Chegg Loses $14.5B in 3 Years Due to ChatGPT & AI Surge
Chegg Inc. (CHGG) has experienced a significant decline in its stock value, currently trading at $1.49 USD, reflecting a 0.99% decrease from the previous close costing the company to lose over $14.5 billion.
According to WSJ, this downturn is primarily attributed to the emergence of AI-powered tools like OpenAI’s ChatGPT and Google’s Gemini which offer similar educational services for free, leading to a substantial loss of subscribers for Chegg.
FT reported that the broader online education sector has also been affected, with global investments dropping to $3 billion in 2024 from $17.3 billion in 2021.
This decline is linked to the end of the pandemic and the rise of free generative AI tools.
In response, Chegg has attempted to integrate AI into its platform, including partnerships with OpenAI and Scale AI, but has struggled to regain its footing.
The company is now focusing on targeting more serious students with comprehensive services beyond just homework answers.
Despite these challenges, Chegg’s subscription revenue continues to generate positive EBITDA and free cash flow
The company is trading at just 1.1x EV/FY25 adjusted EBITDA, reflecting operational risks but also potential for stabilization.
The future of Chegg remains uncertain as it navigates the competitive pressures from AI advancements and seeks to adapt its business model accordingly.
