Chegg's AI-Driven Restructuring: A Strategic Turnaround or a Sinking Ship?

In the ever-shifting landscape of edtech, Chegg Inc. (NASDAQ: CHEG) has become a cautionary tale of disruption-and perhaps a case study in desperate reinvention. Once a dominant force in student homework help and digital textbook rentals, the company has seen its market capitalization collapse from $14.7 billion in 2021 to a mere $156 million by October 2025, as generative AI tools and evolving search behaviors eroded its core business model, according to The Outpost. Now, with a 45% workforce reduction, leadership upheaval, and a pivot to the "skilling market," Chegg faces a pivotal question: Is this a calculated strategic overhaul, or is the ship already sinking?

The Crisis: AI's Double-Edged Sword

Chegg's struggles are emblematic of a broader industry reckoning. According to AOL News, the company attributes its "significant decline in traffic and revenue" to the rise of AI tools like ChatGPT and AI-generated search summaries from Google. These technologies have not only reduced demand for Chegg's homework assistance but also redirected student traffic away from its platform. Compounding the issue, Chegg's stock price has lost 99% of its value since its 2021 peak, a trajectory that has left even ardent value investors skeptical.

Yet, as value investors often emphasize, crisis can create opportunity. Chegg's aggressive restructuring-announced in October 2025-aims to cut $100–$110 million in 2026 non-GAAP expenses through workforce reductions and operational streamlining, a move detailed in the Outpost coverage. While painful, such measures could stabilize the business long enough to pivot toward new revenue streams.

Strategic Shifts: From B2C to B2B and the Skilling Market

Chegg's pivot to the "skilling market" represents its most ambitious gambit yet. The company now targets the $40 billion-plus B2B education sector, leveraging its Busuu platform and AI-related skills courses, a strategy outlined in AOL News coverage. This shift aligns with a growing demand for upskilling in AI literacy and workplace readiness, particularly as businesses adapt to automation. According to internal projections cited by the Outpost, these initiatives could generate $70 million in 2025 revenue and achieve double-digit growth in 2026.

However, the skilling market is crowded. Competitors like Coursera, Udemy, and even Google's own skill-building platforms pose significant challenges. For Chegg to succeed, it must demonstrate not just cost efficiency but also unique value propositions-such as tailored corporate partnerships or AI-driven personalized learning.

Market Reception and Leadership Overhaul

The market's response to Chegg's restructuring has been muted at best. While the company's legal action against Google-alleging that AI-generated search summaries unfairly reduced its traffic-has garnered attention, the Outpost coverage suggests it remains a longshot. Meanwhile, the return of Dan Rosensweig as CEO, a former CEO of Chegg from 2019–2021, signals a return to "known quantities" in leadership. Yet, as AOL News notes, this move also highlights the lack of fresh perspectives in a rapidly evolving industry.

From a value investing lens, Chegg's leadership changes and cost-cutting measures are necessary but insufficient. The company's ability to execute its B2B pivot will hinge on its capacity to innovate beyond cost savings-a domain where its historical strengths lie in customer acquisition, not enterprise solutions.

The Verdict: A High-Risk, High-Reward Proposition

Chegg's AI-driven restructuring embodies the classic value investor dilemma: a severely undervalued stock with a plausible path to recovery, but one fraught with execution risks. The company's projected $70 million in 2025 skilling revenue is a promising start, but it pales in comparison to its peak earnings. Moreover, the $15–$19 million in severance charges reported by the Outpost and ongoing legal battles could further strain liquidity.

For investors, the key question is whether Chegg can transform its cost base into a sustainable competitive advantage. If the skilling market pivot succeeds, the company's current valuation-trading at a fraction of its former self-could represent a compelling entry point. However, given the entrenched dominance of AI tools and the competitive B2B landscape, this remains a speculative bet rather than a textbook value play.