Chegg Leans on AI to Boost Efficiency Amid Subscriber Decline

Chegg reported Q2 2025 revenues of $105.1 million, down 36% YoY, with subscription services revenue falling 39% to $89.7 million. The subscriber base plunged 40% to 2.6 million, largely due to lower traffic stemming from Google's AI Overviews. However, management is betting on efficiency gains and product reinvention, with AI-driven tools improving engagement and cutting operating costs. Growth segments Busuu and Skills are bright spots, with Busuu's B2B business growing 39% and Skills seeing 16% enrollment growth quarter-over-quarter.

Chegg, Inc. (CHGG) reported its second-quarter 2025 financial results, highlighting a challenging period marked by a significant decline in subscriber numbers and revenue. The company's Q2 2025 revenues totaled $105.1 million, down 36% year-over-year (YoY), with subscription services revenue falling 39% to $89.7 million. The subscriber base plunged 40% to 2.6 million, largely due to lower traffic stemming from Google's AI Overviews [1].

Despite these headwinds, management is betting on efficiency gains and product reinvention, with AI-driven tools improving engagement and cutting operating costs. Non-GAAP expenses fell 33% in the second quarter, helping Chegg deliver $23.1 million in adjusted EBITDA despite revenue headwinds. Growth segments Busuu and Skills are bright spots, with Busuu's B2B business growing 39% and Skills seeing 16% enrollment growth quarter-over-quarter [1].

Looking ahead, management guided third-quarter revenues down to $75–77 million, reflecting ongoing traffic pressures. While cost discipline and AI-enabled efficiencies are cushioning profitability, the key question for investors is whether AI can do more than reduce costs—can it drive sustainable growth in a competitive, AI-disrupted edtech landscape? With Chegg in the midst of a strategic review, the next few quarters will be critical in proving whether efficiency gains can offset declining scale [1].

Chegg's stock performance has been mixed. Shares have soared 41.3% in the past three months, performing far better than the Zacks Internet - Software industry. However, the stock is currently trading at a discount compared with its industry peers, with a forward 12-month price-to-sales (P/S) ratio of 0.42. The Zacks Consensus Estimate for 2025 loss per share has narrowed to 11 cents from 40 cents in the past 30 days, and the consensus estimate for 2025 sales implies a 33.8% decline [1].

Competitive pressures from edtech rivals like Coursera (COUR) and Duolingo (DUOL) are intensifying. Coursera has leaned into AI-driven personalization and enterprise partnerships to expand beyond its core university alliances, while Duolingo has aggressively integrated AI to refine language instruction and branch into math and literacy [1].

References:

[1] https://www.nasdaq.com/articles/chegg-turns-ai-efficiency-enough-offset-subscriber-decline