Chegg Shares Plunge After Company Warns That ChatGPT Is Impacting Growth

Shares of Chegg (CHGG) are plunging after the provider of homework help and other educational assistance warned its subscriber growth is being impacted by the use of the ChatGPT AI chatbot. 

In the company’s first quarter earnings report, CEO Dan Rosensweig said that in the first part of the year, Chegg noticed no significant effects from student use of ChatGPT. However, in March, the company “saw a significant spike” in interest in the chatbot, and that “we now believe it’s having an impact on our new customer growth rate.”

Chegg indicated it expects current quarter revenue to be in the range of $175 million to $178 million, about 10% below analysts’ estimates. It sees subscription service revenue of between $159 million to $162 million, a significant decline from the $189.1 million it made a year ago.   

AI Impact Already Here

Rosensweig said that AI and large language models will be affecting society and business at a faster pace than people are used to, adding “education is already being impacted.” He argued that Chegg believes that over time, the new technology will benefit the company, and Chegg is “embracing it aggressively and prioritizing our investments to meet this opportunity.” 

Following the comments, several analysts downgraded the stock, even as Chegg’s first quarter profit of $0.27 per share and $188 million in sales beat estimates. 

Chegg shares are losing almost half their value today, and are down 64% this year.