Chegg, an online education company, announced a significant restructuring on Monday, including a layoff of about 22% of its workforce, equivalent to 248 employees, according to Reuters. This move comes in response to the growing shift from traditional educational platforms to AI-powered tools like ChatGPT, which has led to a decline in Chegg’s web traffic. The company has been grappling with these challenges for months, with no immediate end in sight.
As AI tools, particularly from companies like Google, OpenAI, and Anthropic, become more ingrained in education, Chegg has found itself struggling to compete. Google’s expansion of its Gemini AI platform and the rise of AI-generated overviews have kept traffic largely within Google’s ecosystem, impacting Chegg’s ability to attract students. The increasing adoption of AI by academics, who are being offered free access to subscriptions from AI companies, has further contributed to Chegg’s decline.
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As part of the restructuring plan, Chegg will close its U.S. and Canada offices by the end of the year. It will also reduce its marketing, product development, and general administrative costs. These moves are expected to save the company between $45 million and $55 million in 2025, with further savings of $100 million to $110 million projected for 2026. The company has also warned that restructuring costs will be significant, with charges between $34 million and $38 million expected to be incurred in the second and third quarters.
Chegg reported a 31% decline in subscribers in the first quarter, which now stands at 3.2 million. This contributed to a 30% drop in revenue, down to $121 million, with subscription services experiencing the biggest decline. Chegg’s struggles reflect the growing disruption AI-powered services are causing in the education sector. In response to this shift, Chegg sued Google in February, claiming the search engine giant’s AI-driven overviews are eroding demand for original content and harming publishers by reducing visitor traffic.
Despite these setbacks, Chegg is hopeful that the restructuring will help position it for future growth, though it faces stiff competition from emerging AI technologies. The company’s reliance on its traditional business model is being questioned as AI becomes an increasingly dominant force in the education sector.
