under comparison.
On the revenue side, Duolingo reported second-quarter revenue of $298.5 million, up 18% year over year from $252.3 million. But bookings, at $289.1 million, rose just 8% from $268 million a year earlier, a slower pace than revenue growth. The divergence reflects different financial indicators at a time when the complaint focuses on whether management made clear to investors the effect of monetization policies on user engagement and growth. Higher revenue alone does not mean all business metrics moved at the same rate; bookings, a separate figure in the company’s results, grew more slowly. In the quarter, daily active user growth was 23%, revenue rose 18% and bookings increased 8%, according to the shareholder letter filed with the U.S. Securities and Exchange Commission.
The company acknowledged in its fourth-quarter 2025 results letter that daily active user growth had slowed during the year and forecast growth of about 20% in 2026. It said at the time that an increasing focus on monetization may have contributed to the slowdown, a point that overlaps with investors’ allegations about the impact of advertising and upselling. In February 2026, Duolingo said it would prioritize user growth and learning improvements during the year, even if that constrained near-term financial growth. The company set a target of reaching 100 million daily active users over the medium term and said improving the free learner experience would support word-of-mouth recommendations and later growth drivers such as chess, math and music. Following the strategy announcement and bookings outlook in February, the stock fell more than 15% in extended trading, according to a Reuters report published by Investing.com.
EL7 data show Duolingo shares closed at $138.6 on October 26, 2026, without establishing a causal link between that price and the lawsuit. The court has not yet approved the case as a class action, and no claim form or settlement has been issued, according to OpenClassActions. Investors seeking appointment as lead plaintiffs have until December 7, 2026, to file their motions. The case therefore remains at an early stage, with its potential class action status and whether any allegations will be proven in court still undetermined. The next step centers on motions for lead plaintiff appointment, while the company’s reported figures on users, revenue and bookings remain key background to the dispute.