US-based educational platform Chegg announced on May 12, 2025, that it will lay off about 22% of its workforce, totaling 248 employees.

This decision is part of a restructuring effort aimed at reducing costs and adjusting operations amid increasing competition from AI tools like ChatGPT.

Chegg has experienced a decline in user numbers, reporting a 31% drop in subscribers during the first quarter of 2025, falling to 3.2 million.

Revenue also decreased by 30% to US$121 million, with subscription service revenue dropping nearly a third to US$108 million.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ Traditional edtech faces existential crisis as generative AI redefines the landscape

Chegg’s 31% subscriber decline and 30% revenue drop reflect a broader industry shift rather than an isolated company issue.

Their struggle highlights the fundamental challenge facing content-focused edtech companies: when students can access similar help through free AI tools, the value proposition of subscription models diminishes.

The rapid adoption of AI in education is significant, with 93% of educators expecting to expand their use of AI within the next two years, according to 2024 survey data 1.

This transition away from traditional platforms isn’t slowing. Google’s AI Overviews and specialized educational AI tools are keeping users within their ecosystems rather than clicking through to third-party sites like Chegg.

The company’s mention of OpenAI and Anthropic “courting academics with free access” illustrates how generative AI companies are strategically targeting education, further challenging Chegg’s position as an academic resource provider.

2️⃣ The shifting economics of educational content in an AI-driven world

Chegg’s restructuring reveals the economic realities of competing against free AI tools that offer instantaneous homework help and explanations without subscription fees.

The company’s market valuation reflects this challenge—with analysis showing its stock trading at approximately $0.69 despite an estimated intrinsic value of $5.87 2, suggesting investors recognize the disruption to its business model.

The global EdTech market is experiencing significant investment in AI capabilities, with the generative AI market projected to reach $207 billion by 2030 3, creating intense competitive pressure on established players.