Duolingo's (DUOL) focus on free user growth has strengthened retention, while daily active users have yet to turn meaningfully higher, Morgan Stanley said Tuesday in a report.

The company kept its fiscal 2026 bookings outlook unchanged even after a Q1 beat. Management remains focused on the long term and views the 2026 reset as a chance to reaccelerate user growth, the report said.

Morgan Stanley raised revenue estimates by 1% in 2026 and 2% in 2027 on stronger advertising trends.

Duolingo is developing a range of products, including expanded content production, revamped Asian-language courses, speaking modules, tutors, and longer free trials, which could support user growth and strengthen revenue over time, the report said.

Morgan Stanley cut its price target on Duolingo stock to $95 from $100 and reiterated its equal-weight rating.

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