Chegg Faces Challenges Despite Better-Than-Expected Results

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Shares of Chegg, a provider of student homework and study tools, took a hit after the company released its earnings report for the December quarter. While the results exceeded expectations, disappointing guidance for the March quarter caused a decline in stock prices.

Chegg has been actively adapting its business model to account for the rise of generative AI chatbots, which have presented a potential threat. CEO Dan Rosensweig acknowledged this challenge, stating that Chegg is striving to integrate AI into its platform in an ongoing and iterative process. The goal is to create a truly personalized learning assistant that enhances users’ experiences.

During the fourth quarter, Chegg reported a revenue of $188 million, marking an 8% decline from the previous year. Although this figure exceeded management’s forecast range of $185 million to $187 million and the consensus estimate of $185.9 million among analysts, it still represented a decrease. Subscription services revenue totaled $166.3 million, down 6% from the previous year but slightly above the company’s forecasted range of $164 million to $166 million.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) stood at $66.2 million, surpassing the projected range of $62 million to $64 million. Additionally, the company reported adjusted earnings per share of 36 cents for the quarter, meeting the Street consensus.

Looking ahead to the March quarter, Chegg anticipates revenue of $173 million to $175 million, falling short of the analyst consensus expectation of $180 million. The projected adjusted EBITDA for this period is between $43 million and $45 million, which is below the consensus call of $54.2 million.

In light of these developments, Chegg has also undergone a change in its leadership structure. David Longo, previously the chief accounting officer and controller, has been appointed as the new CFO, replacing Andrew Brown, who announced his retirement. The transition will take effect on Feb. 21.

In conclusion, despite posting better-than-expected results, Chegg faces challenges in the form of AI chatbots and guidance concerns for the upcoming quarter. The company remains dedicated to integrating AI into its platform, while also adjusting its leadership team to propel future growth.

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