Chegg Stock Plunges After Q4 Revenue Falls 24%, Weak Q1 Guidance: Details

Chegg, Inc. (NYSE: CHGG), the leading student-first connected learning platform, reported its fourth-quarter and full-year 2024 financial results on February 25, 2025. The company's stock price plummeted after the report, with shares down 21.79% in after-hours trading. The primary factors contributing to the stock's decline were a 24% year-over-year decrease in total net revenues and weak guidance for the first quarter of 2025.

In the fourth quarter of 2024, Chegg's total net revenues amounted to $143.5 million, a 24% decrease from the same period last year. Subscription services revenues, which account for a significant portion of total net revenues, also declined by 23% year-over-year to $128.5 million. The company attributed the revenue decline to traffic retention issues with Google's AI Overviews (AIO), which has retained traffic that historically came to Chegg, impacting the company's acquisitions, revenue, and employees. As a result, Chegg filed a complaint against Google and Alphabet Inc. and initiated a strategic review process to explore alternatives, including potential acquisition or going private.

Chegg's weak guidance for the first quarter of 2025 further contributed to the stock's decline. The company expects total net revenues in the range of $114 million to $116 million, significantly lower than the $138.07 million analyst estimate. Subscription services revenues are projected to be in the range of $104 million to $106 million, a substantial decrease from the $128.5 million reported in Q4 2024. The weak guidance reflects a 21% year-over-year decrease in subscription services subscribers, which reached 3.6 million in Q4 2024.

Chegg's strategic review process and legal complaint against Google could influence the company's valuation and potential acquisition opportunities. By exploring strategic alternatives and addressing the traffic retention issue, Chegg could attract potential buyers and achieve a premium valuation for its shareholders. However, the weak Q1 guidance and revenue decline raise concerns about the company's ability to stabilize its business in the near future.

Investors should closely monitor Chegg's progress in addressing the traffic retention issue, expanding its enterprise strategy, and integrating AI into its operations. These factors will be crucial in determining whether Chegg can achieve a turnaround in the near future. Additionally, investors should pay attention to any updates on the strategic review process, legal action against Google, and enterprise expansion efforts to assess the likelihood of a turnaround.

In conclusion, Chegg's stock price plummeted after the company reported a 24% year-over-year decrease in Q4 revenue and weak guidance for the first quarter of 2025. The primary factors contributing to the stock's decline were traffic retention issues with Google's AIO, a 21% year-over-year decrease in subscription services subscribers, and weak guidance for the first quarter of 2025. Chegg's strategic review process and legal complaint against Google could influence the company's valuation and potential acquisition opportunities, but the weak Q1 guidance and revenue decline raise concerns about the company's ability to stabilize its business in the near future. Investors should closely monitor Chegg's progress in addressing these challenges to assess the likelihood of a turnaround.