We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Will Chegg's AI Upgrades Fix the Collapse in Its Legacy Traffic?
Read MoreHide Full Article
Key Takeaways
Chegg's legacy academic revenue fell over 40% year over year in Q3 2025 as AI cut search traffic.
CHGG is using AI to automate answers from its 130M-question database, lowering costs and capex needs.
Chegg views AI as a defensive tool, extending legacy cash flows while funding its Chegg Skilling pivot.
Chegg, Inc.’s (CHGG - Free Report) core academic business has been significantly impacted by the rapid adoption of generative Artificial Intelligence (AI) and a sharp decline in Google-driven traffic. This resulted in a more than 40% year-over-year decline in revenues in the third quarter of 2025. With AI-powered search disrupting the process of students accessing academic help, CHGG’s legacy traffic has reduced by nearly 50% as of the third quarter of 2025.
Given the shift in the market trends, Chegg has been heavily investing in AI to improve efficiency, automate content delivery and enhance user experience across Chegg Study, Math and Writing. These upgrades will allow the company to serve most student queries using its existing database of more than 130 million questions, significantly lowering costs and capital intensity. As a result, CHGG has been able to slash operating expenses and reposition the legacy unit as a cash-generating business rather than a growth engine.
However, with a high-quality AI-enhanced product, Chegg admits it cannot compete head-on with free, embedded AI answers offered directly through search engines and large language models. Notably, Chegg’s AI strategy is increasingly about prolonging the tail of the legacy business while funding its pivot to Chegg Skilling. AI has enabled leaner operations, lowered capital expenditure and ensured better margin prospects, helping the academic segment generate cash for several years.
Summing up, Chegg’s AI upgrades are unlikely to “fix” the collapse in legacy traffic; rather, they serve as a defensive tool by stabilizing cash flows and buying time. The trends will continue while the company shifts its long-term growth ambitions toward B2B skilling, language learning and workforce AI education.
Chegg’s Competitive Position in the EdTech Market
Chegg operates in a highly competitive landscape, with renowned names like Duolingo, Inc. (DUOL - Free Report) and Udemy, Inc. (UDMY - Free Report) operating beside it in the ed tech market.
Duolingo dominates the language-learning niche with its gamified app and AI-driven engagement. With a strong mobile presence and daily user engagement, Duolingo has built a brand synonymous with accessible, bite-sized learning. On the other hand, Udemy continues to scale its vast marketplace model, leveraging thousands of independent instructors to address fast-changing professional and technical learning needs.
Chegg’s challenge is proving that its B2B skilling pivot can deliver durable growth, while Udemy continues expanding its corporate footprint and Duolingo deepens monetization through subscriptions and new product lines. Ultimately, Chegg, Udemy and Duolingo illustrate three divergent approaches to competing in an ed-tech market reshaped by AI, corporate upskilling demand and the need for measurable learning outcomes.
Chegg Stock’s Price Performance & Valuation Trend
Shares of this California-based education technology company have inched up 2.4% in the past month, outperforming the Zacks Internet - Software industry, the Zacks Computer and Technology sector and the S&P 500 Index.
Image Source: Zacks Investment Research
CHGG stock is currently trading at a discount compared with the industry peers, with a forward 12-month price-to-sales (P/S) ratio of 0.27, as evidenced by the chart below.
Image Source: Zacks Investment Research
Earnings Estimate Trend of CHGG
The Zacks Consensus Estimate for 2025 loss has widened in the past 60 days to 14 cents, while earnings estimates for 2026 have moved up to 18 cents during the same time frame.
Image Source: Zacks Investment Research
While the estimated figure for 2025 indicates a decline of 118.7% year over year, estimates for 2026 indicate 228.6% growth.
Image: Bigstock
Will Chegg's AI Upgrades Fix the Collapse in Its Legacy Traffic?
Key Takeaways
Chegg, Inc.’s (CHGG - Free Report) core academic business has been significantly impacted by the rapid adoption of generative Artificial Intelligence (AI) and a sharp decline in Google-driven traffic. This resulted in a more than 40% year-over-year decline in revenues in the third quarter of 2025. With AI-powered search disrupting the process of students accessing academic help, CHGG’s legacy traffic has reduced by nearly 50% as of the third quarter of 2025.
Given the shift in the market trends, Chegg has been heavily investing in AI to improve efficiency, automate content delivery and enhance user experience across Chegg Study, Math and Writing. These upgrades will allow the company to serve most student queries using its existing database of more than 130 million questions, significantly lowering costs and capital intensity. As a result, CHGG has been able to slash operating expenses and reposition the legacy unit as a cash-generating business rather than a growth engine.
However, with a high-quality AI-enhanced product, Chegg admits it cannot compete head-on with free, embedded AI answers offered directly through search engines and large language models. Notably, Chegg’s AI strategy is increasingly about prolonging the tail of the legacy business while funding its pivot to Chegg Skilling. AI has enabled leaner operations, lowered capital expenditure and ensured better margin prospects, helping the academic segment generate cash for several years.
Summing up, Chegg’s AI upgrades are unlikely to “fix” the collapse in legacy traffic; rather, they serve as a defensive tool by stabilizing cash flows and buying time. The trends will continue while the company shifts its long-term growth ambitions toward B2B skilling, language learning and workforce AI education.
Chegg’s Competitive Position in the EdTech Market
Chegg operates in a highly competitive landscape, with renowned names like Duolingo, Inc. (DUOL - Free Report) and Udemy, Inc. (UDMY - Free Report) operating beside it in the ed tech market.
Duolingo dominates the language-learning niche with its gamified app and AI-driven engagement. With a strong mobile presence and daily user engagement, Duolingo has built a brand synonymous with accessible, bite-sized learning. On the other hand, Udemy continues to scale its vast marketplace model, leveraging thousands of independent instructors to address fast-changing professional and technical learning needs.
Chegg’s challenge is proving that its B2B skilling pivot can deliver durable growth, while Udemy continues expanding its corporate footprint and Duolingo deepens monetization through subscriptions and new product lines. Ultimately, Chegg, Udemy and Duolingo illustrate three divergent approaches to competing in an ed-tech market reshaped by AI, corporate upskilling demand and the need for measurable learning outcomes.
Chegg Stock’s Price Performance & Valuation Trend
Shares of this California-based education technology company have inched up 2.4% in the past month, outperforming the Zacks Internet - Software industry, the Zacks Computer and Technology sector and the S&P 500 Index.
Image Source: Zacks Investment Research
CHGG stock is currently trading at a discount compared with the industry peers, with a forward 12-month price-to-sales (P/S) ratio of 0.27, as evidenced by the chart below.
Image Source: Zacks Investment Research
Earnings Estimate Trend of CHGG
The Zacks Consensus Estimate for 2025 loss has widened in the past 60 days to 14 cents, while earnings estimates for 2026 have moved up to 18 cents during the same time frame.
Image Source: Zacks Investment Research
While the estimated figure for 2025 indicates a decline of 118.7% year over year, estimates for 2026 indicate 228.6% growth.
Chegg stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.