Chegg Stock Soars 14.05% on Cost-Cutting, AI Strategy

Chegg's stock surged 14.05% in pre-market trading on June 6, 2025, marking a significant rebound for the education technology company that has faced substantial challenges in recent years.

Chegg's core subscription business has been in decline, with subscriber counts dropping 31% year-over-year and revenues down 30%. The company is pivoting its strategy by cutting costs, diversifying into institutional partnerships, and leveraging AI capabilities to create new revenue streams. This shift is aimed at transforming Chegg from a struggling player into a resilient force in the global education market.

Chegg's struggles are largely due to the rise of free AI tools like ChatGPT and Google's Gemini, which have eroded demand for paid study aids. The company's Q1 2025 Subscription Services revenue fell to $107.6 million, with subscribers dropping to 3.2 million. However, Chegg is fighting back with a three-pronged strategy: cost cutting, institutional partnerships, and AI-driven diversification.

Chegg's restructuring plan includes slashing 248 employees and closing offices to save $45–$55 million in 2025 and $100–$110 million by 2026. These cuts are aimed at realigning costs with the shrinking revenue base and freeing capital for higher-margin initiatives. The company's AI-powered tools, such as “Solution Scout” and “Create,” are designed to compete with ChatGPT and offer a path to scale efficiently.

Chegg's proprietary database of 400 million question-answer pairs is being monetized through licensing deals with tech giants, generating $4 million in Q1 and expected to bring in $7 million in Q2. Institutional partnerships are also expanding, with Chegg targeting 40 colleges/universities by year-end. These deals offer predictable B2B revenue and include access to Chegg's AI tools and content. Busuu, Chegg's language-learning arm, is another bright spot, with 7% revenue growth and B2B sales surging 29%.