With a 54% Gain in 2025, This Artificial Intelligence (AI) Stock Is Crushing the S&P 500. Is It Too Late to Buy?

Core Insights - The S&P 500 has experienced volatility in 2025, initially dropping 19% from its peak due to President Trump's tariffs but has since recovered to an 8% decline from its high [1] - Duolingo's stock has surged 54% in 2025, largely unaffected by the trade war as its subscription-based model is not subject to tariffs [2][3] Company Performance - Duolingo reported 130.2 million monthly active users (MAU) at the end of Q1, a 33% increase year-over-year, with growth accelerating from 32% in the previous quarter [5] - The company achieved a record 10.3 million paying subscribers, marking a 40% year-over-year increase, indicating strong user engagement and perceived value in paid features [6] - Duolingo generated $230.7 million in revenue during Q1, a 38$996 million, up from $978.5 million, contributing to a 25$140.5 million in Q1, a 32% increase year-over-year, but slower than revenue growth, resulting in a 30% increase in net income to $35.1 million [11] - Marketing costs were minimal at$26.6 million, allowing more investment in research and development for new features [12] Valuation and Investment Considerations - Duolingo's stock has a price-to-sales (P/S) ratio of 29.5, significantly higher than its historical average of 15.8, and a price-to-earnings (P/E) ratio of 248, compared to the S&P 500's 22.5 [14][16] - Future earnings estimates suggest a forward P/E of 83 for 2025 and 63 for 2026, indicating potential for growth despite current high valuations [17] - While the stock is considered expensive, long-term investors may benefit from growth catalysts like AI and the Max subscription [19]