Bay Area educational tech company slashes 248 jobs as students turn to AI tools for learning
Chegg, the beleaguered Silicon Valley educational technology company, announced a third major round of layoffs in less than a year, cutting 248 jobs — about 22% of its workforce.
The move is part of a broader restructuring plan aimed at curbing costs amid falling revenue and a shrinking customer base, the company said in a filing with the Securities and Exchange Commission.
'We are executing an additional restructuring plan to continue to align our cost structure with our revenue as we navigate the continued industry challenges and the negative impact on our business,' CEO David Longo said in a statement.
As part of the overhaul, Chegg plans to close its U.S. and Canadian offices by the end of the year and scale back investments in marketing and product development.
The Santa Clara company expects to save between $45 million and $55 million in 2025, with further savings projected for 2026.
Chegg, initially launched in 2007 as the 'Netflix for textbooks,' earned popularity for allowing students to rent textbooks at discount prices. Despite $140 million in early investments, the company struggled to keep up with the rising costs of book purchases, shipping and warehouse rentals.
The company pivoted to a subscription-based model offering homework help, test prep and other educational resources that helped it regain its financial footing during the COVID-19 pandemic.
However, Chegg has struggled to stay relevant as students increasingly turn to AI-powered tools like ChatGPT for assistance with academics.
Simultaneously, Google's AI-integrated search summaries, known as AI Overviews, have disrupted search traffic, further weakening Chegg's digital foothold.
In response, Chegg filed a lawsuit against Google earlier this year, claiming the Mountain View tech giant exploited its search monopoly to prioritize AI-generated content trained with Chegg's proprietary database of questions and answers.
Financially, the company is under mounting pressure. Its first-quarter earnings revealed a 31% drop in subscribers, which now total 3.2 million, alongside a 30% year-over-year revenue decline, bringing total revenue to $121 million.
'While ongoing industry challenges impacting Chegg Study continue to affect our financial performance, the opportunity to support and serve students remains,' Longo added.
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KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF—an independent source of health policy research, polling, and journalism. Learn more about KFF. Subscribe to KFF Health News' free Morning Briefing. This article first appeared on KFF Health News and is republished here under a Creative Commons license.
