Online study and academic help platform Chegg (NYSE: CHGG) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, but sales fell by 35.6% year on year to $105.1 million. On the other hand, next quarter’s revenue guidance of $76 million was less impressive, coming in 12.8% below analysts’ estimates. Its non-GAAP profit of $0.10 per share was significantly above analysts’ consensus estimates.
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Chegg (CHGG) Q2 CY2025 Highlights:
- Revenue: $105.1 million vs analyst estimates of $101.2 million (35.6% year-on-year decline, 3.8% beat)
- Adjusted EPS: $0.10 vs analyst estimates of $0.05 (significant beat)
- Adjusted EBITDA: $23.11 million vs analyst estimates of $16.67 million (22% margin, 38.6% beat)
- Revenue Guidance for Q3 CY2025 is $76 million at the midpoint, below analyst estimates of $87.16 million
- EBITDA guidance for Q3 CY2025 is $7.5 million at the midpoint, below analyst estimates of $13.15 million
- Operating Margin: -34.7%, up from -297% in the same quarter last year
- Free Cash Flow was -$12.07 million, down from $15.86 million in the previous quarter
- Services Subscribers: 2.6 million, down 1.77 million year on year
- Market Capitalization: $148.1 million
Company Overview
Started as a physical textbook rental service, Chegg (NYSE: CHGG) is now a digital platform addressing student pain points by providing study and academic assistance.
Revenue Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Chegg struggled to consistently generate demand over the last three years as its sales dropped at a 13.3% annual rate. This wasn’t a great result and suggests it’s a lower quality business.
This quarter, Chegg’s revenue fell by 35.6% year on year to $105.1 million but beat Wall Street’s estimates by 3.8%. Company management is currently guiding for a 44.4% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to decline by 27.4% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and implies its products and services will face some demand challenges.
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Services Subscribers
User Growth
As a subscription-based app, Chegg generates revenue growth by expanding both its subscriber base and the amount each subscriber spends over time.
Chegg struggled with new customer acquisition over the last two years as its services subscribers have declined by 17.4% annually to 2.6 million in the latest quarter. This performance isn't ideal because internet usage is secular, meaning there are typically unaddressed market opportunities. If Chegg wants to accelerate growth, it likely needs to enhance the appeal of its current offerings or innovate with new products. 
In Q2, Chegg’s services subscribers once again decreased by 1.77 million, a 40.5% drop since last year. The quarterly print was lower than its two-year result, suggesting its new initiatives aren’t moving the needle for users yet.
Revenue Per User
Average revenue per user (ARPU) is a critical metric to track because it measures how much the average user spends. ARPU is also a key indicator of how valuable its users are (and can be over time).
Chegg’s ARPU growth has been subpar over the last two years, averaging 1.1%. This raises questions about its platform’s health when paired with its declining services subscribers. If Chegg wants to grow its users, it must either develop new features or lower its monetization of existing ones. 
This quarter, Chegg’s ARPU clocked in at $40.43. It grew by 8.3% year on year, faster than its services subscribers.
Key Takeaways from Chegg’s Q2 Results
We were impressed by how significantly Chegg blew past analysts’ EBITDA expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. On the other hand, its number of users declined and its number of services subscribers fell short of Wall Street’s estimates. Overall, this quarter was mixed, but expectations for Chegg are quite low, and the stock traded up 2.3% to $1.31 immediately following the results.
So should you invest in Chegg right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
