Chegg Turns to AI for Efficiency: Enough to Offset Subscriber Decline?

Chegg, Inc. CHGG is leaning heavily on artificial intelligence (“AI”) to reshape its business model as it navigates a turbulent period marked by sharp subscriber losses. The education-technology firm reported second-quarter 2025 revenues of $105.1 million, down 36% year over year, with subscription services revenue falling 39% to $89.7 million. The subscriber base plunged 40% to 2.6 million, largely due to lower traffic stemming from Google’s AI Overviews.Yet management is betting that efficiency gains and product reinvention will stabilize the business. Chegg has embedded AI across Chegg Study, launching tools like Solution Scout and AI-driven flashcard generators. The company says these innovations are improving engagement, with reported gains in retention and satisfaction. AI is also cutting operating costs—non-GAAP expenses fell 33% in the second quarter—helping Chegg deliver $23.1 million in adjusted EBITDA despite revenue headwinds.Growth segments Busuu and Skills are bright spots. Busuu’s language-learning platform posted 15% revenue growth, led by a 39% surge in its B2B business. Skills, focused on workplace readiness, saw 16% enrollment growth quarter-over-quarter, positioning both businesses as long-term growth drivers.Looking ahead, management guided third-quarter revenues down to $75–77 million, reflecting ongoing traffic pressures. While cost discipline and AI-enabled efficiencies are cushioning profitability, the key question for investors is whether AI can do more than reduce costs—can it drive sustainable growth in a competitive, AI-disrupted edtech landscape? With Chegg in the midst of a strategic review, the next few quarters will be critical in proving whether efficiency gains can offset declining scale.Competitive Pressures From EdTech RivalsChegg’s challenges in balancing AI adoption with subscriber declines come against the backdrop of intensifying competition from peers like Coursera COUR and Duolingo DUOL. Coursera, a leading online learning platform, has leaned into AI-driven personalization and enterprise partnerships to expand beyond its core university alliances. Coursera continues to build traction in professional upskilling—a direct overlap with Chegg’s Skills business—raising the stakes as both companies court corporate and institutional clients. Meanwhile, Duolingo remains a formidable player in language learning, boasting a massive global user base and strong brand equity. Duolingo has aggressively integrated AI to refine language instruction, while also branching into math and literacy, a move that broadens its moat against niche players. For Chegg, Busuu’s double-digit B2B growth is encouraging, but Duolingo’s scale and Coursera’s enterprise depth highlight just how competitive and capital-intensive the AI-driven edtech race has become.CHGG Stock’s Price Performance & Valuation TrendShares of this data engineering company have soared 41.3% in the past three months, performing far better than the Zacks Internet - Software industry, as you can see below.CHGG Stock’s Price PerformanceImage Source: Zacks Investment ResearchCHGG stock is currently trading at a discount compared with its industry peers, with a forward 12-month price-to-sales (P/S) ratio of 0.42, as evidenced by the chart below.CHGG’s P/E Ratio (Forward 12-Month) vs. Industry Image Source: Zacks Investment ResearchEarnings Estimate Trend of CHGG StockThe Zacks Consensus Estimate for 2025 loss per share has narrowed to 11 cents from 40 cents in the past 30 days.The consensus estimate for 2025 sales implies a 33.8% decline. The same for the company’s 2025 EPS is expected to decline from the year-ago profit level of 75 cents per share.Image Source: Zacks Investment ResearchCHGG’s Zacks RankChegg stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Chegg, Inc. (CHGG): Free Stock Analysis Report Coursera, Inc. (COUR): Free Stock Analysis Report Duolingo, Inc. (DUOL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks