Chegg slashes 45% of workforce, blames 'new realities of AI'

In a significant move, Chegg announced on Monday that it will reduce its workforce by approximately 45%, affecting 388 employees. This decision comes as the company grapples with the 'new realities' brought about by advancements in artificial intelligence and a decline in web traffic, which has severely impacted its revenue. The online education platform, which has been operational for two decades, is facing stiff competition from emerging generative AI tools like OpenAI's ChatGPT. These tools have become increasingly favored by students, leading to a decrease in Chegg's user engagement. Earlier this year, Chegg initiated legal action against Google, claiming that AI-generated summaries in search results have adversely affected its traffic and sales. In their latest announcement, the company reiterated this concern, noting that both AI advancements and reduced Google traffic are hindering its business model. These layoffs follow a previous reduction in May, where Chegg cut 22% of its workforce, citing the growing prevalence of AI technologies. Chegg, which went public in 2013, saw its stock peak at $113.51 in February 2021, a surge fueled by the COVID-19 pandemic and the shift to online learning. However, the company's stock has since plummeted by 99%, with its market capitalization dropping from a high of around $14.7 billion to approximately $156 million. Chegg offers various educational services, including textbook rentals, homework assistance, and a suite of AI-powered tools, such as a feature that automatically generates flashcards. As part of the restructuring announcement, Dan Rosensweig will reassume the role of CEO effective immediately, taking over from Nathan Schultz, who will remain with the company as an executive advisor. Rosensweig, who previously served as CEO from 2010 to 2024, is returning to guide Chegg through this challenging period. The board has also decided to keep the company independent, concluding a strategic review initiated earlier this year. They believe that remaining a standalone public entity will provide the best opportunity for long-term shareholder value. In April, Chegg faced potential delisting from the New York Stock Exchange when its stock dipped below $1, but by May, it managed to recover above that threshold.