What Happened?
Shares of online study and academic help platform Chegg (NYSE: CHGG) fell 15.4% in the afternoon session after the stock continued to pull back as the company announced a major restructuring plan that included laying off about 45% of its workforce and reappointing its former CEO to navigate challenges from Artificial Intelligence.
The educational technology firm announced the plan as it struggled with the negative impact of AI, which has hurt its core homework help business. According to reports, students increasingly turned to free AI tools, making Chegg's paid model less attractive. This shift resulted in a significant drop in revenue, subscribers, and web traffic. The restructuring involved cutting about 388 jobs and brought back Executive Chairman Dan Rosensweig to the roles of CEO and President. The move suggested an urgent shift in the company's operational approach to address its financial distress.
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What Is The Market Telling Us
Chegg’s shares are extremely volatile and have had 100 moves greater than 5% over the last year. But moves this big are rare even for Chegg and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 1 day ago when the stock dropped 13.8% on the news that the company announced a massive restructuring plan that included laying off 45% of its workforce and bringing back its former CEO to deal with the negative impact of Artificial Intelligence on its business. The educational technology firm cut about 388 jobs, citing a significant drop in revenue. The company stated that the "new realities of AI" and less traffic from Google had hurt its core homework help business, as students turned to free AI tools. Along with the job cuts, Chegg announced that its former CEO, Dan Rosensweig, was returning to lead the company. As part of the overhaul, the firm planned to shift its focus toward professional courses and the skills development market to find new growth.
Chegg is down 36.3% since the beginning of the year, and at $1.07 per share, it is trading 59.6% below its 52-week high of $2.65 from December 2024. Investors who bought $1,000 worth of Chegg’s shares 5 years ago would now be looking at an investment worth $14.30.
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