Chegg Announces 22% Workforce Reduction as AI Tools Disrupt EdTech Industry

Chegg to lay off 22% of workforce as AI tools shake up edtech industry

May 12 (Reuters) - Chegg (CHGG.N), opens new tab said on Monday it would lay off about 22% of its workforce, or 248 employees, to cut costs and streamline its operations as students increasingly turn to AI-powered tools such as ChatGPT over traditional edtech platforms. The company, an online education firm that offers textbook rentals, homework help and tutoring, has been grappling with a decline in web traffic for months and warned that the trend would likely worsen before improving. Google's expansion of AI Overviews is keeping web traffic confined within its search ecosystem while gradually shifting searches to its Gemini AI platform, Chegg said, adding that other AI companies including OpenAI and Anthropic were courting academics with free access to subscriptions. As part of the restructuring announced on Monday, Chegg will also shut its U.S. and Canada offices by the end of the year and aim to reduce its marketing, product development efforts and general and administrative expenses. The majority of the resulting charges of $34 million to $38 million are expected to be incurred in the second and third quarters. Chegg expects cost savings of between $45 and $55 million in 2025 and $100 to $110 million in 2026 due to the restructuring. It also reported first-quarter results on Monday, saying subscribers declined 31% in the period to 3.2 million. Revenue declined 30% to $121 million, as its subscription services revenue fell by nearly a third to $108 million. In February, Chegg sued Google (GOOGL.O), opens new tab saying Google's internet search engine was eroding demand for original content and undermining publishers' ability to compete with its artificial intelligence-generated overviews, thereby causing a drop in visitors and subscribers. Chegg had 1,271 employees as of December 31. Reporting by Kritika Lamba in Bengaluru; Editing by Devika Syamnath Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:World at Work

Chegg announces move to reduce workforce by 22% as students turn to AI

Online learning platform Chegg has announced plans to lay off around 22% of its workforce - 248 employees - to cut costs and streamline operations. The news was bundled with the announcement of a less-than-ideal 30% drop in quarterly revenue, with the company generating $121.4 million in its first fiscal quarter. Chegg has seen declining web traffic for months, and it's expected that this trend could even worsen in the short term, hence the decision to take drastic measures and lay off more than a fifth of its current workforce. In its earnings post, Chegg CEO Nathan Schultz blamed Google's implementation and expansion of AI Overviews for its continued dominance in the search market (something that the US Department of Justice has already complained about) and the interest in its Gemini AI chatbot. Schultz also noted that OpenAI has launched free subscriptions to ChatGPT Plus for college students, with Anthropic also following a similar path, putting Chegg's business at risk. Despite announcing two restructurings in 2024, the company is being forced to take things further by closing physical offices across the US and Canada by the end of 2025. The company will also be "limiting [its] upper funnel marketing, reducing new product development efforts, and finally cutting [its] general and administrative expenses." The 248 roles at risk are predominantly "concentrated in the US and Canada," with Chegg Study and corporate services seeing the biggest redundancies of 66%. The company hopes to save an additional $45-55 million in 2025 on top of the $120 million in savings it predicts from its 2024 restructuring efforts. Further savings of $100-110 million, impacted by the most recent cost-cutting events, are expected for 2026. CFO David Longo added: "Looking ahead, industry challenges continue to cause a notable decline in traffic and subscriber acquisitions."

How AI Stole This Company's Customers and Led to Big Layoffs

In a press release announced Monday, the company's CEO Nathan Schultz explained that he believes "macroeconomic trends will continue to put pressure on our company and business trends will worsen before they get better." Schultz explained that the pressures on Chegg's business mean it will "regrettably will be parting ways with approximately 22% or 248 of our talented team members," a decision he was "saddened by." The company will also close its physical offices in the U.S. and Canada by the end of the year, and cut back on operating costs like spending on new product development and administrative fees, the New York Post explained. For around two decades, Chegg made itself a go-to app for students, providing rented textbooks, a forum for answering questions on standard academic topics, and live online tutoring services. But the first real sign that AI was impacting the company's business came in November last year, when the company announced third quarter losses of $212.6 million which was driven by a decrease of nearly half a million subscribers -- continuing a trend that saw three years of declining revenue at the Santa Clara, California, company. In June 2024 the company said it was cutting 319 jobs, and it added another 441 (about 21 percent of the remaining workforce) to that tally in November. Facing ongoing damage from the rise of AI tools, in February Chegg filed a federal antitrust lawsuit against Google. The suit alleged that Google's controversial AI summaries feature, which puts AI-generated summaries of key points relating to the users' search queries right at the top of the search results page, was unfairly steering people away from actually visiting Chegg's site.

