Chegg blames artificial intelligence and declining Google traffic for its sharp decline
Chegg, the well-known online education company, announced on Monday that it will lay off about 45% of its global workforce, or roughly 388 employees, as it faces what executives described as the “new realities” of artificial intelligence (AI).
The massive job cuts mark one of the most significant restructurings in the company’s 20-year history. Once a dominant name in digital learning and textbook rentals, Chegg has seen its fortunes collapse as AI-driven platforms such as OpenAI’s ChatGPT and other generative AI tools increasingly replace traditional online tutoring and homework help.
According to CNBC, Chegg said the rise of AI and declining web traffic from Google have caused a severe drop in revenue and user engagement.
“AI and reduced traffic from Google to content publishers have hurt our business significantly,” Chegg said in its statement.
The company explained that it would restructure its academic learning operations and continue investing in AI-based services, even as it scales down other parts of its business.
AI’s impact on Chegg’s core model
Chegg’s downfall has been accelerating over the past two years as students increasingly turn to free or low-cost AI platforms that can generate instant answers, study summaries, and even write essays.
While Chegg initially tried to adapt by introducing its own AI-powered learning tools, such as automatic flashcard generation and personalized study aids, these efforts have not offset the sharp decline in user subscriptions.
In a notable legal move earlier this year, Chegg sued Google, accusing the tech giant of reducing traffic to its platform by displaying AI-generated answer summaries directly in search results. The company argued that this change dramatically cut into its site visits and ad revenue.
Despite these challenges, Chegg said it plans to remain a standalone public company. The firm ended a months-long strategic review that considered potential mergers or acquisitions, concluding that independence would best serve its shareholders.
“After reviewing multiple proposals, the board unanimously determined that remaining an independent company offers the best opportunity to maximize long-term shareholder value,” the company said.
Leadership shake-up and return of Dan Rosensweig
In another major development, Dan Rosensweig, Chegg’s long-serving leader, will return as CEO, replacing Nathan Schultz, who stepped down after just 18 months in the role. Schultz will remain an executive advisor to Rosensweig and Chegg’s board.
Rosensweig, a former Yahoo executive who led Chegg from 2010 until 2024, is widely credited with growing the company during its most successful years, including its 2013 IPO and the pandemic-driven online education boom.
Under his leadership, Chegg’s stock once soared to $113.51 per share in February 2021, during the height of remote learning. However, since then, the company’s value has plummeted by 99%, wiping out nearly $14.5 billion in market capitalization.
Today, Chegg’s market cap stands at just $156 million, and the company narrowly avoided delisting from the New York Stock Exchange earlier this year after its stock dropped below $1 per share.
Chegg’s struggle to redefine its future
While Chegg continues to offer textbook rentals, tutoring services, and study resources, the company now faces a dramatically different learning landscape. AI-driven platforms have changed how students access knowledge, and Chegg must adapt quickly to survive.
The firm’s decision to cut nearly half its workforce comes only months after it laid off 22% of employees in May, citing similar reasons. Together, the cuts reflect how severely generative AI has reshaped the educational technology market.
Industry analysts say Chegg’s story could serve as a cautionary tale for other digital education companies that rely heavily on content models vulnerable to AI disruption.
“AI isn’t just transforming education—it’s rewriting the business models of entire industries,” said a market analyst. “Chegg’s restructuring is a sign of the times.”
Looking ahead: Can Chegg survive the AI era?
Despite its current turmoil, Chegg insists that its future lies in leveraging AI rather than fighting it. The company plans to integrate AI into its learning tools to create smarter, adaptive educational solutions.
However, analysts remain skeptical about whether Chegg can reclaim its market position against free, powerful tools like ChatGPT or Google Gemini that have already become integral to modern student workflows.
For now, the company’s focus is on stabilizing its finances and retaining its core customer base, even as it trims nearly half of its workforce.
As Chegg’s AI transformation continues, investors, educators, and students alike will be watching closely to see whether the company can reinvent itself — or become one of the first major casualties of the generative AI revolution.
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