DoorDash and Duolingo show Wall Street doesn’t love AI spending equally

Across the tech industry this earnings season, companies urged Wall Street to prepare for increased spending as the artificial intelligence boom accelerates.

But while investors have largely rewarded mega-cap companies by raising capital spending forecasts and ignoring guidance, companies outside the $1 trillion club have been punished.

door dash, Duolingo and roblox Shares of companies suffered double-digit declines last week after the companies announced that spending was on the rise, raising concerns about future profitability. Unlike big tech companies, which have pledged massive expansion to meet the surge in demand for AI services and workloads, small and medium-sized companies are viewed with more skepticism, with analysts unsure whether their bets will pay off and provide significant new revenue opportunities.

“Investors don’t like investment cycles,” Evercore ISI’s Mark Mahaney said on CNBC’s “Closing Bell: Overtime” last week. “What happened with all the companies that went in and out of this revenue cycle and said, ‘We really want to be the first to invest,’ and gave the market a negative surprise,” he said.

DoorDash stock fell 17% on Thursday, the food delivery platform’s worst decline as a publicly traded company in five years. DoorDash said in its third-quarter earnings report that it plans to spend “hundreds of millions of dollars” on new products and technology next year.

“While we wish there was a way to grow a baby into an adult without investing or watch a baby grow into an adult overnight, we don’t believe this is how life and business work,” the company said in an earnings call.

DoorDash recently ramped up its investment in automated delivery with the launch of Dot in September, a combined $5.1 billion investment in restaurant reservation platform SevenRooms and British food delivery service Deliveroo.

CEO Tony Xu said on an earnings call that the company’s investment performance “demonstrates that we’re having some success repeating this strategy, and we’re doing this now to position ourselves for future growth.”

Analysts have a different view.

“Looking ahead, we maintain a Hold rating as we see multiple expansion opportunities as limited until we have more clarity on the period during which investments could weigh on earnings,” Gordon Haskett analysts said.

A DoorDash spokesperson said in a statement that the company is “fortunate to have an increasingly successful core business” and takes a “disciplined investment approach” to new projects.

Duolingo also had its worst day as a publicly traded company on Thursday, despite reporting higher sales and bookings in its third-quarter earnings report.

After Duolingo announced it was prioritizing new user acquisition, the stock lost a quarter of its value and is now down 41% for the year. The company is pouring money into AI features such as interactive video calling options as it looks to attract paying subscribers.

“There’s been a tradeoff between monetization and user growth, and part of my job has always been to mediate between the two,” CEO Louis von Ahn told CNBC after the earnings call. He said the company is changing its “trade-offs to focus more on user growth.”

“As a result of the long-term investments we are making, it will take some time before we see the financial results,” von Ahn said on an earnings call.

Following the report, analysts at KeyBanc Capital Markets downgraded the stock from buy to the equivalent of hold, citing concerns that increased investment would weigh on near-term bookings, earnings and valuations.

“This suggests that it may take several quarters before more meaningful financial gains are realized,” the company said.

Duolingo has not commented.

Meanwhile, the tech industry’s biggest companies may take years to see whether their big bets on AI pay off, as well. But investors aren’t too worried.

alphabet and Amazon Both companies rose after announcing their financial results in late October. Both companies again raised their outlook for capital spending this year, suggesting there will be no economic slowdown in 2026.

Amazon Web Services is a leading provider of cloud infrastructure, with Google in third place in the market, and is rushing to build out data centers to meet anticipated demand for AI-related computing power. AWS and Google are also investing in their own silicon to reduce dependence. Nvidia You can offer your customers a more complete technology stack.

Microsoft, No. 2 in the cloud infrastructure market, fell after its earnings report also included guidance on increasing capital spending. But the company, valued at nearly $4 trillion, remains largely backed by Wall Street as it competes for more AI deals and bigger workloads.

The exception among megacaps is metafell 11% following the results. The company expects to spend up to $72 billion in capital spending this year, but it doesn’t sell cloud services comparable to Amazon, Google or Microsoft.

Meta says it is deploying AI across its product portfolio to improve targeting in its core advertising business, but uncertainty surrounding its revenue is holding investors back. Mahaney said he grouped Meta as a “negative surprise” to the market.

Roblox also belonged to that category.

Shares of the online gaming platform fell about 16% on Oct. 30 after the company warned that increased spending on safety and infrastructure could hurt profit margins. CEO David Baszucki told CNBC’s “Squawk on the Street” that platform safety is “a top priority.”

Finance chief Naveen Chopra said the investment could weigh on near-term engagement and bookings, but was “extensive for long-term growth”.

Benchmark analysts expected the investment to hinder profitability and downgraded the stock to hold from buy. Ross analysts recommend owning the stock and also believe that margins could take a hit next year.

“The impact of these efforts may have a negative impact on platform engagement in the short term,” Ross analysts said, “but we expect them to result in greater long-term benefits for users.”

Roblox has not commented on this matter.

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