Chegg Shares Plunge After Company Warns That ChatGPT Is Affecting Its Subscriber Growth
Chegg (CHGG), the educational assistance provider, has issued a warning to its investors regarding its subscriber growth, which is being impacted by the use of the ChatGPT AI chatbot. The company's shares have taken a significant hit following the announcement.
In its Q1 earnings report, CEO Dan Rosensweig stated that the company didn't see any significant effects from ChatGPT in the early part of the year. However, in March, the company saw a significant spike in interest in the chatbot, which he believes is having an impact on Chegg's new customer growth rate.
Chegg has projected its current quarter revenue to be between $175 million to $178 million, which is approximately 10% less than the analysts' estimates. Subscription service revenue is expected to be between $159 million to $162 million, a significant decline from the $189.1 million it made a year ago.
Although the CEO, Rosensweig, believes that AI and large language models will be affecting society and business at a faster pace than people are used to, he argues that Chegg is embracing technology aggressively and prioritizing investments to meet this opportunity. He believes that over time, the technology will benefit the company.
Despite the earnings report's positive aspects, including the reported Q1 profit of $0.27 per share and $188 million in sales, several analysts downgraded the stock following the announcement. Chegg's shares have lost approximately half of their value and are down by 64% this year.
