Chegg to Report Q3 Earnings: Should You Buy the Stock or Wait?

Core Insights - Chegg, Inc. (CHGG) is set to report its third-quarter 2025 results on November 10, with previous quarter's adjusted EPS and net revenues exceeding Zacks Consensus Estimates by 143.5% and 3.7%, respectively, although both metrics saw significant year-over-year declines of 58.3% and 36% [1][4]. Financial Performance - The Zacks Consensus Estimate for the third-quarter adjusted loss per share remains unchanged at 14 cents, reflecting a substantial 255.6% year-over-year decline from an adjusted EPS of nine cents [4][11]. - The estimated net revenues for the upcoming quarter are projected at $76.4 million, indicating a 44.1% decrease from $136.6 million reported in the same quarter last year [4][11]. Revenue Drivers - Chegg's revenue performance is expected to decline due to a drop in subscriber numbers, attributed to reduced traffic from AI-driven search tools, particularly Google's AI overviews [6][7]. - The Subscription Services product line, which accounted for 85.4% of second-quarter 2025 net revenues, is anticipated to generate revenues between $67 million and $69 million, down from $119.8 million year-over-year [8][9]. - The Skills and Other product line is also expected to see a decline, with revenues estimated at $8.23 million, down from $16.8 million in the previous year [9]. Margin and Cost Structure - Gross margins are expected to narrow to 56-57%, down from 68% in the previous year, due to lower revenue leverage and increased restructuring-related costs [10][11]. - Adjusted EBITDA is projected to range from $7 million to $8 million, significantly lower than the $22.3 million reported in the same quarter last year [11]. Market Position and Valuation - Chegg's stock has increased by 30.3% over the past six months, outperforming the Zacks Internet - Software industry and the S&P 500 Index, while underperforming the Zacks Computer and Technology sector [14]. - The stock is currently trading at a forward 12-month price-to-sales (P/S) ratio of 0.28, indicating a discount compared to peers like Coursera, Duolingo, and Stride, which have higher P/S ratios [15][16]. Strategic Outlook - Despite facing challenges from declining subscriber counts and revenue pressures, Chegg's focus on AI integration and upskilling initiatives may support future growth [17][18]. - The ongoing restructuring and rising administrative costs signal continued pressures on the bottom line, making immediate investment decisions less favorable [18][19].