Chegg targets 14% Q4 skilling growth following major restructuring and B2B SaaS pivot

Earnings Call Insights: Chegg, Inc. (CHGG) Q3 2025

MANAGEMENT VIEW

*
Daniel Rosensweig, Executive Chairman & CEO, addressed "current challenges" and announced his return as CEO, stating the company is "undervalued" and "see[s] a significant opportunity to rebuild and reinvent Chegg and return it to a growing company with strong adjusted EBITDA margins and cash flow." He outlined a new structure splitting the company into two units: "Our growth business, Chegg Skilling, which we expect to have sustainable double-digit growth and our legacy academic services, which will focus on generating cash." Rosensweig emphasized, "We took decisive action restructuring the company to enable our academic services to operate more efficiently and generate significantly more cash flow while repositioning Chegg Skilling to become a larger, more profitable B2B SaaS business." He highlighted that Chegg Skilling, including language learning (Busuu) and workplace skills (Chegg Skills), is expected to post a 14% year-over-year growth, reaching $70 million in full year revenue for 2025.

*
David Longo, CFO, stated, "We delivered a good third quarter, surpassing our revenue expectations and outperforming our adjusted EBITDA guidance by $5 million as a direct result of our cost cutting and restructurings." He noted "total revenue was $78 million, a decrease of 42% year-over-year," attributing this to reduced traffic and lower subscription and advertising revenues. Longo also reported, "Non-GAAP operating expenses were $49 million in the quarter, a reduction of approximately $41 million or 46% year-over-year, driven by the execution of our restructurings."

OUTLOOK

* Longo provided Q4 guidance: "we expect $18 million of revenue from our skilling business, which represents an increase of 14% year-over-year. Total revenue between $70 million and $72 million, gross margin to be in the range of 57% to 58% and adjusted EBITDA between $10 million and $11 million." Management expressed confidence in the transition, with Rosensweig stating, "Looking ahead, we expect the business to continue to grow at double-digit pace."

FINANCIAL RESULTS

* The company reported Q3 total revenue of $78 million, a 42% year-over-year decrease. Non-GAAP operating expenses came in at $49 million, down 46% year-over-year due to restructuring measures. Adjusted EBITDA for the quarter was $13 million, representing a margin of 17%. CapEx for Q3 was $6 million, down 63% year-over-year. Free cash flow for Q3 was negative $900,000, impacted by a $7.5 million FTC settlement payment and $5.5 million in severance costs. Chegg ended the quarter with $112 million in cash and investments and a net cash balance of $49 million.

Q&A

*
Eric Sheridan, Goldman Sachs: Asked about strategic product priorities for skilling and resource allocation moving forward. Rosensweig responded all growth resources "are going to go into the skilling business," emphasizing the move from B2C to B2B and highlighting focus areas as "frontline workers," language learning, and job-related skills in AI. He stated, "we have the necessary cash now by removing almost 400 people from the company."

*
Devin Au, KeyBanc: Inquired about support for the legacy academic business. Rosensweig explained, "90% of all the questions that we get are already in Chegg's database," adding the business will continue to generate cash but cannot "compete with the situation that Google has caused and the fact that OpenAI is what it is."

*
Devin Au, KeyBanc: Requested more detail on Busuu initiatives and product milestones. Rosensweig described the pivot to B2B, focus on conversational learning, and expansion into Latin America. He stated product road map metrics will include "number of businesses that we sign up, the number of seats in those businesses, the retention that we have within those businesses."

*
Ryan MacDonald, Needham: Asked about additional channels for growth in skilling. Rosensweig outlined a strategy to diversify channels beyond Guild and gradually build a B2B sales force, noting, "we are working very hard to be able to offer noncompetitive products to Guild in other channels."

*
Ryan MacDonald, Needham: Followed up on advertising revenue headwinds. Rosensweig clarified, "those ads didn't appear in the Skills. Those ads appeared in Chegg Study, they appeared in Chegg Math and Chegg Writing. And that's where the traffic has declined." He asserted, "You will see no headwinds in skilling other than things that we don't expect or might pop up."

