Chegg Q1 2025 revenue down 30% as company restructures and explores strategic alternatives

Subscriber base drops 31% year-over-year as Chegg expands AI partnerships and prepares for additional layoffs.

Chegg has reported first-quarter 2025 revenue of $121.4 million, down 30 percent year-over-year, alongside a net loss of $17.5 million. Subscription Services revenue fell to $107.6 million, a 30 percent decrease from Q1 2024.

The company ended the quarter with 3.2 million subscribers, representing a 31 percent drop compared to the same period last year.

Adjusted EBITDA reached $19.3 million, ahead of guidance, while free cash flow totaled $15.8 million. The company also repurchased $65 million in convertible notes at a discount and closed the quarter with $126 million in cash and investments.

Content licensing and institutional deals diversify revenue

Chegg reported early gains from new licensing agreements, including $4 million in Q1 revenue from two AI companies using its question-and-answer content. The company expects another $7 million from content licensing in Q2 and continues to pursue additional partnerships.

Its business-to-institution program has also expanded from five to 15 pilot programs in Q1, with a target of 40 by year-end. CEO Nathan Schultz says these initiatives represent a shift away from direct-to-student reliance: “In Q1, we exceeded our revenue and adjusted EBITDA expectations, delivered $16 million of free cash flow and continued to diversify our revenue streams. We are encouraged by the conversations in our strategic alternatives process and the value these organizations see in our business.”

Restructuring impacts 22% of workforce

Chegg announced a new round of layoffs affecting 248 employees, approximately 22 percent of its workforce. The restructuring will focus cuts on Chegg Study and corporate services, while sparing Busuu and Chegg Skills. The company expects to achieve $45–$55 million in non-GAAP savings this year, and $100–$110 million in 2026.

This follows two rounds of restructuring in 2024, which are projected to deliver $120 million in savings for 2025. Cumulative savings from all three initiatives are forecast to reach up to $175 million this year.

AI disruption continues to pressure core business

While the company continues to invest in AI capabilities and diversify revenue, executives say the impact of generative AI and search engine changes is worsening. Chegg specifically cited Google's AI Overviews and student-focused offerings from OpenAI and Anthropic as key sources of pressure.

This comes after Chegg filed a lawsuit against Google, claiming the search giant’s AI features are diverting traffic and undermining its core business model.

Mixed performance across product lines

Busuu, Chegg’s language learning unit, grew 7 percent year-over-year in Q1 and is projected to generate $48 million in revenue in 2025, with positive adjusted EBITDA expected by Q1 2026. Its B2B revenue rose 29 percent year-over-year.

Chegg Skills is also positioned for growth, with new pilot programs in India and expansion plans for its partnerships with Guild and other providers. The business is targeting profitability and revenue growth in 2026.

Q2 outlook remains cautious

For the second quarter of 2025, Chegg forecasts total revenue between $100 million and $102 million, with Subscription Services contributing $85 million to $87 million. Adjusted EBITDA is expected to range from $16 million to $17 million.

Nathan Schultz, Chief Executive Officer and President of Chegg, Inc., says: “Despite these promising developments, we believe the trends impacting our business will worsen before they get better. We are taking steps to further align costs with our outlook, including an additional restructuring of our business.”