Chegg Slashes 22% of Workforce and Closes Offices Amid AI Disruption in EdTech
In a dramatic response to the accelerating disruption caused by artificial intelligence in the education sector, Chegg Inc., once a leading provider of academic support, has announced it will lay off 22% of its workforce—amounting to 248 jobs—as it struggles to adapt to a rapidly evolving digital learning landscape. This sweeping move is part of a larger restructuring plan aimed at navigating the mounting pressures from AI-driven tools that are rapidly replacing traditional education support platforms.
The layoffs are only one facet of the company’s broader cost-cutting strategy. Chegg will also shutter all of its offices in the United States and Canada by the end of 2025, signaling a shift toward a remote-first operational model. Alongside these structural changes, the company plans to significantly reduce expenditures across departments, including marketing, product development, and administrative operations.
The Tipping Point: AI Disrupts the Homework Help Model
Chegg’s announcement comes at a time when artificial intelligence tools such as ChatGPT, Google’s Gemini AI, and other generative platforms are redefining how students access academic assistance. With the ability to deliver real-time answers, personalized explanations, and interactive learning modules—often at little to no cost—these tools are rapidly supplanting legacy services like Chegg.
“Larger economic forces will continue to place pressure on our company, and we expect business conditions to worsen before they improve,” said Chegg CEO Nathan Schultz in a candid statement accompanying the company’s restructuring announcement. His remarks underline the existential challenge Chegg now faces: redefining its relevance in a world where students have instant access to AI-powered educational tools.
Subscriber Base and Revenue Take a Hit
Chegg’s latest quarterly results illustrate the magnitude of the problem. The company experienced a staggering 31% decline in subscribers, dropping to 3.2 million in Q1 2025. Even more alarming was a 30% plunge in revenue year-over-year, with earnings shrinking to $121 million in the first quarter. Once considered a reliable go-to for textbook rentals, homework help, and tutoring, Chegg now finds itself outpaced by new technology that has reshaped student habits and expectations.
The rapid erosion of Chegg’s user base is directly tied to the rise of AI-enhanced search results and educational bots. Google’s AI Summaries now answer questions directly within the search interface, eliminating the need to click through to external sites. Meanwhile, AI platforms like OpenAI’s ChatGPT and Anthropic’s Claude offer free or low-cost tutoring experiences that adapt dynamically to student queries.
Legal Action and Industry Tensions
Chegg has not taken the competition lightly. The company recently filed a lawsuit against Google, claiming the tech giant’s AI summaries have drastically reduced demand for its services by cannibalizing traffic. The lawsuit marks a critical turning point in the battle between content creators and AI aggregators, raising broader questions about the ownership and monetization of online educational resources.
“What we’re witnessing is a fundamental change in how students are interacting with learning content,” said Maya Chen, a senior analyst in education technology. “If AI can deliver customized learning on demand, Chegg and others must offer something AI alone can’t—perhaps live human interaction, career guidance, or credentialed learning paths.”
A Costly Transition with Long-Term Savings
The company estimates that the restructuring plan will cost between $34 million and $38 million, with most charges recorded during the second and third quarters of 2025. However, Chegg anticipates substantial cost savings in the years ahead—projecting $45–$55 million in 2026, and up to $110 million in the longer term.
Yet these figures do little to offset the steep decline in investor confidence. Since going public in 2013, Chegg’s market capitalization has plummeted by roughly 90%, with losses accelerating in recent months amid broader tech sector volatility and AI-driven disruption.
From Pandemic Boom to Post-AI Bust
Chegg’s rise and fall underscore how dramatically fortunes can change in the digital education sector. During the COVID-19 pandemic, Chegg experienced explosive growth as students turned to online learning platforms in record numbers. The platform’s subscriber base soared, and its valuation followed suit.
But that pandemic-era boost proved temporary. As in-person learning resumed and AI platforms began offering richer, faster, and cheaper services, Chegg’s core value proposition eroded. Now, the company finds itself in a precarious position—caught between outdated models and a future it has yet to fully embrace.
A Broader Shift in the EdTech Landscape
Chegg’s current turmoil is not an isolated case. The entire education technology sector is undergoing seismic shifts, driven by the convergence of AI, automation, and digital pedagogy. Traditional providers of learning content and tutoring services are under pressure to evolve or be left behind.
The key challenge? AI platforms are not just tools—they are ecosystems. They collect user data, learn from interaction patterns, and deliver tailored learning experiences. This level of personalization is difficult to replicate with static content or pre-recorded tutoring sessions. Edtech firms must now think beyond content delivery and explore adaptive learning, credentialing, and direct integration with school systems and universities.
Closing Offices, Opening Possibilities?
While the closure of all North American offices may seem drastic, it’s emblematic of a broader pivot in how Chegg intends to operate. A remote-first model reduces overhead and aligns with a digital-native workforce that is already accustomed to asynchronous collaboration.
This strategic decision may also hint at a renewed focus on software and AI development. Chegg’s future success likely depends on how effectively it can integrate AI into its offerings—whether through partnerships, in-house development, or acquisitions.
“We are not giving up,” said CEO Schultz. “But we are being realistic about the environment and doing what’s necessary to survive and ultimately thrive again.”
A Warning for Other Incumbents
Chegg’s restructuring serves as a cautionary tale for other traditional education firms that have yet to fully reckon with the AI revolution. As generative AI tools become more sophisticated and accessible, any service that relies on static content delivery, even if subscription-based, risks obsolescence.
Investors are now scrutinizing whether Chegg can evolve fast enough. Analysts say the company must not only adapt technologically but also rethink its entire business model. That could mean pivoting toward partnerships with schools and universities, developing AI-powered adaptive testing solutions, or expanding into areas like career training and credentialed certifications.
The Road Ahead: A Turnaround or a Takedown?
Despite its struggles, Chegg still holds valuable assets. It has a recognizable brand, a sizable (if shrinking) user base, and years of experience in the education sector. But turning these strengths into a viable AI-era business model will require more than budget cuts and layoffs. It demands a deep understanding of what students now expect from digital education—and how AI can be integrated to meet those expectations in ways that are ethical, effective, and unique.
The coming months will be critical. Chegg will need to convince both users and investors that it has a place in the AI-powered future of learning. That means clarity on strategy, transparency in execution, and bold innovation that goes beyond just playing defense.
For now, the edtech world is watching closely. Can Chegg pivot quickly enough to remain relevant, or will it become another casualty in the fast-moving AI transformation of education?