Chegg Stock Nearly Cut in Half After Warning That ChatGPT Is Hurting Growth
Chegg is now focused on integrating AI into its own services, according to the company’s CEO. Photo: Pavlo Gonchar/Zuma Press By Will Feuer May 2, 2023 10:26 am ET Shares of Chegg were cut nearly in half after the company, which offers tools to help students with homework, said ChatGPT is eating into its growth. The stock fell almost 46% to $9.54 a share in morning trading, on pace for its lowest close since 2017. The selloff hit shares of some other online-learning platforms. Shares of virtual language-learning company Duolingo fell 9% while American depositary receipts tied to shares of London-based Pearson fell 12.5%. “This is not a sky-is-falling thing,” Chief Executive Dan Rosensweig said Monday evening on a conference
Chegg is now focused on integrating AI into its own services, according to the company’s CEO.
Photo: Pavlo Gonchar/Zuma Press
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Shares of Chegg were cut nearly in half after the company, which offers tools to help students with homework, said ChatGPT is eating into its growth.
The stock fell almost 46% to $9.54 a share in morning trading, on pace for its lowest close since 2017. The selloff hit shares of some other online-learning platforms. Shares of virtual language-learning company Duolingo fell 9% while American depositary receipts tied to shares of London-based Pearson fell 12.5%.
“This is not a sky-is-falling thing,” Chief Executive Dan Rosensweig said Monday evening on a conference call.
Santa Clara, Calif.-based Chegg offers subscription-based academic services that help students with writing and math assignments as well as study materials. Mr. Rosensweig said the company didn’t see a significant effect on its business from ChatGPT until March, when the company behind the product, OpenAI, launched GPT-4.
Chegg said the popularity of ChatGPT among students is affecting its customer-growth rate, though Mr. Rosensweig said it isn’t yet hurting retention rates.
“It’s not substantial yet. It’s just on the margin that, based on our research, that people normally who would have paid for us around midterms or closer to finals that were reluctant to pay or be longer-term subscribers now have a new, free site to go try,” Mr. Rosensweig said.
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The warning from Chegg and the subsequent selloff are among the most concrete indications yet of the looming disruption that could come from the broader adoption of generative artificial intelligence applications. Jobs and companies across the economy are exposed to the sudden rise of AI as businesses consider using the generative text tools to boost production and shrink their workforces. A recent study said most jobs will change in some form because of GPTs.
Mr. Rosensweig said he met several months ago with OpenAI CEO Sam Altman. Mr. Rosensweig said Chegg is now focused on integrating AI into its own services.
Last month, the company said it plans to roll out CheggMate, which will be built with OpenAI’s GPT-4 model.
“There’s been a technological shift, and we need to prepare for it,” Mr. Rosensweig said.
He contrasted the latest advances in AI with the adoption of other recent technologies such as bitcoin payments and nonfungible tokens. “We didn’t see those as real or important or as threats. We see this one as a real, transformational change,” Mr. Rosensweig said. “We’re betting very big on the fact that people are going to need to learn how to use these things.”
Mr. Rosensweig made his comments as Chegg reported results for the first quarter that topped analysts’ expectations. However, the company’s current-quarter guidance fell short of Wall Street’s expectations.
Chegg said it expects second-quarter revenue of $175 million to $178 million, below the $193.6 million expected by analysts, according to FactSet.
Write to Will Feuer at [email protected]
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