SENTIMENT ANALYSIS

*
Analysts' tone was probing with focus on sustainability of skilling growth, product strategy, and business model resilience. Questions indicated a neutral to slightly negative sentiment, especially regarding the legacy business and competitive pressures.

*
Management's tone was confident and assertive in the prepared remarks, using phrases like "I firmly believe we will create significant long-term value for our shareholders" and "I'm confident that Chegg will evolve and thrive." In Q&A, Rosensweig was direct, acknowledging challenges and the necessity of restructuring, but remained optimistic: "we finally feel like we've hit the bottom because we have a business that's growing."

*
Compared to the previous quarter, management's sentiment shifted from cautious optimism and focus on transformation to a more urgent, action-oriented confidence following decisive restructuring. Analyst tone remained probing but shifted to deeper scrutiny on execution and growth levers.

QUARTER-OVER-QUARTER COMPARISON

*
Q3 saw a shift in leadership as Rosensweig returned as CEO, replacing Nathan Schultz. The company moved from exploring strategic alternatives in Q2 to executing a major restructuring and splitting into two business units.

*
Strategic focus moved decisively to B2B SaaS skilling, while the legacy academic business shifted to a cash-generation role. Prior quarter commentary included ongoing investment in Chegg Study and pilots with institutions, which was less emphasized this quarter.

*
The Q3 transcript reflected sharper cost controls, with a steeper year-over-year cut to operating expenses and more aggressive headcount reductions. Guidance language was more explicit, with a clear 14% growth target for the skilling business.

*
Management's tone in Q3 was more assertive about the turnaround, while Q2 featured more discussion of strategic review and market uncertainty. Analyst focus this quarter shifted to execution details and sustainability of skilling growth.

RISKS AND CONCERNS

*
Management cited the "rise of AI and the subsequent negative impact on traditional sources of traffic" as a key challenge. The restructuring, including a reduction of almost 400 employees and one-time cash costs, was presented as mitigation.

*
The legacy academic business faces ongoing headwinds from "Google traffic dropped by 50%" and disruptive AI competition. Management initiated a lawsuit against Google and is focusing on leveraging its existing database to maximize cash flow from the legacy segment.

*
The transition to B2B SaaS and skilling is in early stages, with management acknowledging it is "going to start slow" in terms of expanding direct partnerships and sales channels.

FINAL TAKEAWAY

Chegg leadership emphasized a decisive pivot toward its B2B skilling business, targeting double-digit growth and a streamlined cost base following a significant restructuring. The company expects a 14% year-over-year increase in skilling revenue for Q4 and is positioning legacy academic services for cash generation while investing growth resources into the expanding skilling market. Management expressed confidence in the new strategy and its ability to rebuild shareholder value, highlighting a path toward profitability and future cash flow improvement as the core focus moving forward.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/chgg/earnings/transcripts]

MORE ON CHEGG

* Chegg, Inc. (CHGG) Q3 2025 Earnings Call Transcript [https://seekingalpha.com/article/4841535-chegg-inc-chgg-q3-2025-earnings-call-transcript]
* Chegg: Rebound Initiatives Have Low Chance Of Success [https://seekingalpha.com/article/4820464-chegg-rebound-initiatives-have-low-chance-of-success]
* Chegg Non-GAAP EPS of $0.00 beats by $0.08, revenue of $77.74M beats by $1.54M [https://seekingalpha.com/news/4519561-chegg-non-gaap-eps-of-0_00-beats-by-0_08-revenue-of-77_74m-beats-by-1_54m]
* Chegg leans on old leadership, pivots to skills training as it fights to stay alive in age of AI [https://seekingalpha.com/news/4509438-chegg-leans-on-old-leadership-pivots-to-skills-training-as-it-fights-to-stay-alive-in-age-of-ai]
* Seeking Alpha’s Quant Rating on Chegg [https://seekingalpha.com/symbol/CHGG/ratings/quant-ratings]