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ChatGPT: The End of Chegg?

Last updated on May 9, 2023

Chegg (CHGG), its ticker symbol, is an online education service that provides answers to homework and test questions submitted by students around the world. In its second quarter earnings call on May 1st, Chegg reported a year-over-year drop in subscription revenue and profit, with a 7% overall revenue loss. This trend is expected to continue into the third quarter, putting the company at DEFCON 5. 

The biggest threat, as Chegg CEO Dan Rosensweig stated, is ChatGPT. He believes that “the ease of OpenAI sources like ChatGPT has made Chegg’s online homework assistance useless. Not only is ChatGPT able to formulate code, write original songs, and provide homework answers, but it is also free. Compared to the $15 dollar monthly price tag that comes with a subscription to Chegg, ChatGPT has offered a new and quick alternative for students, attracting over one billion users per month since its inception only 6 months ago

Year to date, Chegg stock has fallen 65%, with a 50% drop this week. In an attempt to combat such losses, Chegg has partnered with ChatGPT to produce Cheggmate, an AI powered study tool. The product is expected to launch this month, but “any potential impact won’t show up until FY24 at the earliest.” Being at its most preliminary stages, it is uncertain whether this new program will take off. There are concerns as to whether or not students will utilize this new tool, or continue using the classic ChatGPT that they have learned to love so quickly. 

However, this is only one instance of the power that ChatGPT and the rise of AI has over the modern economy and industry. Countless businesses and sectors are now realizing the potential of this new tool. This could benefit worker productivity, but also threatens countless jobs that AI could perform in an instant. Like Chegg, many will have to adapt to these new circumstances, effectively opening the door for many opportunities as well as many drawbacks. 

Complex Terms:

  • Earnings Call: A conference call, such as a webcast, where the management of a public company announces the financial outcomes of a past quarter, as well as plans and expectations for the future of the company.
  • FY24: Fiscal year (in this case 2024), a unique one-year period, different for each institution, used by businesses and the federal government in order to keep track of finances for taxpaying and accounting.

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