Chegg Reports Breakeven Q3 Earnings, Revenues Down Y/Y, Stock Up

Core Insights - Chegg, Inc. reported break-even earnings in Q3 2025, exceeding Zacks Consensus Estimate but showing a year-over-year decline [1][3][8] - Net revenues of $77.7 million surpassed the consensus mark but fell 43% year over year [3][8] - Following the earnings report, Chegg's shares rose by 3.4% in after-hours trading [1] Revenue Performance - The decline in performance was attributed to a decrease in the number of subscribers, lower enrollments in Chegg Skills, and reduced advertising revenues [2] - Subscription Services revenues decreased by 42% to $69.1 million, while Skills and Other product line revenues fell by 49% to $8.6 million [4] Operating Highlights - Gross profit decreased by 50.6% year over year to $46 million, with gross margin contracting by 900 basis points to 59% [5][8] - Total operating expenses dropped by 80% to $63.2 million from $315.5 million [5] - Adjusted EBITDA was $13.3 million, down from $22.3 million in the prior year [5][8] Liquidity and Cash Flow - As of September 30, 2025, Chegg had cash and cash equivalents of $38.2 million, down from $161.5 million in 2024 [6] - For the first nine months of 2025, net cash provided by operating activities was $24.5 million, a decrease from $107.1 million in the previous year [6] - Free cash flow at the end of Q3 was $2.8 million, down from $45.4 million a year ago [6] Q4 2025 Outlook - Chegg expects Q4 net revenues to be in the range of $70-$72 million, compared to $143.5 million in the same quarter last year [7][8] - Chegg Skilling revenues are projected to be $18 million [7] Margin and EBITDA Projections - The gross margin for Q4 is expected to be between 57% and 58%, down from 68% reported a year ago [9] - Adjusted EBITDA is projected to be between $10 million and $11 million, significantly lower than the $36.6 million reported a year ago [9]