By Katherine Hamilton
Chegg shares slipped after the company said traffic has dropped off due to generative artificial intelligence.
The stock fell 31% to $1.08 Tuesday morning, which would be an all-time low at close, according to Dow Jones market data.
While legal action against Google and a strategic review could create some value in the future, investors are concerned about how the education website can compete with AI, Raymond James analysts said.
Chegg swung to a loss in its fourth quarter and non-subscriber traffic fell 49% in January. Google's AI overviews, which started in May giving searchers a summary of various online materials, has been keeping users from visiting Chegg's site, Chief Executive Nathan Schultz said.
Chegg said it is undertaking a strategic review process and exploring a range of alternatives, including being acquired or going private.
It also filed a lawsuit against Google claiming the search engine forces Chegg to supply content for its AI summaries without fair compensation.
Total subscribers decreased 21% in the fourth quarter. Chegg said it expects $114 million to $116 million in revenue during the first quarter of 2025, which would be a roughly 34% decline from the previous year and is below analysts' forecast of $138.7 million.
Write to Katherine Hamilton at katherine.hamilton@wsj.com
(END) Dow Jones Newswires
February 25, 2025 10:43 ET (15:43 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
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