Chegg, the online education platform known for textbook rentals, homework assistance, and tutoring services, has disclosed plans to lay off approximately 248 employees, or 22% of its workforce. This move is part of a broader strategy to reduce operational costs and realign the company in response to shifting consumer behavior, especially as students increasingly rely on AI-powered tools like OpenAI’s ChatGPT for academic support.
This restructuring comes at a time when Chegg’s traditional educational services are facing fierce competition from advanced AI solutions that have captured the attention of students, making it necessary for Chegg to adapt its operations in a rapidly evolving market.
AI Tools Like ChatGPT Threaten Chegg’s Core Business
Chegg has been battling a significant decline in its website traffic for months, attributing much of this to the rise of AI-driven tools like ChatGPT, which have become increasingly popular among students for homework help and academic assistance. The company warned that this downward trend in user engagement could continue in the coming months.
Additionally, Chegg cited the expansion of Google’s AI-driven search results and its own Gemini platform, which is now absorbing more search queries and keeping users within Google’s ecosystem. This has resulted in fewer students visiting Chegg’s platform, as they opt for quick AI responses instead of traditional study materials.
Office Closures and Cost-Cutting Measures on the Horizon
In an effort to streamline its operations, Chegg will close its offices in both the United States and Canada by the close of 2025. The company also plans to reduce its spending in areas such as product development, marketing campaigns, and general administrative costs.
Chegg expects that the restructuring will incur one-time costs in the range of $34 million to $38 million, with the majority of these expenses being recorded over the second and third quarters of the year. However, the company anticipates substantial savings in the coming years.
Projected Savings of Over $100 Million in 2026
Despite the significant immediate costs, Chegg forecasts that the restructuring will result in long-term financial benefits. The company projects that its cost-saving measures will lead to reductions of between $45 million and $55 million in 2025, and between $100 million and $110 million in 2026.
These changes are expected to help Chegg adjust to the new competitive landscape while maintaining profitability.
Sharp Decline in Subscribers and Revenue
The latest financial results show that Chegg’s subscriber base has shrunk by 31%, dropping to 3.2 million. The company’s revenue also took a hit, falling by 30% to $121 million in the first quarter, with its subscription services revenue decreasing by almost a third to $108 million.
This significant drop reflects the increasing trend of students turning to AI tools instead of relying on traditional educational platforms, signaling a shift in how academic support is consumed.
Legal Dispute with Google Over AI’s Impact on Content Creators
Earlier this year, Chegg filed a lawsuit against Google, accusing the tech giant of using its AI capabilities to divert users away from original content. The lawsuit claims that Google’s AI-generated summaries and overviews have harmed content creators and publishers by offering quick, AI-driven answers that discourage users from visiting other platforms like Chegg.
Chegg argues that this has caused a dramatic decline in web traffic and subscriber numbers, putting pressure on the company’s business model.
As of December 31, 2024, Chegg had 1,271 employees. This figure is set to decline significantly as the company moves forward with its restructuring plans in an effort to stay competitive in the face of disruptive technologies.
