CHGG Q2 Deep Dive: Strategic Shift Toward Skills and Language Learning as Subscriber Base Shrinks

August 12, 2025 at 23:12 PM EDT

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Online study and academic help platform Chegg (NYSE: CHGG) beat Wall Street’s revenue 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
Services Subscribers: 2.62 million, down 1.75 million year on year
Market Capitalization: $120.2 million

StockStory’s Take

Chegg’s second quarter was marked by ongoing challenges in its core academic business, as the company reported a sharp drop in subscribers and year-over-year revenue. Management attributed this to lower traffic, particularly due to changes in Google’s AI-driven search overviews, which reduced student discovery of Chegg’s services. CEO Nathan Schultz described the quarter as a period of transformation, highlighting that, despite the subscriber decline, “retention and ARPU increased year-over-year, demonstrating that when students find Chegg, they value the service and are retaining as well as ever.” Disciplined cost management and progress in restructuring initiatives were central to the company’s performance, as Chegg identified additional savings to be realized in the coming year.

Looking ahead, Chegg’s outlook reflects a strategic pivot toward workplace skills and language learning, with Busuu and Skills positioned as the company’s primary growth engines. Management emphasized ongoing investment in product innovation, especially AI-driven personalization for Busuu and the expansion of new upskilling programs. CFO David Longo acknowledged continued market turbulence and evolving consumer expectations, noting, “We are investing in these platforms to accelerate growth and ensure they remain key drivers of long-term shareholder value.” The company is focused on aligning its cost structure and generating cash flow to support this transition.

Key Insights from Management’s Remarks

Management pointed to the shift in Chegg’s business mix, with a greater emphasis on Busuu and Skills, as well as technology improvements in Chegg Study, as the main factors shaping results and the company’s near-term trajectory.

Busuu’s B2B momentum: The language learning segment, Busuu, showed strong B2B growth, driven by an expanded direct sales force and new partnerships, particularly in the DACH region. Management cited a 39% year-over-year revenue increase in B2B and improved client retention, attributing gains to both internal sales execution and channel partners like Guild.
AI-powered product enhancements: Chegg continued to integrate artificial intelligence into its product suite, notably launching new features in Busuu (such as “speaking bites”) and Chegg Study (including Solution Scout and AI-generated flashcards). These tools aim to personalize the learning experience and support retention.
Core academic pressures: The core Chegg Study business remains under pressure from lower student traffic, which management linked to Google’s AI overviews. However, increases in both retention rates and average revenue per user suggest that engaged students continue to find value in the platform.
Skills business repositioning: Chegg’s Skills division shifted away from traditional boot camps toward shorter, modular courses focused on AI, career fundamentals, and professional upskilling. Management highlighted a 16% increase in enrollments and noted progress in aligning offerings with emerging workforce needs.
Cost management and restructuring: The company continued to realize significant expense reductions through restructuring, with additional savings identified for 2026. Management stressed that these efforts are intended to strengthen cash flow and enable further investment in growth segments.

Drivers of Future Performance

Chegg’s outlook is shaped by its strategic focus on expanding Busuu and Skills, while managing headwinds in its legacy academic business.

Growth in language learning and upskilling: Management expects Busuu and Skills to be the primary contributors to future growth, citing robust B2B pipelines and ongoing product innovation, particularly with AI features that target career-focused learners and organizations.
Continued academic segment pressures: The company anticipates persistent challenges in acquiring new academic subscribers due to external factors like search ecosystem changes, but aims to offset this by deepening engagement with current users and expanding B2B institutional pilots.
Cost discipline and margin improvement: Chegg plans to maintain strict cost controls, with further reductions in operating expenses and capital expenditures. Management believes these measures will support margin improvement and provide resources for investment in Busuu and Skills expansion.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be monitoring (1) the revenue and profitability ramp in Busuu and Skills as Chegg deepens its B2B and B2C offerings, (2) the outcome and expansion of institutional pilot programs for Chegg Study, and (3) the company’s ability to maintain cost discipline while funding growth in its new business segments. Progress on AI-driven personalization and evidence of improved retention will also be key performance markers.

Chegg currently trades at $1.13, down from $1.28 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

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