Chegg to lay off 22% of workforce as AI tools shake up edtech industry

Chegg said on Monday it would lay off about 22% of its workforce, or 248 employees, to cut costs and streamline its operations as students increasingly turn to AI-powered tools such as ChatGPT over traditional edtech platforms. The company, an online education firm that offers textbook rentals, homework help and tutoring, has been grappling with a decline in web traffic for months and warned that the trend would likely worsen before improving. Google's expansion of AI Overviews is keeping web traffic confined within its search ecosystem while gradually shifting searches to its Gemini AI platform, Chegg said, adding that other AI companies including OpenAI and Anthropic were courting academics with free access to subscriptions. As part of the restructuring announced on Monday, Chegg will also shut its U.S. and Canada offices by the end of the year and aim to reduce its marketing, product development efforts and general and administrative expenses. The majority of the resulting charges of $34 million to $38 million are expected to be incurred in the second and third quarters. Chegg expects cost savings of between $45 and $55 million in 2025 and $100 to $110 million in 2026 due to the restructuring. It also reported first-quarter results on Monday, saying subscribers declined 31% in the period to 3.2 million. Revenue declined 30% to $121 million, as its subscription services revenue fell by nearly a third to $108 million. In February, Chegg sued Google saying Google's internet search engine was eroding demand for original content and undermining publishers' ability to compete with its artificial intelligence-generated overviews, thereby causing a drop in visitors and subscribers. Chegg had 1,271 employees as of December 31.

Homework tool Chegg to slash 22% of workforce as AI bots steal away...

Chegg on Monday announced plans to slash 22% of its workforce as artificial intelligence bots steal students away from its study and homework help tools. The online platform, which offers textbook rentals and step-by-step homework tutorials, said it has been struggling as Google's AI Overviews squash web traffic, and firms like OpenAI and Anthropic offer discounts and deals to college students on their language models. "We believe the macroeconomic trends will continue to put pressure on our company and business trends will worsen before they get better," CEO Nathan Schultz said in a press release. "As part of this, we regrettably will be parting ways with approximately 22% or 248 of our talented team members, which is a challenging decision and one I'm saddened by," he added. Chegg also plans to close its physical offices in the US and Canada by the end of the year, as well as cut back on new product development and reduce administrative costs. These cost-cutting measures will save Chegg approximately $45 million to $55 million in 2025, and $100 million to $110 million in 2026, the company said. It expects to incur restructuring charges of $34 million to $38 million, mostly from severance payments. Shares in Chegg jumped 4.8% on Monday. Chegg disclosed its subscriber count declined 31%, to 3.2 million, as the company reported its first-quarter results on Monday. Revenue plunged 30% to $121 million, as revenue from subscription services fell by nearly a third to $108 million. It suffered a net loss of $17.5 million in the same period. In February, Chegg filed a federal antitrust lawsuit against Google, claiming the search engine's AI summaries, which populate at the top of the results page, have decimated its site traffic and revenue. Google has argued that its AI summaries send web traffic to "a greater diversity of sites."

Chegg to lay off 22% of workforce as AI tools shake up edtech industry

(Reuters) -Chegg said on Monday it would lay off about 22% of its workforce, or 248 employees, to cut costs and streamline its operations as students increasingly turn to AI-powered tools such as ChatGPT over traditional edtech platforms. The company, an online education firm that offers textbook rentals, homework help and tutoring, has been grappling with a decline in web traffic for months and warned that the trend would likely worsen before improving. Google's expansion of AI Overviews is keeping web traffic confined within its search ecosystem while gradually shifting searches to its Gemini AI platform, Chegg said, adding that other AI companies including OpenAI and Anthropic were courting academics with free access to subscriptions. As part of the restructuring announced on Monday, Chegg will also shut its U.S. and Canada offices by the end of the year and aim to reduce its marketing, product development efforts and general and administrative expenses. The majority of the resulting charges of $34 million to $38 million are expected to be incurred in the second and third quarters. Chegg expects cost savings of between $45 and $55 million in 2025 and $100 to $110 million in 2026 due to the restructuring. It also reported first-quarter results on Monday, saying subscribers declined 31% in the period to 3.2 million. Revenue declined 30% to $121 million, as its subscription services revenue fell by nearly a third to $108 million. In February, Chegg sued Google saying Google's internet search engine was eroding demand for original content and undermining publishers' ability to compete with its artificial intelligence-generated overviews, thereby causing a drop in visitors and subscribers. (Reporting by Kritika Lamba in Bengaluru; Editing by Devika Syamnath)