Key Takeaways Busuu-Chegg Skills drive double-digit growth, with revenues to hit $70M in 2025 and deeper B2B expansion.Chegg is slashing expenses by more than 50% by 2026, boosting EBITDA and pivoting to financial discipline.Shares down 23% in a month, trading at a discount, and executing on sustained skilling momentum.Chegg, Inc. (CHGG) has redefined its business model with a new growth engine, Chegg Skilling, built by integrating Busuu and Chegg Skills. The cornerstone of this reinvention is its belief in ...

Key Takeaways CHGG has lost 45%, facing academic traffic decline, revenue contraction and an ongoing operational reset.Its restructuring cut non-GAAP expenses sharply, while skilling unit targets sustained double-digit growth.Chegg sees stronger free cash flow in 2026, supported by lower capex, leaner costs and a solid cash position.Shares of Chegg, Inc. (CHGG) have lost 45.4% in the past three months compared with the Zacks Internet – Software industry’s 10.1% decline. Over the same timeframe, the broader ...

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]

Financial Data and Key Metrics Changes - In Q3 2025, total revenue was $78 million, a decrease of 42% year-over-year, primarily due to reduced traffic leading to fewer subscribers and less subscription revenue [10] - Non-GAAP operating expenses were $49 million, a reduction of approximately $41 million, or 46% year-over-year, driven by restructuring efforts [11] - Adjusted EBITDA for Q3 was $13 million, representing a margin of 17% [11] - Free cash flow for Q3 was negative $900,000, impacted by a one-time $7.5 million settlement payment to the FTC and $5.5 million in severance payments [12] - The company concluded the quarter with cash and investments of $112 million and a net cash balance of $49 million [12] Business Line Data and Key Metrics Changes - The company has split into two units: Chegg Skilling, expected to have sustainable double-digit growth, and legacy academic services, focusing on cash generation [5][6] - Chegg Skilling is expected to end 2025 with strong momentum, anticipating a 14% year-over-year growth and full-year revenue of $70 million [8] - The legacy academic business is expected to generate cash for several years despite challenges from reduced Google traffic [22] Market Data and Key Metrics Changes - The skilling market is currently valued at over $40 billion, with a focus on workforce, AI, and language learning [7] - Chegg Skilling is positioned to capture growth in the B2B market, transitioning from a B2C model [16] Company Strategy and Development Direction - The company aims to rebuild and reinvent itself, focusing on the skilling market and leveraging its assets for long-term value creation [5][9] - A strategic shift towards the skilling market is seen as essential for future growth, with all growth resources allocated to this segment [16] - The company is investing in AI to enhance its offerings and improve operational efficiency [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the disruptive impact of AI on traditional business models and is adapting to these changes [5][6] - The company is optimistic about its ability to grow in the skilling market, with expectations of double-digit growth in the coming quarters [10][12] - Management believes they have hit the bottom and are now positioned for future growth and profitability [13] Other Important Information - The company has undergone significant restructuring, which included a reduction of nearly 400 employees to streamline operations [17] - The transition to a B2B model is expected to provide a more stable and secure business environment [24] Q&A Session Summary Question: Strategic product priorities for skilling and resource allocation - All growth resources will be directed towards the skilling business, focusing on B2B opportunities and sustainable growth [16] Question: Support for the legacy academic business - The legacy business will continue to operate efficiently, leveraging its existing database and technology to generate cash [22] Question: Initiatives for the Busuu business and growth confidence - The company is focusing on repackaging learning mechanisms for B2B and leveraging AI for conversational learning [27][29] Question: Investments and channels for the skilling business - The company is exploring new distribution channels and building a B2B Salesforce to expand its market reach [34][36] Question: Impact of reduced traffic on skilling business - The skilling business is not expected to face headwinds from reduced traffic, as it is positioned for growth [38]

