Education technology group Chegg (CHGG) today is shedding a fifth of its workforce after struggling to compete with the AI tools of rivals such as Alphabet (GOOGL)-owned Google.
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AI Top of the Class
Chegg said it is being forced to lay off 22% of its employees, around 248 workers, to cut costs and streamline its operations because students are increasingly turning to AI-powered tools such as Google’s Gemini AI platform and ChatGPT to help them with their studies and revision.
According to Google, Gemini AI is an AI-powered assistant designed to support students and educators in Google Workspace for Education. It offers a range of features, including personalized learning experiences, AI-powered note-taking, and assistance with various tasks like writing, research, and summarizing.
Chegg said Google’s expansion of AI Overviews is keeping web traffic confined within its search ecosystem while gradually shifting searches to its Gemini AI platform, adding that other AI companies, including OpenAI and Anthropic, were courting academics with free access to subscriptions.
Indeed, back in February this year, Chegg said it had filed a lawsuit against Google, claiming that AI summaries of search results have hurt its traffic and revenue.
Chegg, an online education firm that offers textbook rentals, homework help, and tutoring, warned that its declining web traffic was likely to worsen before improving.
Major Cost Savings
It will shut its U.S. and Canadian offices by the end of the year and look to reduce its marketing and product development spend, as well as general and administrative expenses.
It hopes to save costs of between $45 and $55 million in 2025 and $100 to $110 million in 2026 as a result of the restructuring.
Chegg also reported first-quarter results today, stating that subscribers declined 31% in the period to 3.2 million. Revenue declined 30% to $121 million, as its subscription services revenue fell by nearly a third to $108 million.
However, its shares rose 6%, helped by revenues beating expectations but also the general market bounce following the reduction in U.S. and Chinese tariffs.
Is CHGG a Good Stock to Buy Now?
On TipRanks, CHGG has a Moderate Sell consensus based on 3 Hold and 4 Sell ratings. Its highest price target is $2. CHGG stock’s consensus price target is $1.30 implying an 77.45% upside.
