Chegg is slashing nearly half its workforce - 388 employees - as generative AI tools like ChatGPT devastate the online education company's core homework help business. The EdTech pioneer that once thrived during the pandemic now faces an existential crisis, with its stock down 99% from pandemic highs and revenue plummeting as students turn to free AI alternatives.
The homework help revolution that made Chegg a pandemic darling is officially over. The company just announced it's cutting 388 employees - 45% of its workforce - as AI tools fundamentally reshape how students get academic help. The brutal reality? Why pay for Chegg when ChatGPT does it for free.
"The new realities of artificial intelligence and diminished traffic from internet search have led to plummeting revenue," the company said in Monday's announcement. It's a stark admission from a company that built its business on being students' go-to source for homework solutions.
This isn't Chegg's first AI-driven bloodbath. The company already cut 22% of its workforce in May, also blaming rising AI adoption. But the problem has only gotten worse as tools like OpenAI's ChatGPT become more sophisticated at solving homework problems that once drove students to pay for Chegg's services.
The numbers tell a devastating story. Chegg's stock hit $113.51 in February 2021, riding high on pandemic-fueled remote learning demand. The company's market cap peaked at $14.7 billion as students stuck at home turned to online homework help. Today, that same stock trades around $1, and the market cap has collapsed to just $156 million - a 99% wipeout that ranks among the most spectacular falls in EdTech history.
Dan Rosensweig, the former Yahoo executive who led Chegg through its pre-AI glory days, is returning as CEO effective immediately. He's replacing Nathan Schultz, who took over just six months ago when Rosensweig stepped down in April 2024. The leadership shuffle suggests the board recognizes this isn't just a rough patch - it's an existential crisis requiring proven crisis management.
Google is also in Chegg's crosshairs. The company sued the search giant in February, arguing that AI-powered search summaries are stealing traffic from content publishers like Chegg. When Google can answer "What's the derivative of x²?" directly in search results, students don't need to click through to Chegg's paid platform.
