FOLLOW US

Chegg stock declined as much as 37% on Tuesday as investors weighed the education company's first-quarter earnings beat against its lower 2022 revenue guidance, driven mainly by a drop in college students.

Chegg saw earnings per share of $0.32 in the first quarter, beating analyst expectations by $0.08. Their first-quarter revenue of $202 million was below analyst estimates by roughly $1 million and represented year-over-year growth of just 1.9%.

Additionally, the firm said it has 5.4 million Chegg Services subscribers, which represents a year-over-year increase of 12%.

However, Chegg lowered its fiscal-year 2022 revenue guidance to between $740 million and $770 million from its prior guidance of between $830 million to $850 million. The milestone is below analyst estimates for $843 million in 2022 revenue. Furthermore, Chegg now sees second-quarter revenue of up to $192 million, which is short of the average analyst's estimate of $209 million. 

Due to rising inflation and higher wages, people shifted their focus to work instead of school. A combination of lower enrollment at higher education schools, the economy, and inflation have led to "reduced traffic to higher education support services" like Chegg, the company said.

"With higher wages and increased cost of living, more people are shifting their priorities towards earning over learning, resulting in lower course load or delaying enrollment in schools at this time," Chegg CEO Dan Rosensweig said.

Chegg sees these trends as temporary "and when they subside, our operating model, balance sheet, and leading brand put us in a strong position to accelerate our growth," Rosensweig said.

Chegg stock is down about 85% from its record high and is down more than 50% year-to-date.