AI "kills" online education? U.S. giant Chegg's market value plunges 99%, announces 45% massive layoffs

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Chegg, the American online education giant that once benefited from the wave of remote learning during the pandemic, is now facing an existential crisis brought on by generative AI.

On Monday local time, Chegg announced it would cut 45% of its global workforce, equivalent to about 388 positions. The 20-year-old company directly attributed the move to "the new reality of artificial intelligence" and reduced traffic from search engines such as Google. This is the second large-scale round of layoffs in a short period, following a 22% reduction this May.

Alongside the layoff announcement, Chegg implemented a series of major adjustments. The company announced that former CEO Dan Rosensweig will immediately return, replacing Nathan Schultz, who had served as CEO for only a few months. Additionally, the company ended the strategic review that began earlier this year, deciding to abandon options such as selling or privatizing, and will continue to operate as an independent listed company.

Behind these dramatic upheavals is the collapse of Chegg’s market value. The company’s stock price has plummeted 99% from its all-time high of $113.51 in February 2021, with its market capitalization evaporating from a peak of about $14.7 billion to about $156 million. Once a Wall Street star, it is now struggling to adapt to the AI era.

Difficult transformation: 45% layoff to cope with AI impact

Chegg’s latest restructuring plan is its most aggressive measure to address business challenges. The company said in a statement that the 45% layoff decision is to reduce costs and streamline operations to adapt to the AI-driven industry shift.

According to reports, this restructuring is expected to generate related costs of about $15 million to $19 million, which will occur by the first quarter of 2026. As of December 31, 2024, the company had 1,271 employees.

Chegg made clear that its core business is facing a double blow. On one hand, generative AI tools represented by OpenAI’s ChatGPT are increasingly popular among students, directly encroaching on Chegg’s market for providing homework help and tutoring services. On the other hand, the company believes that Google Search’s AI summary feature has damaged its website traffic and sales and has filed a lawsuit against Google over this issue in February of this year.

As the company faces a critical transformation, Chegg chose to bring back an experienced veteran. Dan Rosensweig will return immediately and once again serve as CEO. He was formerly an executive at Yahoo and led Chegg for fourteen years starting from 2010, until stepping down in April 2024.

His successor Nathan Schultz is stepping down as CEO but will continue to serve as the company’s executive advisor. Before becoming CEO, Schultz was the company’s chief operating officer.

From Peak to Trough: The Former Star Whose Market Value Plummeted 99%

Previously, Chegg launched a strategic review to explore various possibilities, including a sale or privatization transaction. However, Monday’s announcement put an end to that process.

The company stated, “After careful consideration of several proposals, the board unanimously determined that remaining an independent, publicly traded company represents the best opportunity to maximize long-term shareholder value.”

Chegg’s sharp decline is yet another prominent example of how technological waves are upending traditional business models. During the Covid-19 pandemic, the global shift to remote learning led to a surge in demand for Chegg’s textbook rentals, homework help, and online tutoring services, driving its stock price to a historic high of $113.51 in February 2021.

However, with the rise of generative AI, its business moat was quickly eroded. Its stock price plunged 85.6% in 2024 alone and has continued to decline by more than 10% so far this year. In April of this year, due to its stock price staying below $1 for 30 consecutive trading days, Chegg received a delisting warning from the New York Stock Exchange. Although its stock price climbed back above $1 in May, the crisis is far from resolved.

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