Introduction: Chegg Shares Plummet 40 Following ChatGPT’s Effect on Business Growth
Chegg, an American education technology company that specializes in textbook rentals, homework help, online tutoring, and scholarship matching services, has experienced a significant decline in its shares lately. The company’s shares have plummeted 40% after the impact of ChatGPT on its business growth became apparent. ChatGPT is an AI-powered chatbot that was introduced by Chegg to enhance its customer service experience.
Chegg Beats First-Quarter Expectations on Top and Bottom Lines
Despite the recent decline in Chegg’s shares, the company had an impressive performance in the first quarter of 2021. Chegg beat the expectations of analysts on both top and bottom lines, with a revenue of $198.4 million, which is a year-over-year increase of 51%. Chegg’s net income for the first quarter was $46.7 million, or $0.38 per share, which is a significant improvement from the net income of $10.5 million in the same period last year.
Chegg Issues Weak Second-Quarter Revenue Outlook
Chegg’s strong financial performance in the first quarter was not enough to prevent the company from issuing a weak second-quarter revenue outlook. The company’s revenue guidance for the second quarter is $195 million to $198 million, which is lower than the consensus estimate of $206.2 million. Chegg’s CEO, Dan Rosensweig, attributes the weak outlook to the impact of ChatGPT on new customer growth rate.
ChatGPT is Hurting Chegg’s Growth, Says CEO Dan Rosensweig
According to Chegg’s CEO, Dan Rosensweig, the company’s implementation of ChatGPT has hurt its growth by reducing the number of new customers signing up for its services. ChatGPT is intended to enhance the customer experience by providing quick and accurate responses to their inquiries. However, the AI-powered chatbot may have made it difficult for new customers to navigate Chegg’s services and offerings, leading to a decline in customer acquisition.
Chegg Shares Tumble 40% as ChatGPT’s Impact on New Customer Growth Rate Becomes Evident
The impact of ChatGPT on Chegg’s business growth has become evident, resulting in a significant decline in the company’s shares. Chegg’s shares have fallen by 40% following the release of its weak second-quarter revenue outlook. The company’s stock was trading at $72.44 before the release of the outlook but dropped to $43.37 in after-hours trading. The decline in Chegg’s shares indicates that investors are concerned about the company’s growth prospects in the future.
