Chegg Inc. Faces Turbulence Amid AI Disruption in EdTech

In a significant shift within the education technology sector, Chegg Inc., a prominent online educational platform, has announced a series of strategic changes in response to the growing influence of AI tools like ChatGPT. The company, known for its diverse services including homework help, course selection, and textbook rentals, is grappling with a notable decline in subscribers and revenue, prompting a substantial restructuring.

Subscriber Decline and Workforce Reduction

Chegg reported a 31% drop in subscribers in the first quarter of 2025, bringing the total to 3.2 million. This decline is largely attributed to students increasingly turning to AI-powered tools for educational assistance. In response, Chegg has decided to lay off approximately 22% of its workforce, equating to 248 employees. This move is part of a broader strategy to cut costs and streamline operations as the company navigates the challenges posed by AI advancements.

Financial Performance and Market Reaction

Despite the subscriber decline, Chegg’s Q1 revenue of $121.4 million exceeded expectations, beating forecasts by $6.78 million. However, the company still reported a net loss of $17.5 million for the quarter, a wider loss compared to the previous year. On a non-GAAP basis, the adjusted loss was 6 cents per share, missing estimates by 6 cents. Following the earnings announcement, Chegg’s stock rose by 6%, closing at $0.73.

Strategic Restructuring and Future Outlook

As part of its restructuring efforts, Chegg plans to shut down its offices in the U.S. and Canada, aiming to achieve cost savings of approximately $110 million. The company is also targeting $48 million in revenue from its acquisition of Busuu, a language learning platform, by 2026. Despite these efforts, Chegg’s CEO has indicated that the trends impacting the business are expected to worsen before they improve.

Analyst Perspective

In light of these developments, Needham analysts have reiterated a “Hold” rating on Chegg’s stock. The ongoing disruption in the edtech industry, driven by AI tools, continues to pose significant challenges for traditional platforms like Chegg.

Conclusion

Chegg’s recent moves reflect the broader impact of AI on the education technology landscape. As the company adapts to these changes, it remains to be seen how effectively it can leverage its existing services and new acquisitions to regain its footing in a rapidly evolving market.