Financial Performance - Total revenue for Q3 2025 was $78 million, a 43% decrease year-over-year[35] - Adjusted EBITDA for Q3 2025 was $13 million, compared to $22 million in Q3 2024[37] - Free cash flow for Q3 2025 was -$1 million, impacted by $55 million in severance payments and a $75 million settlement payment[39] - Capital Expenditures (CapEx) in Q3 2025 were $6 million, down 63% year-over-year[39] - The company ended the quarter with $112 million in cash and investments, resulting in a net cash balance of $49 million[42] Business Strategy and Outlook - The company is splitting into two units: Chegg Skilling (growth business) and legacy academic services (cash flow generation)[8] - Chegg Skilling is expected to have sustainable double-digit growth[8] - Chegg Skilling revenue is expected to increase approximately 14% year-over-year in Q4 2025, driving total revenue of approximately $70 million for the year[10] - Q4 2025 total net revenue is guided to be between $70 million and $72 million[44] - Q4 2025 Adjusted EBITDA is guided to be between $10 million and $11 million[44] - Full-year 2025 CapEx is anticipated to be approximately $27 million, with a targeted further reduction of approximately 60% in 2026[39]

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].

Core Insights - Chegg, Inc. (CHGG) has experienced a 9.2% decline in stock price over the past month, underperforming its industry and broader market indices [1][8] - The stock is currently trading at $1.29, down 52.7% from its 52-week high of $2.73, but 193.2% above its 52-week low of $0.44 [1] - The company's forward price-to-sales (P/S) ratio stands at 0.38X, significantly lower than the industry average of 5.45X, raising questions about whether it represents a contrarian buy or a value trap [3][24] Financial Performance - Chegg's Q2 2025 total revenues fell 36% year over year to $105.1 million, although this was better than expected [5] - Adjusted EBITDA was reported at $23.1 million, indicating some progress in profitability despite revenue pressures [5] - Earnings estimates for 2025 and 2026 have remained flat, with expectations of a decline from 75 cents per share in 2025 to break-even in 2026, and revenues projected to fall 33.8% in 2025 and 12.2% in 2026 [4] Challenges and Competition - The introduction of AI Overviews has negatively impacted Chegg's traffic and subscriber base, leading to a 39% drop in Subscription Services revenue to $89.7 million [9][10] - Chegg's reliance on third-party platforms for user acquisition poses a vulnerability, especially as competition intensifies from companies like Coursera, Udemy, and Duolingo [11][12] - The company reported a net loss of $35.7 million in Q2 and a free cash flow burn of $12 million due to restructuring costs [13] Strategic Initiatives - Chegg is undergoing a strategic review to explore options such as a sale or going private, which may create long-term value but adds short-term uncertainty [14][15] - The company has implemented cost control measures, reducing non-GAAP operating expenses by 33% year over year to $64 million in Q2, with expectations of further savings in the coming years [16][17] - Chegg is transforming its flagship "Chegg Study" into an AI-driven learning platform, with early data showing a 23% improvement in learning outcomes for users of new AI features [18][20] Growth Opportunities - Chegg is diversifying its offerings through Busuu and Chegg Skills, targeting the language learning and professional upskilling markets [21][23] - Busuu reported a 15% year-over-year revenue growth in Q2, with expectations to generate approximately $48 million in revenue for 2025 [22] - Chegg Skills is positioned in the $40 billion global upskilling market, with a 16% sequential increase in enrollments and plans to pursue ACE Credit recommendations [23] Valuation and Market Sentiment - Chegg's stock trades at a deep discount with a forward P/S ratio of 0.38X, reflecting execution risks amid ongoing revenue declines and strategic uncertainty [24][25] - Consensus estimates suggest continued revenue declines in 2025 and 2026, with potential stabilization thereafter if management's initiatives succeed [26] - The current market sentiment remains cautious, with investors likely to wait for clearer signs of revenue stabilization or outcomes from the strategic review before increasing exposure [27][28]

