Duolingo's (DUOL) Q2 results showed strong improvements in user growth, but the translation of that into bookings is still in an early phase, Wedbush said in a note Thursday.

The investment firm highlighted that daily active users, or DAU, growth rose to 23% from 21% in Q1, and monthly active users, or MAU, growth increased to 10% from 6%, with management saying "top-of-funnel growth improved in almost every region."

Wedbush said, however, bookings only rose 8%, or 6% in constant currency terms, and the company's 2026 bookings outlook was left unchanged as "management intends to keep operating for user improvements with monetization efforts still to come."

The investment firm noted the company is benefitting from "AI cost deflation" with video call unit costs down from about $0.30 per call at launch to under $0.01 due to a move to open-source models.

"We remain on the sidelines pending evidence that better user growth can sustain and convert into better bookings growth," the note said.

Wedbush kept Duolingo's neutral rating and lifted the company's price target to $150 from $139.

Price: 146.90, Change: +0.87, Percent Change: +0.60