Chegg shares fall after claim that ChatGPT hinders its growth

Shares of online education company Chegg plummeted by over 40% following CEO Dan Rosensweig’s announcement that the company’s growth had been hurt by the rise of OpenAI's ChatGPT.

Chegg, which provides homework assistance and online tutoring, reported a revenue estimate of $175 million to $178 million for the current quarter, much lower than FactSet’s analyst consensus of $193.6 million.

Although Chegg exceeded expectations on both earnings per share and revenue in the first quarter, Jefferies downgraded the company’s stock to hold from buy, citing the threat of AI.

Meanwhile, Chegg’s own AI product, CheggMate, developed in collaboration with OpenAI, is currently in beta testing.

“While CHGG plans to launch the CheggMate beta this month to a select few, the timing of a full launch is unclear,” Jefferies analyst Brent Thill said. “We don’t expect there to be any meaningful impact from CheggMate in FY23, believing any potential impact won’t show up until FY24 at the earliest.”