Is there any other company that is so seemingly hard done by AI than Chegg? That is what they are blaming their troubles on, but the problem is deeper than that.
The Santa Clara-based education company announced this week that it will cut about 45 percent of its staff (roughly 388 employees) and bring back longtime chief executive Dan Rosensweig to lead a sweeping restructuring. Chegg said the layoffs will save about $100 million to $110 million in 2026 expenses and cost the company up to $19 million in cash severance. The company will remain a public company after exploring potential sale or take-private offers with Goldman Sachs.
In its official release, Chegg blamed “the new realities of AI and reduced traffic from Google to content publishers” for a “significant decline” in traffic and revenue. That line has become its explanation for everything: collapsing growth, eroding margins, and a stock that has fallen more than 90 percent from its 2021 peak.
But the cracks appeared long before ChatGPT and AI Overviews changed how students search for answers.
A Year of Decline
Chegg entered 2025 already weakened. In May 2025 it laid off 22 percent of its workforce, that is about 248 people after reporting a 30 percent year-over-year revenue drop to $121 million and a 31 percent fall in subscribers to 3.2 million. In February the company sued Google, accusing its new AI Overviews feature of diverting traffic away from Chegg’s paid content. The lawsuit underscored how dependent Chegg had become on search referrals and homework queries typed into Google.
As student behavior shifted to free generative-AI tools, Chegg’s model (charging $15 a month for step-by-step solutions) stopped working. Its own data show that nearly all new questions on Chegg Study can now be answered automatically by its in-house AI, a sign that what once required a network of tutors can now be replicated by software.
The company’s management responded the only way they could: by cutting costs. The May 2025 restructuring closed its U.S. and Canada offices and cut marketing and product spending. The October layoffs doubled down on that approach. In two rounds of cuts this year, Chegg has reduced its workforce by more than half.
Behind the financial pain is a deeper credibility problem. For years, Chegg marketed itself as a learning aid while professors accused it of fueling academic dishonesty. Universities from the U.S. to Australia have investigated how students used Chegg to access exam and assignment answers in real time. The company defended its model as legitimate tutoring, but the reputation stuck. When students discovered free AI alternatives that could deliver similar results, they left quickly.
Investors did too. Chegg’s stock fell 85.6 percent in 2024 and another 10 percent in 2025 before the latest announcement. Analysts now give it an average “Reduce” rating, with price targets around $1.70 per share.
A Pivot Without a Base
Chegg’s answer is to reinvent itself as a business-to-business skilling company. Rosensweig’s return to the CEO seat marks the start of that shift. The company now calls its core opportunity the “$40 billion-plus skilling market”. It plans to expand in language learning, workplace readiness, and AI-related courses: areas it already touches through its Busuu acquisition.
Busuu’s revenue grew 15 percent year over year in Q2 2025, with corporate language training up 39 percent. Those numbers explain why Chegg is moving away from individual students toward employers who pay for training at scale. The company projects about $70 million in 2025 revenue from its skilling businesses and expects double-digit growth in 2026.
The shift sounds practical but carries risk. The skilling market is already crowded with Coursera, Duolingo, Guild Education, and LinkedIn Learning, all with stronger brands in corporate training and credentialing. Chegg’s brand is still tied to homework help, not career advancement. Re-educating customers and building employer partnerships will take time and resources that a shrinking company may not have.
Rosensweig has called the move a “bright future” for Chegg. But even as he promises growth, the company continues to shrink. Cutting nearly half the workforce while expanding into new markets is a contradiction the numbers will test soon enough. Chegg said it will share more details on its Q3 2025 earnings call on November 10.
For now, the market remains skeptical. Shares have not recovered since the announcement. Analysts point out that turning a consumer subscription service into a B2B provider is effectively building a new company from scratch: one with lower margins and longer sales cycles.
The Deeper Problem
Chegg insists that AI blindsided it, but the real story is how exposed its business already was. A service built on giving students quick answers was always going to struggle once technology made quick answers free. Blaming AI for that is like blaming calculators for ending math tutors.
The layoffs and leadership change are the consequence. Rosensweig’s return is meant to reassure investors, but it also confirms that Chegg’s growth story has run out. The pivot to skilling might keep the company alive, but it won’t fix the trust it lost with both students and employees.
AI didn’t destroy Chegg: it revealed how little substance there was behind the model. What Chegg sells now is time: time to cut costs, time to find a new audience, and time to convince the market that it still belongs in the future of learning.