Core Insights - Chegg, Inc. experienced a significant decline in Q2 2025, with revenues dropping 36% year over year to $105.1 million, and subscription service revenues falling 39% to $89.7 million, attributed to a 40% decrease in its subscriber base to 2.6 million due to reduced traffic from Google's AI Overviews [1][9] Financial Performance - Total operating expenses for Chegg decreased by 72% year over year to $202.5 million in the first half of 2025, driven by aggressive cost-cutting measures including workforce reduction and office closures [2] - The company anticipates adjusted expense savings of $165 million to $175 million for 2025, with an additional $100 million to $110 million expected in 2026 [2] Business Strategy - Chegg is focusing on integrating AI into its business model through diversified service offerings such as Chegg Study, Chegg Skills, and Busuu, while moving away from its traditional Q&A-based subscription model [3] - The success of margin sustainability will depend on Chegg's ability to offset subscriber losses with growth in its Busuu and Skills businesses [3][4] Market Position - Chegg operates in a competitive landscape with key players like Duolingo and Udemy, facing challenges in the edtech ecosystem [5] - Duolingo leads in language learning with a gamified app and strong user engagement, while Udemy is enhancing its offerings with AI-powered tools [6] - Chegg's existing content and platforms provide a modest competitive edge, contingent on effective execution of AI enhancements [7] Stock Performance - Chegg's stock has surged 179.9% over the past six months, outperforming the Zacks Internet - Software industry and the S&P 500 index [8] - The stock is currently trading at a forward 12-month price-to-sales (P/S) ratio of 0.41, indicating a discounted valuation compared to industry peers, suggesting an attractive entry point for investors [10] Earnings Estimates - Earnings estimates for Chegg indicate a loss per share of $0.11 for 2025, with expectations of breakeven earnings in 2026 [11][12] - The estimated figures for 2025 reflect a downtrend of 114.7% year over year, while estimates for 2026 indicate a potential growth of 100% [12]

Core Insights - The demand for AI tools in digital learning is significantly impacting traditional subscription models like Q&A services offered by Chegg, prompting the company to integrate AI into its business model [1][4] - Chegg is transforming its Chegg Study into a Personalized Learning Assistant using AI to enhance student graduation rates and is investing in Busuu and Skills for language learning and upskilling [2][9] - Chegg aims to intensify AI incorporation in its portfolio through product innovation, particularly in Busuu's B2C segment [3] Company Strategy - Chegg is focusing on addressing market pressures by enhancing its service offerings with AI tools, trusted content, and human oversight to meet current student demands [4] - The company is pivoting towards skills development, institutional licensing, and enterprise solutions to carve out a competitive niche in the edtech market [4] Competitive Landscape - Chegg competes with companies like Udemy and Stride, each occupying different niches in the edtech space, with varying levels of AI integration [5][6] - Udemy is leveraging AI for upskilling and course material enhancement, while Stride focuses on K-12 education but has less emphasis on AI in recent offerings [6][7] - Chegg's legacy content and existing user base provide a foothold in language learning and academic support, although its competitive edge over Udemy and Stride is modest [7] Stock Performance - Chegg's stock has increased by 156% over the past six months, outperforming the Zacks Internet - Software industry and the S&P 500 index [8][9] - The stock is currently trading at a forward 12-month price-to-sales (P/S) ratio of 0.54, indicating a discount compared to industry peers, suggesting an attractive entry point for investors [11] Earnings Estimates - Earnings estimates for Chegg indicate a projected loss per share for 2025, with a break-even forecast for 2026; loss estimates for 2025 have contracted to 11 cents per share [13][16] - The estimated figures for 2025 show a year-over-year downtrend of 114.7%, while estimates for 2026 indicate a potential growth of 100% [16]

Core Insights - Chegg, Inc. is enhancing its offerings to adapt to the growing demand for AI-based learning alternatives and improve revenue visibility amid market pressures and competition [1][4] Product Development - The company is focusing on enhancing the Chegg Skills product and transforming Chegg Study into a more efficient business with AI integration, planning to launch new capabilities by September 2025 [2] - Chegg is also investing in its Busuu and Skills business, targeting growth in language learning and workplace readiness, with a continued emphasis on AI for personalization in the second half of 2025 [3] Competitive Positioning - Chegg has established a competitive edge over Coursera and Udemy by focusing on direct student support and embedding Gen AI tools into study workflows, differentiating itself from competitors that cater more to professionals and lifelong learners [5][6][7] Financial Performance - Chegg's stock has surged 56.2% in the past month, outperforming the Zacks Internet - Software industry and the S&P 500 index, with a current price-to-sales (P/S) ratio of 0.49, indicating a discounted valuation compared to industry peers [8][10] - The company expects adjusted expense savings of $165 million to $175 million in 2025, with an additional $100 million to $110 million in 2026, supporting long-term growth [4][9] Earnings Estimates - For 2025, Chegg's bottom-line estimates indicate a loss per share of 11 cents, while 2026 estimates suggest a break-even point, with recent estimates showing a contraction in losses for 2025 [12][13]