Chegg's Turnaround Play: Cost-Cutting and Content Goldmine Signal Buying Opportunity

Chegg Inc. (NYSE: CHEGG) has long been synonymous with student-centric education tools, but its recent struggles—marked by declining subscriptions and rising competition from free AI platforms—have overshadowed its underlying resilience. Yet beneath the headlines of subscriber losses lies a company undergoing a strategic metamorphosis. By aggressively slashing costs, prioritizing high-margin segments like its Busuu language platform, and monetizing its vast content library, Chegg is positioning itself for a comeback. For investors willing to look past short-term pain, the pieces are falling into place for a compelling turnaround story.

The Cost-Cutting Catalyst: $165M in Savings, Not Sacrifices

Chegg’s restructuring program, announced in early 2025, is a masterclass in operational discipline. By reducing its workforce by 22% and closing physical offices, the company aims to save $165–$175 million annually by 2025, with further gains expected in 2026. These cuts are not arbitrary—$34–$38 million in restructuring costs will be incurred in 2025, but the long-term payoff is clear.

The strategy isn’t just about trimming fat; it’s about redirecting resources to areas with higher returns. Upper-funnel marketing and non-essential product development are being pared back to focus on core assets like Busuu and Chegg Skills. This pivot is already showing results: Q1 2025’s adjusted EBITDA margin of 16% and improved gross margins (64–65% in Q2) signal a leaner, meaner Chegg.

Busuu: The High-Growth Engine Ignoring the Headwinds

While Chegg Study’s subscription base has cratered—31% YoY decline to 3.2 million in Q1—its Busuu subsidiary is defying gravity. The language-learning platform delivered 7% YoY revenue growth in Q1, driven by 29% B2B revenue growth as enterprises adopt its AI-enhanced tools. With plans to hit $48 million in 2025 revenue and achieve positive adjusted EBITDA by early 2026, Busuu is no longer a side project but a cornerstone of Chegg’s future.

Its AI-powered features, like Speaking Practice, are boosting retention and attracting premium B2C users. Meanwhile, strategic B2B partnerships with large enterprises are unlocking recurring revenue streams. This dual focus positions Busuu as a $100+ million revenue business by 2026, a growth trajectory that few peers can match.

Content Licensing: Unlocking the $5 Billion Q&A Library

Chegg’s crown jewel—the 50 million-strong Q&A database—has long been underutilized. But 2025 marks a turning point. Early licensing deals with tech firms have already generated $4 million in Q1, with $7 million expected in Q2, and negotiations for broader agreements are advancing. Even a conservative estimate of monetizing 5% of its library could yield $25–$30 million annually, with upside if partnerships expand.

The strategic alternatives process, which has drawn interest from PE firms and edtech players, underscores the value investors see in this asset. A potential spinoff or sale of non-core divisions could unlock hidden value, while retaining Chegg’s high-margin segments.

The Strategic Alternatives Edge: A Catalyst for Revaluation

Chegg’s ongoing review of strategic alternatives—reportedly attracting interest from both buyers and partners—hints at a possible breakup or asset sale. The company’s $480 million net cash position adds a safety net, while its undervalued stock (trading at ~5x 2026 EBITDA estimates) suggests the market has yet to price in these tailwinds.

Conclusion: A Buy for the Long Game

Chegg is not a stagnant relic of the subscription era but a reinvented asset play. While subscriber declines and restructuring costs will pressure near-term results, the structural improvements—cost discipline, Busuu’s growth, and content monetization—are laying the groundwork for recovery. With a $1.7 billion market cap versus its $5 billion+ content library and Busuu’s growth runway, the stock is primed to rebound once these efforts crystallize.

For investors with a 2–3 year horizon, Chegg offers a rare combination: a de-risked balance sheet, a high-growth subsidiary, and a trove of underappreciated assets. The pain is real today, but the payoff could be monumental. Buy now—before the market catches on.

Note: Always conduct independent research and consult with a financial advisor before making investment decisions.