Duolingo Faces Securities Class Action Over Growth and Monetization Claims

What the lawsuit says

The case is captioned City of Dearborn Heights Act 345 Police & Fire Retirement System v. Duolingo, Inc., No. 26-cv-02197, and was filed in the United States District Court for the Western District of Pennsylvania. It covers anyone who purchased or acquired Duolingo Class A common stock during the class period, inclusive of both dates.

According to the complaint as summarized by Kessler Topaz, the defendants made materially false or misleading statements and failed to disclose material facts about the company's business, operations and prospects. The complaint lists several specific allegations:

• Daily active user (DAU) growth was being weighed against deliberately added user friction, such as more ads, subscription tier upsells and worsened product quality, and Duolingo understood that any friction would cause users to leave.
• The company's A/B testing showed that more friction in the free experience, including its monetization push and rapidly generated low-quality AI content, was hurting DAU growth.
• Quickly generated AI content was worsening product quality, hurting the user experience and threatening the sustainability of financial performance.
• As a result, the defendants' statements lacked a reasonable basis.

These are allegations in a complaint, not findings by a court. Kessler Topaz also states that it did not file the complaint.

The stock drops behind the case

The release points to three events that it says moved the share price. On November 5, 2025, Duolingo reported third quarter results showing DAU growth of 36%, down from 49% in the first quarter. The company also said it would reverse course on its monetization push and focus on user growth. The stock fell 25% to close at $193.74 on November 6, 2025.

On January 12, 2026, Duolingo announced that its CFO had resigned and gave limited preliminary fourth quarter metrics showing DAU growth of only 30%. The stock fell another 8.5% to close at $161.74 that day.

After the market closed on February 26, 2026, Duolingo reported fourth quarter results. According to the release, the company confirmed the slower DAU growth and revealed that the "small financial impact" from its strategic shift was anything but. It said 2026 DAU growth would come in at 20%, along with lower bookings and less profitability. The stock fell 14% to close at $101 on February 27, 2026.

Lead plaintiff process and what investors can do

Investors have until December 7, 2026 to seek appointment as lead plaintiff. A lead plaintiff acts on behalf of all class members in directing the litigation and is usually the investor or small group with the largest financial interest who are also adequate and typical of the proposed class. The lead plaintiff selects counsel, who become lead or class counsel if approved by the court.

Kessler Topaz says investors may seek the role through its firm or other counsel, or do nothing and remain an absent class member. According to the firm, the decision does not affect the ability to share in any recovery. It says representation is on a contingency fee basis, and that there is no cost or obligation to speak with an attorney. Contact is through attorney Jonathan Naji at (484) 270-1453.

The release is marked as attorney advertising in certain jurisdictions. For Duolingo shareholders who held shares during the class period, the practical point is the December 7, 2026 deadline, which applies only to those who want to lead the case.