Chegg lays off 22% of workforce as AI tools disrupt EdTech industry

Chegg is laying off 248 employees—22% of its workforce—and shutting down its U.S. and Canada offices, becoming the latest victim of AI disruption.

The move is part of a sweeping restructuring effort as students increasingly ditch traditional study platforms in favor of AI tools like ChatGPT.

The move is part of a larger cost-cutting effort to simplify operations and deal with what Chegg calls a fundamental shift in how students find academic help. More are skipping traditional platforms and going straight to free or low-cost AI tools that deliver instant answers.

Chegg Lays Off 248 Employees as Students Abandon Old-School EdTech for AI

Chegg has been feeling the impact for months. Web traffic has taken a hit, and the company isn’t expecting things to turn around anytime soon. It warned investors that the trend could get worse before it gets better.

“Chegg said on Monday it would lay off about 22% of its workforce, or 248 employees, to cut costs and streamline its operations as students increasingly turn to AI-powered tools such as ChatGPT over traditional edtech platforms,” Reuters reported.

Chegg is one of the many search-driven businesses affected by AI. Google’s AI-generated summaries now provide direct answers at the top of search results, pulling information from various sources without necessarily sending traffic to them. Websites that depend on search visibility—whether education platforms, media outlets, or reference sites—are seeing a decline in visitors as Google’s AI keeps users on its own pages.

For Chegg, the impact has been severe. The company has lost about 90% of its market value since going public in 2013, and its stock fell another 24% after the lawsuit was announced, dipping just above $1 per share. Chegg has brought in Goldman Sachs to explore options, including a potential sale or going private, Schultz told analysts on a Monday earnings call.

Part of the blame, according to Chegg, goes to Google. The search giant’s push to keep users on its own platform—especially with AI Overviews and Gemini—means fewer students are clicking through to third-party sites like Chegg. The company also pointed fingers at OpenAI and Anthropic, both of which are aggressively courting academics by offering free access to their AI tools.

Chegg’s Collapse? AI Threat Triggers Mass Layoffs and Subscriber Exodus

The layoff didn’t come as a surprise. In 2023, the startup lost 40% of its value after admitting that ChatGPT was hurting its online education business.

Chegg is shutting its U.S. and Canada offices by the end of the year and scaling back on marketing, product development, and general operations. The restructuring will cost the company between $34 million and $38 million, most of which will hit in Q2 and Q3 this year.

But Chegg is betting the changes will pay off. It expects to save up to $55 million in 2025 and potentially double that in 2026.

Still, the numbers aren’t pretty. The company said its total subscribers dropped 31% in the first quarter to 3.2 million. Revenue slid 30% to $121 million, with subscription revenue down to $108 million.

Back in February, Chegg sued Google, accusing it of undermining original content creators and damaging publishers’ ability to compete by serving up AI-generated overviews. According to the lawsuit, this led to a drop in visitors and paying users.

Chegg ended last year with 1,271 employees. That number is now getting a sharp cut as the company becomes one of the more visible casualties of AI’s rise.