Chegg is slashing about 45% of its workforce—388 roles—as the company says the “new realities of AI” and a sharp drop in Google-driven traffic have significantly reduced its student traffic and revenue.
TL;DR
- Chegg is cutting 45% of its workforce (388 roles) due to AI's impact and reduced Google traffic.
- CEO Dan Rosensweig is returning to lead Chegg through this restructuring and AI pivot.
- The company is adapting to students using generative AI and a decline in search referrals.
- Chegg aims to reduce costs and overhaul product experiences with generative AI.
Chegg's recent announcement
- will eliminate 388 positions globally, an edtech firm, has laid off approximately 45% of its workforce as part of a significant restructuring initiative designed to reduce expenses and adapt its operations for an AI-centric market.
- Chegg cited the swift uptake of generative AI by students and a decline in Google referrals to content publishers as reasons for the workforce reductions, stating these factors have significantly diminished the demand for its offerings.
- The company anticipates restructuring costs in the range of $15 million to $19 million by early 2026, coupled with a strategy to decrease 2026 non-GAAP expenditures by an estimated $100 million to $110 million, as reported by Reuters coverage. Summarizing the company’s statement.
New management appointments
- Dan Rosensweig, the executive chairman, has resumed his role as CEO, taking over from Nathan Schultz. Schultz will now act as an executive adviser following the restructuring.
- Rosensweig previously led Chegg for more than a decade, and his return accompanies the pivot to a leaner operating model under pressure from AI-native competitors and changing student behaviors.
Chegg's AI Disruption
- Chegg's leadership has consistently recognized AI's transformative impact. In July 2023, Rosensweig informed a Fortune audience that he had become a “poster child” for AI's disruptive potential, following a 48% stock drop after Chegg issued a warning that ChatGPT was impacting new customer growth.
- In that Fortune discussion at the Brainstorm Tech conference, he outlined “CheggMate,” a generative AI learning assistant trained on the company’s large corpus of verified Q&A, pitching a personalized, trustworthy tutor that adapts to a student’s needs and context.
Past shifts in AI and education
- Chegg's alert regarding ChatGPT's influence prompted a dramatic stock selloff, leading the company to focus its counter-strategy on developing a dependable AI assistant tailored for students, which would be incorporated into its primary product offerings.
- The event highlighted a wider conflict in AI and education: students depending on AI for answers versus fostering deeper learning. It also acknowledged Chegg's position that integrity and effective teaching methods need to adapt as well. Technology.
The model's malfunction—and its future trajectory
- Chegg's established advantages, including search-based finding, a paid repository for homework assistance, and expert question-and-answer services, were weakened as students began using free, broad-use chatbots and as search engines started displaying AI-generated responses. Reducing referral traffic to content sites.
- The company explains the restructuring as essential for providing learning services at a significantly reduced cost, concurrently overhauling product experiences with generative AI, despite uncertainties regarding the timing and extent of product-market recovery. Still unclear.
Market & strategy insight
- Chegg has finished a strategic review and decided to keep operating on its own, after considering options like selling the company or becoming privately held. This announcement came at the same time as news of staff reductions and changes in leadership. Alter.
- Over the last two years, stock prices have faced significant decline, stemming from investors' doubts regarding the pace and success of Chegg's transition to AI, especially with the rise of both broad and niche AI competitors. Tutors.
The most significant takeaway from the edtech sector
- Generative AI has redefined what students expect regarding speed, tailored experiences, and affordability, diminishing the appeal of fixed answer databases and one-off tutoring in favor of interactive, context-aware solutions. Helpers.
- Fortune’s earlier reporting highlighted this shift: Chegg's future success depends on integrating AI as an internal asset, not an external challenge, enabling it to provide reliable solutions, adjust to student requirements, and maintain Maintaining academic honesty on a large scale.
For this story, Fortune an initial draft was created with the assistance of generative AI. An editor then confirmed the information's accuracy prior to publication.