Duolingo

None of the warning signs we check for were found.

We look for five warning signs: doubt it can keep going, weak checks on its own accounts, a notice that its past accounts can't be relied on, a change of auditor, and one customer bringing in a big share of sales. We don't check lawsuits, investigations or debt yet.

We checked the auditor's report, internal controls, restatement notices, auditor changes and big customers in the 10-K filed 27 Feb 2026, plus the 10-Q filed 6 Aug 2026 and 5 later 8-Ks.

• Its accounts show patterns that sometimes come before companies have to correct past results (Beneish score).
• It isn't cheap on profits: 38.0× operating profit.

Whether the price already reflects the risks is what the deep dive is for.

• Regulatory and legislative developments on the use of AI and machine learning could adversely affect our use of such technologies in our products and services as well as our operating results.

  Could happen

  At the state-level, numerous states have enacted laws regulating AI. For example, California has enacted various AI-related laws and regulations, including related to safety protocols, reporting, and transparency. In addition, Colorado’s Artificial Intelligence Act will require developers and deployers of “high-risk” AI systems to implement certain safeguards against algorithmic discrimination (among other requirements), and the Texas Responsible Artificial Intelligence Governance Act prohibits the development and deployment of AI systems for certain purposes while establishing a regulatory sandbox. Moreover, state AI laws like Colorado’s Artificial Intelligence Act and various state privacy laws, including the CCPA, regulate the use of automated decision making technology that results in legal or similarly significant effects on individuals and provide rights to individuals in respect of automated decision making. Such regulations, and the manner in which such new laws are interpreted, may impact our ability to develop, use, procure and commercialize AI and machine learning technologies in the future. Additionally, it is possible that existing laws and regulations may be interpreted in ways that would affect the operation of our learning platforms, online testing business and data analytics and the way in which we use AI and machine learning technologies. Further, the cost to comply with such laws or regulations could be significant and would increase our operating expenses, which could adversely affect our business, financial condition and results of operations.

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