TLDR
- CHGG stock rose 6% to $0.73 after Q1 earnings beat.
- Revenue fell 30% to $121.4 million; subscribers dropped 31%.
- Chegg to lay off 22% of staff and shut U.S., Canada offices.
- AI tools like ChatGPT and Google Gemini are eroding traffic.
- Cost savings from restructuring are expected to hit $110 million in 2026.
Chegg, Inc. (NYSE: CHGG) stock climbed over 6% to $0.73 on Monday morning, May 12, 2025, as of writing, after the company posted better-than-expected first-quarter results.
While revenue and subscriber numbers fell sharply, investors responded positively to its cost-cutting plans and early success in licensing deals.
Revenue Drops, Subscribers Shrink
For the first quarter ended March 31, 2025, Chegg reported total net revenues of $121.4 million, down 30% year-over-year. Subscription services revenue also fell by 30% to $107.6 million, while the total subscriber count shrank 31% to 3.2 million. The company posted a net loss of $17.5 million and a non-GAAP net loss of $6.7 million. Adjusted EBITDA came in at $19.3 million, ahead of expectations.
Chegg’s gross margin stood at 56%, with a non-GAAP gross margin of 57%. CEO Nathan Schultz admitted the business faces worsening trends but noted progress in diversifying revenue streams. Notably, Chegg has signed two licensing agreements to provide its question-and-answer content to language model companies, calling it an early win in a new revenue avenue.
Massive Layoffs and Office Closures
Facing rising competition from AI-powered tools, Chegg announced plans to lay off 22% of its workforce, or about 248 employees. The company will also close its offices in the U.S. and Canada by year-end. These moves are part of a sweeping restructuring aimed at cutting costs amid falling web traffic and user engagement.
💼📉 Chegg to Lay Off 22% of Workforce Amid Declining Traffic
Chegg will lay off 248 employees, roughly 22% of its workforce, to cut costs as AI tools like ChatGPT attract students away from traditional edtech platforms.
The company is restructuring, closing offices and cutting…
— PiQ (@PiQSuite) May 12, 2025
Chegg expects to incur charges of $34 million to $38 million through Q2 and Q3 from the layoffs and closures. However, it anticipates $45 million to $55 million in savings for 2025 and up to $110 million by 2026. This restructuring effort reflects the company’s attempt to align its expenses with its weakened outlook.
AI Disruption Hits Hard
The company blamed the rise of AI tools like ChatGPT, Google Gemini, and others for eroding its user base. Google’s shift to AI-generated overviews has kept more traffic within its ecosystem, reducing visits to Chegg’s platforms. The company even filed a lawsuit against Google in February, accusing it of undermining original content and publisher revenues.
Business Outlook for Q2
For the second quarter, Chegg forecasts total revenue between $100 million and $102 million, with subscription revenue between $85 million and $87 million. It projects gross margin to improve to 64%-65% and adjusted EBITDA of $16 million to $17 million. The company also plans to expand its institutional business pilots from 15 to 40 by year-end.
Despite current headwinds, investors seemed encouraged by Chegg’s restructuring moves and new licensing revenue opportunities, sending shares higher after the report.