Core Insights - Chegg's stock has declined 99% from its all-time high, raising questions about its future viability amidst layoffs and AI integration efforts [2][3] - The company has opted to remain independent after a review by Goldman Sachs, indicating a lack of attractive acquisition offers [2] Financial Performance - Chegg's market capitalization has dropped approximately $14.5 billion since its peak in February 2021, reflecting significant financial struggles [4] - In Q2, revenue fell 23% to $105 million, and the company reported an operating loss of $36.5 million along with $12 million in negative free cash flow [5][6] - The forecast for Q3 revenue was disappointing, falling $10 million short of analysts' expectations, with anticipated adjusted EBITDA of $7.5 million, nearly $6 million below consensus [5][6] Workforce and Layoffs - Chegg has laid off 45% of its workforce, totaling 1,396 employees across multiple rounds of layoffs since June 2024, in response to the impact of AI and reduced traffic from search engines [3][8] - The layoffs are part of a broader trend as students increasingly turn to free alternatives like ChatGPT for homework help [8] Competitive Landscape - Chegg faces stiff competition from free services that offer similar or superior functionalities, leading to a decline in its subscriber base [10][12] - Since the launch of ChatGPT in November 2022, Chegg has lost over 500,000 subscribers, with a significant shift in student preferences towards free AI tools [9][10] Unique Selling Proposition - Chegg's original business model, which relied on paid human contractors for homework solutions, is now considered obsolete as students prefer free alternatives [14] - The company's attempts to pivot towards AI-powered services have not been successful, with new offerings failing to retain subscribers [15] Future Prospects - Despite challenges, Chegg has $114 million in cash and has acquired Busuu, a language learning platform, which generated $43 million in revenue in 2024 [16] - Analysts view Chegg's stock as undervalued, trading 16% below the Wall Street price target of $1.20, but questions remain about its ability to compete effectively [17]