Shares of education software provider Chegg jumped Tuesday on second-quarter results that topped expectations and the rollout of an artificial intelligence-driven strategy.
The company posted revenue of $182.9 million, down 6% year-over-year but ahead of Street expectations of $176.5 million, and earnings of $0.28 per share, up from $0.06 a year ago but just short of expectations of $0.29.
Subscription revenue was $165.9 million, down 5%, but ahead of the company’s guidance range of $159 million to $162 million.
Shares of the ed tech company rose 7% to $10.76.
Investors also got a taste of how the company plans to utilize AI. Chegg launched the beta version of its generative AI experience in May, and CEO Dan Rosensweig said initial feedback has been encouraging.
“We believe we are in an unrivaled position to deliver a unique, personalized learning experience for students because we have the assets, the vision, and the balance sheet that no one else has,” he said
The full AI-enabled Chegg experience is expected to debut this fall, he added.
“The new Chegg will combine the best of generative AI with Chegg’s proprietary high-quality solutions and demonstrated ability to improve student outcomes,” Rosensweig said. “They can expect to see a much simpler conversational user interface, personalized learning pathways, more in-depth content, and the ability to transform it automatically into innovative study tools, such as practice tests, study guides, and flashcards.”
In fact, Chegg is building its own large language models “trained with our unique data sets, and with the help of our 150,000 subject matter experts,” he added.
Rosensweig isn’t worried about competition with other LLMs such as ChatGPT, though. The CEO pointed to survey data that he said showed students don’t see Chegg as being an either/or with software like ChatGPT, but rather “as complementary, with very different use cases.”
Looking ahead, Chegg projects third-quarter revenue of $151 million to $153 million, with subscription revenue of between $135 million and $137 million.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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