EdTech takes the F as Chegg cuts 22% of workforce due to AI

Chegg’s massive layoffs signal a profound disruption in the education technology sector as AI tools like ChatGPT increasingly replace traditional homework help platforms. The company’s declining subscriber numbers and revenue highlight how rapidly generative AI is reshaping student behavior, with Chegg specifically calling out Google, OpenAI, and Anthropic for keeping users within their ecosystems and offering academics free access to AI subscriptions that compete directly with Chegg’s core business model.

The big picture: Chegg is cutting 22% of its workforce—248 employees—as students increasingly abandon traditional education platforms in favor of AI tools like ChatGPT.

• The company will also close its U.S. and Canada offices by year-end as part of a comprehensive restructuring plan aimed at reducing costs.
• These changes come as Chegg grapples with a prolonged decline in web traffic that shows no signs of reversing in the near term.

By the numbers: Subscribers plummeted 31% to 3.2 million in the first quarter, with revenue dropping 30% to $121 million.

• The company’s subscription services, which form the backbone of its business model, saw revenue fall by nearly a third to $108 million.
• Chegg expects to incur restructuring charges between $34 million and $38 million, primarily in the second and third quarters of 2025.

Cost-cutting strategy: The restructuring aims to reduce marketing, product development, and administrative expenses to offset declining revenue.

• The company projects cost savings between $45-55 million in 2025 and $100-110 million in 2026.
• These measures represent a dramatic shift for a company that had 1,271 employees as of December 31, 2024.

Behind the numbers: Chegg directly blames AI companies for its troubles, specifically naming Google, OpenAI, and Anthropic as competitors keeping users within their ecosystems.

• Google’s AI Overviews and gradual shift of searches to its Gemini platform are specifically cited as factors confining web traffic within Google’s ecosystem.
• The company claims AI firms are courting academics with free subscriptions, further eroding Chegg’s value proposition to students.

Legal pushback: In February, Chegg sued Google, claiming its AI-generated search overviews were undermining publishers’ ability to compete.

• The lawsuit alleged that Google’s AI features caused a significant drop in visitors and subscribers to Chegg’s platform.
• This legal action underscores how traditional content providers are struggling to adapt to an AI-dominated information landscape.