Chegg plummets 37% as CEO says 'people are shifting their priorities toward earning over learning' and inflation is putting pressure on guidance

• Chegg plunged 37% on Tuesday as investors digested the company's first-quarter earnings and revenue guidance.
• Chegg said it expects second-quarter revenue of up to $192 million, which fell short of analyst estimates.
• The education company said inflation and higher wages is shifting priorities towards working over learning.

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

Chegg saw adjusted earnings per share of $0.32 in the first quarter, beating analyst expectations by $0.08. The company's first-quarter revenue of $202 million fell short of analyst estimates by about $1 million, and represented year-over-year growth of just 1.9%.

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

But 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. That falls short of analyst estimates for $843 million in 2022 revenue. Additionally, Chegg now sees second-quarter revenue of up to $192 million, which is short of the average analyst's estimate of $209 million.

The underwhelming guidance is driven by the fact that rising inflation and higher wages has people rethinking the value proposition between work and 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.

The company said that it has seen at least 1 million US students forgo or delay higher education over the last two years. Ultimately, the company 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.