The first company to admit that "ChatGPT affects revenue"! The stock price was cut in one day

One word from the CEO and the share price of Chegg, a leading US online education company, has been cut in one day.

On Monday evening local time, Dan Rosenweig, CEO of Chegg, a leading U.S. online education company, admitted during an earnings call that ChatGPT is hurting its business growth:

"Since March, we have seen a significant increase in student interest in ChatGPT. We now believe that this is having an impact on our new customer growth rate."

The news came as Chegg's shares flashed 49%, the biggest intraday drop in the company's history. Meanwhile, a host of European and U.S. education stocks were also brought crashing down: shares of U.K.-based Pearson Group fell 15 percent, shares of language learning platform Duolingo dropped 10 percent and shares of U.S. education company Udemy fell more than 5 percent.

Chegg expects second-quarter revenue of $175-178 million, sharply below the $193.6 million widely expected by analysts.

Chegg's database is a "tool" used by college students to find homework and answers, as mentioned by Wall Street News, and students pay $15 a month for the service to search the database for answers to homework exercises or exam questions they want.

In 2020, Chegg also acquired Mathway, a math problem-solving software, to further expand its vast database of questions covering a wide range of subjects, including elementary algebra, algebra, trigonometry, elementary calculus, calculus and linear algebra, as well as other related subjects.

The analysis points out that the main reason for the lower-than-expected drop is that students' interest in ChatGPT has increased significantly, resulting in Chegg being diverted and students no longer need to access relevant study materials through Chegg. In response to the 48 percent decline, company CEO Dan Rosenweig said the drop was "overblown.

"I think it's overblown, and I don't usually say that, and I don't really talk about the stock price."

Chegg's warning marks the first time a company has acknowledged that advances in generative artificial intelligence have had a direct impact on its financial results, according to media commentary.

Analysts at Morgan Stanley cut their price target on Chegg to $12 from $18, citing that AI overshadowed it. Jefferies cut its price target on the company to $11 from $25 and downgraded the stock to hold from buy, citing AI as a threat to Chegg.

Last month, the company launched its artificial intelligence product CheggMate. however, the impact of the product is uncertain, according to the analysis.

Citigroup analyst Tom Singlehurst said ChatGPT could directly replicate Chegg's "study guide" service, which provides students with ready-made answers to college course questions.

But he said ChatGPT is more likely to be a "secondary threat" to Pearson, which writes course materials, and that it will "change the way course administrators create content" in ways that are not yet clear.

Pearson CEO Andy Bird, on the other hand, directly denied that ChatGPT was a threat to the company's business model, saying that Pearson's business model is completely different from Chegg's and that there is a lucrative opportunity for the company to combine its artificial intelligence capabilities with Pearson's existing intellectual property.

It's worth noting that in addition to education, the "big kill" of generative AI is also having an impact on other industries, such as customer service.

French call center operator Teleperformance SE warned last week that 20 to 30 percent of the company's call volume could be automated over the next three years as chatbots like ChatGPT become mainstream.

Russ Mould, investment director at British brokerage AJ Bell, said.

"Management teams, investors and regulators around the world are working hard on how ChatGPT will change the business model.

No one knows what will happen next or when, which is something investors need to consider when assessing the valuation of any stock they hold or are researching."