Chegg, Having Lost Most of Its Value, Faces a Survival Struggle

IBL News | New York

Chegg, the former $14 billion EdTech giant, moved last week from a market correction to a survival struggle, showing the existential risk of legacy digital businesses.

In 39 months, Chegg has lost 99% of its value. Previous categories of corporate death (Kodak, Blockbuster, Nokia handsets) took 5-10 years to play out. Now, Chegg is showing that AI-driven collapse can happen in three years or less.

Chegg had, in 2022, before ChatGPT, a simple business: Students paid $19.95 a month for textbook rentals, homework help, and on-demand tutoring from contractors.

The company built a moat from years of accumulated answers and pre-solved homework libraries — and Google indexed those answer pages heavily.

ChatGPT, free, instant, and with follow-up questions, didn’t require students to wait for a human contractor to respond to a posted query.

By Q1 2025, Chegg’s subscriber base dropped 31% year-on-year to 3.2 million. Revenue fell 30% to $121 million. By Q3 2025, web traffic from non-subscribers was down 37% year-on-year.

CheggMate — the AI tool Chegg launched in April 2023 in partnership with OpenAI itself — failed to retain subscribers.

Students who had direct access to ChatGPT had no reason to pay Chegg for an inferior wrapper over the same underlying technology.

In addition, Google’s AI Overviews — the AI-generated search summaries that began rolling out across Google search in 2024 and accelerated in 2025 — destroyed Chegg’s organic search traffic. Google’s AI now generates the answer directly in the search results. (This outcome shows organic search traffic from Google is no longer a defensible moat for any business that monetizes content-driven discovery.)

In May 2025, 248 employees were laid off (22% of staff), and the US/Canada offices were closed. In October 2025, a further 388 employees (45% of the remaining staff).

Chegg’s board has approved $300 million in securities repurchases and implemented $100-120 million in cost savings for 2026. Now, bondholders are openly questioning whether the company can continue servicing its debt.

A sale to a strategic acquirer, like a textbook publisher or a private equity firm specializing in turnarounds, has been explored. Also, going private has been discussed. Neither of the two has worked.

Analysts say that European edtech, content publishing, customer service, paralegal services, basic translation, junior coding, and a dozen other categories were in positions directly analogous to Chegg’s in late 2022.