Chegg Slashes Workforce by 22% as AI Competition Mounts
▼ Summary
– **Chegg announces 22% global workforce reduction** as part of a restructuring plan driven by competition from AI tools like ChatGPT and Gemini.
– **AI disruption has severely impacted Chegg’s business**, causing a 50% stock drop in 2023 and declining subscriptions as students opt for free AI alternatives.
– **Chegg sues Google**, alleging Gemini’s AI Overviews feature diverts traffic, leading to a 49% drop in non-subscriber visits in early 2025.
– **Cost-saving measures aim for $45M–$55M in 2025**, rising to $100M–$110M by 2026, including office closures in the U.S. and Canada.
– **Chegg shifts to a remote work model** and pivots toward AI-integrated services, expanding into financial literacy and career support to stay competitive.
Educational technology company Chegg announced a significant restructuring plan this week, including a reduction of its global workforce by approximately 22%. The move comes as the company continues to face intense pressure from the proliferation of artificial intelligence tools, most notably OpenAI’s ChatGPT and Google’s Gemini, which are fundamentally altering how students approach learning and homework assistance.
The company anticipates these measures, which include a shift towards a more AI-centric model and a significant reduction in its physical office footprint, will result in substantial cost savings, estimated between $45 million and $55 million in 2025, potentially rising to $100 million to $110 million by 2026.
The ChatGPT Disruption
The rise of sophisticated AI chatbots has posed a direct challenge to Chegg’s traditional subscription-based homework help services. The impact was starkly illustrated in May 2023, when Chegg’s stock value plunged by nearly 50% in a single day. This occurred after the company acknowledged that ChatGPT was negatively affecting its ability to attract new customers.
Despite launching its own AI-powered solution, CheggMate, the company has struggled to counteract the allure of readily available, often free, AI alternatives. Chegg CEO Nathan Schultz has pointed to “the rapid proliferation of generic AI tools” as a core challenge. Students are increasingly turning away from platforms like Chegg, opting instead for AI that provides instantaneous answers. This shift has seen Chegg’s market valuation erode significantly since its 2013 IPO. In response, Chegg has been attempting to pivot its strategy towards a broader “360 degrees” support model, incorporating areas like financial literacy and early career guidance to differentiate its offerings. However, declining web traffic, subscription numbers, and overall revenue paint a picture of a company battling headwinds in a rapidly evolving edtech environment.
Google’s Gemini Adds to Traffic Woes
Chegg’s challenges are not limited to ChatGPT. The company is also contending with the growing influence of Google’s Gemini AI platform. This has culminated in Chegg filing a lawsuit against Google, alleging that Google’s AI Overviews feature unlawfully diverts traffic that would historically have landed on Chegg’s site.
According to Chegg’s complaint, this practice has led to a dramatic fall in visitor numbers. The company reported that non-subscriber traffic to its platform plummeted by 49% in January 2025, a steep acceleration from an 8% decline noted in the second quarter of 2024. The lawsuit accuses Google of violating the Sherman Antitrust Act through reciprocal dealing, monopoly maintenance, and unjust enrichment, arguing that Google’s AI-generated summaries directly answer user queries, thereby reducing the need for users to click through to educational resource websites like Chegg.
Google has publicly dismissed Chegg’s claims as “meritless,” asserting that its AI features are designed to help users discover a wider array of content from across the web. Nevertheless, the legal battle underscores the growing friction between content creators and search engine giants as AI-generated summaries become more prevalent. Google’s Gemini platform itself has seen substantial growth, reportedly reaching approximately 42 million active users by October 2024, highlighting the scale of the challenge for companies reliant on search engine referrals.
Office Closures and a Remote Future
As part of its comprehensive restructuring, Chegg is set to completely close its physical offices in the United States and Canada by the end of 2025. This move signals a decisive shift towards a remote work model and is a key component of its strategy to reduce operational expenditures in the face of declining revenue. These closures are expected to be a primary contributor to the company’s projected cost savings over the next two years.
The decision to slash its workforce and shutter North American offices underscores the profound impact AI is having on established players in the educational technology sector. Chegg’s path forward involves not only embracing AI within its own products but also navigating a competitive landscape increasingly dominated by powerful, general-purpose AI tools.
