US edtech company Chegg has announced that it will lay off about 22% of its workforce, a report claims. The company has reportedly blamed increased student reliance on AI-powered tools like ChatGPT and Google‘s AI Overviews for the same. The online education company, which offers textbook rentals, homework help, and tutoring services, stated that the layoffs will affect nearly 248 employees. This decision is aimed at cutting costs and streamlining operations in response to a changing educational landscape where students are increasingly opting for AI-driven platforms over traditional edtech services. Chegg has been facing a decline in its web traffic for several months and had previously warned that this trend was likely to continue before any potential improvement.
How Google, OpenAI may be responsible for Chegg’s job cuts
According to a report by the news agency Reuters, Chegg said that Google’s expansion of its AI Overviews feature is keeping web traffic within its search ecosystem, while the gradual shift of searches towards Google’s Gemini AI platform is also impacting their user engagement.
Additionally, Chegg has noted that other AI companies, including OpenAI and Anthropic, are actively engaging academics by offering free access to their subscription services, further contributing to the challenges faced by traditional edtech platforms. The company’s decision to reduce its workforce reflects the significant disruption caused by the rapid advancements and adoption of AI in the education sector.
In February, Chegg also filed a lawsuit against Google, arguing that Google’s search engine had reduced demand for original content and weakened publishers’ ability to compete with its AI-generated summaries, leading to a decline in both visitor traffic and subscriptions. As of December 31, 2024, Chegg had 1,271 employees, the Reuters report added.
How much Chegg may be saving from this restructuringAs per the Reuters report, Chegg will also close its U.S. and Canada offices by the end of the current year as part of its recently announced restructuring. The company aims to reduce its marketing and product development efforts, as well as general and administrative expenses.Chegg anticipates incurring the majority of the resulting charges, estimated between $34 million and $38 million, during the second and third quarters. The company expects to achieve cost savings ranging from $45 to $55 million in 2025 and $100 to $110 million in 2026 due to this restructuring.
In its first-quarter results, which were also reported recently, Chegg indicated a 31% decline in subscribers to 3.2 million. Revenue decreased by 30% to $121 million, with subscription services revenue falling by nearly a third to $108 million.