Chegg to cut 22% of staff after subscriptions and revenue dropped amid AI

Chegg revealed on Monday, May 12, that it would lay off 22% of its staff, to be precise, 248 employees, to reduce costs and align its operations. The company briefing said students increasingly turn to AI-powered tools like ChatGPT over traditional edtech tools. 

The edtech company revealed that subscriber numbers and revenue fell sharply due to rising competition from AI tools. Chegg’s projections showed significant savings from restructuring by 2026. The company expects to save $45 to $55 million on restructuring costs in 2025 and $100 to $110 million in 2026.  

Chegg faces competition from AI-powered tools like ChatGPT 

Chegg, an online edtech firm offering textbook rentals, homework help, and tutoring, said it has been struggling with reduced web traffic for months. The edtech firm warned that the struggle may worsen before getting better. 

Chegg just cut 22% of staff after subscriptions and revenue dropped a further ~30%. Stock down 99% from 2021 peak to $0.69. Stack Overflow axed 28% last year. AI now gives away answers these sites monetized. Next up: other gatekeepers that can’t add real, proprietary value. pic.twitter.com/QVqV61VAzu

— Simon Smith (@_simonsmith) May 12, 2025

According to Chegg, the layoff impact will be concentrated in the US and Canada and predominantly affect Chegg Study and corporate services. The company said there will be a 66% reduction in the US and Canadian business areas.  

The Santa Clara, California-based company reported its 2025 first-quarter earnings. The company exceeded its revenue and adjusted EBITDA expectations, delivering $16 million in free cash flow. Nathan Schultz, CEO and President of Chegg, said that despite the promising developments, the company believes the trends in AI will worsen their impact before getting better. 

Schultz added that they are taking steps to further align costs with the outlook, including an additional business restructuring. The company’s press release showed that the subscriber base had declined by 31% in Q1 to $3.2 million. Revenue decreased by 30% to $121 million, and subscription services fell to $108 million. 

The American education technology company said that Google’s expansion of AI Overviews confines the web traffic within its search engine ecosystem while gradually migrating searches to its Gemini AI platform. The edtech company added that other AI platforms like ChatGPT are luring students to their platforms using free access to subscriptions.

The American education technology company sued Google in February, saying that Google’s search engine destroyed demand for original content and undermined publishers’ ability to compete with its AI-generated overviews. The company added that the fraud led to a drop in visitors and subscribers.

Edtech firm expects cost savings from restructuring

According to the online tutoring firm, restructuring charges of about $34 to $38 million are expected to be incurred in the second and third quarters. Chegg revealed that the cost savings drawn from the reorganization will be between $45 and $55 million in 2025 and $100 to $110 million in 2026.

As part of the reorganization, the company revealed plans to close its U.S. and Canadian offices by the end of the year. The edtech firm aims to reduce marketing campaigns, product development, and administrative expenses. Chegg shares 

Nathan Schultz, CEO at Chegg, said the company has progressed in AI innovation. The CEO said their core product, Chegg Study, a verticalized and personalized student support platform, has been enhanced with Solution Scout, which allows students to compare multiple language models against Chegg’s proprietary content.

Schultz added that the Practice service now has a new AI-powered feature called Create, which will empower students to generate custom content directly from their class materials. He said that Chegg Skills and Busuu are not affected as they are encouraged by the progress those businesses have made. He said the company is committed to investing in its growth.

CEO Schultz insisted that Chegg Study’s strategy of providing actual learning outcomes for students is enduring. He added that they diversify their company revenue through two key opportunities: question-and-answer pair licensing and institutional direct contracts.

Chegg’s CEO revealed their excitement about Busuu’s performance and the opportunity for Skills, which are expected to be adjusted EBITDA positive in 2026.

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