Chegg Turns to AI for Efficiency: Enough to Offset Subscriber Decline?

Core Insights - Chegg, Inc. is heavily investing in artificial intelligence to transform its business model amid significant subscriber losses, reporting Q2 2025 revenues of $105.1 million, a 36% decline year-over-year, with subscription revenue down 39% to $89.7 million and a 40% drop in subscribers to 2.6 million [1][8] Business Model and AI Integration - Management is optimistic that efficiency improvements and product innovation will stabilize the business, with AI tools like Solution Scout and AI-driven flashcard generators enhancing user engagement and satisfaction [2] - Non-GAAP expenses decreased by 33% in Q2, allowing Chegg to achieve $23.1 million in adjusted EBITDA despite revenue challenges [2] Growth Segments - Busuu and Skills are identified as growth segments, with Busuu's language-learning platform experiencing a 15% revenue increase, driven by a 39% rise in its B2B business, while Skills saw a 16% quarter-over-quarter enrollment growth [3] Future Outlook - For Q3, management projects revenues to be between $75 million and $77 million, indicating ongoing traffic challenges, raising questions about AI's potential to drive sustainable growth in a competitive edtech environment [4] Competitive Landscape - Chegg faces increasing competition from companies like Coursera and Duolingo, with Coursera focusing on AI-driven personalization and enterprise partnerships, and Duolingo expanding its offerings in language learning and other subjects [5] Stock Performance and Valuation - Chegg's stock has increased by 41.3% over the past three months, outperforming the Zacks Internet - Software industry [6] - The stock is currently trading at a forward 12-month price-to-sales (P/S) ratio of 0.42, indicating a discount compared to industry peers [10] Earnings Estimates - The Zacks Consensus Estimate for Chegg's 2025 loss per share has improved to 11 cents from 40 cents over the past month, with a projected 33.8% decline in sales for 2025 [12]