Is Chegg's Margin Strength Enough to Offset Top-Line Woes?

Chegg, Inc. CHGG is navigating a shifting higher education landscape characterized by enrollment volatility, rising competition from AI-driven learning platforms and evolving student preferences. Due to these aspects, the company’s top line has been under pressure for some time now. In the first six months of 2025, net revenues have declined 32.9% year over year to $226.5 million, with Subscription Services revenues tumbling 34% to $197.3 million.However, amid these uncertainties, Chegg is working toward improving its operating efficiency through expense reductions in marketing and product development. It is currently taking aggressive steps to reduce its total operating expenses across multiple fronts. Through the restructuring initiative, during the first six months of 2025, its total operating expenses declined year over year by 72% to $202.5 million. Moreover, thanks to this disciplined cost management and restructuring actions, CHGG expects to realize adjusted expense savings between $165 million and $175 million for 2025, with an additional $100-$110 million in adjusted savings expected in 2026.The company’s focus on optimizing its subscription model and leveraging automation within content delivery continues to bolster margins. But concerns linger around user engagement and subscriber retention, especially as generative AI tools create low-cost or free alternatives to traditional study support.Summing up, the effectiveness of Chegg in converting its operational resilience into renewed demand, in a rapidly evolving digital learning market, determines the prospects in the long term.Chegg’s Market Competition PositionChegg operates in a highly competitive landscape that spans school programs, online education and digital learning services. Key market players like Duolingo, Inc. DUOL and Stride, Inc. LRN represent distinct yet overlapping challenges within the broader edtech ecosystem.Duolingo dominates the language-learning niche with its gamified app and AI-driven engagement. With a strong mobile presence and daily user engagement, Duolingo has built a brand synonymous with accessible, bite-sized learning. On the other hand, Stride remains mainly focused on the K-12 space, delivering online curricula, personalized learning paths and virtual/blended schooling solutions. However, explicit references to AI-enabled services in its product offerings have become less prominent in recent reporting.Chegg’s legacy content base, existing learners and its Busuu platform give it a foothold in language learning and academic support. Overall, Chegg’s edge over Duolingo and Stride is modest, as it can survive and even thrive if its AI enhancements are well-executed comparatively.CHGG Stock’s Price Performance & Valuation TrendShares of this California-based education technology company have surged 166.5% in the past six months, significantly outperforming the Zacks Internet - Software industry, the Zacks Computer and Technology sector and the S&P 500 Index.Image Source: Zacks Investment ResearchCHGG stock is currently trading at a discount compared with the industry peers, with a forward 12-month price-to-sales (P/S) ratio of 0.38, as evidenced by the chart below. The discounted valuation of the stock, compared with its peers, advocates for an attractive entry point for investors.Image Source: Zacks Investment ResearchEarnings Estimate Trend of CHGGThe Zacks Consensus Estimate for 2025 loss is pegged at 11 cents per share, while the same for 2026 stands at breakeven earnings. Both metrics have remained constant in the past 60 days.Image Source: Zacks Investment ResearchWhile the estimated figure for 2025 indicates a downtrend of 114.7% year over year, estimates for 2026 indicate 100% growth.Chegg stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) 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 Stride, Inc. (LRN): Free Stock Analysis Report Chegg, Inc. (CHGG): 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