DoorDash and Duolingo: Wall Street’s Uneven Appetite for AI Investment

Across the tech landscape, a prevalent theme this earnings season saw companies signaling increased capital expenditure in anticipation of accelerated growth fueled by artificial intelligence. While tech behemoths were largely rewarded for, or at least given a pass on, their boosted capex guidance, smaller players are facing investor skepticism.

DoorDash, Duolingo, and Roblox all experienced significant stock declines last week after announcing increased spending, sparking concerns about their paths to profitability. In stark contrast to the trillion-dollar giants whose aggressive AI infrastructure investments are perceived as essential to meet burgeoning market demand for AI services, these companies are facing stricter scrutiny. Analysts are questioning whether their strategic bets will translate into tangible revenue gains commensurate with the level of investment.

“Investors traditionally show aversion towards investment cycles,” Mark Mahaney of Evercore ISI commented on CNBC’s “Closing Bell: Overtime” last week. He pointed out that companies that negatively surprised the market by prioritizing investments faced considerable headwinds.

DoorDash’s stock plummeted 17% on Thursday, marking its worst single-day performance since its IPO. The company’s Q3 earnings report alluded to a “several hundred million dollar” investment in new products and technology for the upcoming year, with the expectation that these investments are necessary, even though not always liked by investors.

“We wish there was a way to grow a baby into an adult without investment, or to see the baby grow into an adult overnight, but we do not believe this is how life or business works,” the company stated in its earnings release, signaling a long-term growth strategy.

Recently, DoorDash has been intensifying investments in autonomous delivery solutions, highlighted by the launch of its ‘Dot’ delivery robot. Furthermore, the company spent a combined $5.1 billion acquiring restaurant booking platform SevenRooms and British food delivery service Deliveroo, underscoring its ambition to consolidate and expand its service offerings.

CEO Tony Xu asserted during the earnings call that DoorDash’s consistent investment strategy has yielded “some success in repeating this playbook, and we’re doing this now for future growth.”, a strategy the company hopes that will deliver results.

However, not all analysts share this outlook. Gordon Haskett analysts noted, “Looking ahead, we maintain our Hold rating as we see limited multiple expansion opportunity until there is greater clarity surrounding how long investments could weigh on margins,” highlighting the uncertainty surrounding the near-term impact of DoorDash’s investments.

A DoorDash spokesperson responded that the company is “fortunate to have an increasingly successful core business” and that it takes a “disciplined investment approach” to its various strategic initiatives.

Duolingo also had its worst day as a public company on Thursday, although revenue and bookings exceed in its third-quarter earnings report, indicating the market sentiment on long-term growth.

The stock experienced a staggering 25% decline in value, bringing its year-to-date losses to 41%. The company’s emphasis on bolstering user acquisition—particularly through substantial investments in AI-driven features such as interactive video calls—has fueled worries among investors about the potential impact on its near-term profitability.

“There are experiments that put monetization and user growth at odds, and part of my job has been, always, arbitrating between these two,” CEO Luis von Ahn told CNBC following the earnings release. He acknowledged the strategic shift, noting, that the company is adjusting the “trade off to be much more towards user growth.”

During the earnings call, von Ahn cautioned that “it’s going to take some time for us to see the results, financial results, over the long-term investments that we’re doing,” a sentiment that did little to alleviate investor concerns.

Following the earnings report, KeyBanc Capital Markets downgraded Duolingo’s stock from ‘buy’ to the equivalent of ‘hold,’ citing apprehensions that the stepped-up investments will negatively affect near-term bookings, earnings, and overall valuation.

“This suggests to us that it might take several quarters to see more meaningful financial benefits,” the firm’s analysts noted, reinforcing market anxieties about the lag between investment and returns.

Duolingo did not provide a comment.

Meanwhile, the industry’s most dominant tech players face a similar, multi-year timeframe to determine if their substantive AI investments will translate directly into heightened profitability. The market, however, appears less perturbed—largely exhibiting patient confidence in their long-term strategies.

Both Alphabet and Amazon witnessed stock rallies following the release of their Q3 earnings reports. The companies signaled further increases in capital expenditure forecasts, reinforcing expectations that the pace of investment will continue unabated into 2026.

Amazon Web Services, the leader in cloud infrastructure, and Google are engaged in an intense competition to construct cutting-edge data centers aimed at meeting the surging demand for AI-related computational capacity. Both enterprises are also increasingly investing in proprietary silicon development, mitigating dependence on Nvidia and augmenting their capabilities to offer clients complete technology stacks optimized explicitly for AI workloads.

Microsoft, positioned as the second-largest cloud infrastructure provider, experienced a moderate stock dip following its Q1 2026 earnings report, which likewise guided toward higher capex. Nevertheless, the software giant, valued near $4 trillion, still largely enjoys Wall Street’s confidence as it vies for market share in the burgeoning AI infrastructure and services segment.

Meta represents an exception in the megacap sphere, having suffered an 11% drop following its earnings release. Despite projecting capital expenditures as high as $72 billion for the year, the company does not offer cloud services on par with rivals like Amazon, Google, and Microsoft, triggering market scrutiny regarding the efficacy of its AI spending.

Although Meta asserts that it’s integrating AI throughout its product offerings and refining targeting in its core ad business, the lack of clear revenue linkages has eroded investor confidence. The market views Meta’s spending with added skepticism, placing it in the category of companies that “negatively surprised” investors.

Roblox also found itself in the same unfavorable category.

Shares of the online gaming platform faced a nearly 16% decline on Oct. 30, as the company cautioned that heightened spending on platform safety and infrastructure is likely to exert downward pressure on profit margins. CEO David Baszucki stated that platform safety remains a “top priority.”

Finance chief Naveen Chopra highlighted that such investments may temporarily impact near-term user engagement and bookings, but he anticipates the spending to amplify “a magnifier of longer-term growth,” indicating the management’s long-term priorities.

Analysts at Benchmark swiftly downgraded Roblox shares from ‘buy’ to ‘hold,’ anticipating that heightened investment would impair profitability. Roth analysts, who maintained a ‘hold’ recommendation on the stock, anticipate potential margin compression next year.

“The impact from these initiatives may negatively impact platform engagement in the near term,” the Roth analysts wrote, “but is expected to have a greater long-term benefit for users.”

Roblox didn’t provide a comment for this story.

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