Chegg’s Earnings Call: Mixed Sentiments Amid AI Challenges

Chegg Inc ((CHGG)) has held its Q4 earnings call. Read on for the main highlights of the call.

Chegg Inc.’s recent earnings call revealed a mixed sentiment, highlighting both significant advancements and notable challenges. While the company showcased progress in AI integration and enterprise growth, these achievements were overshadowed by a considerable decline in revenue and subscriber numbers. The impact of Google’s AI Overview on Chegg’s traffic has been substantial, prompting strategic reviews and legal actions against Google, underscoring the seriousness of the challenges faced by the company.

AI and Machine Learning Integration

Chegg has successfully integrated AI and machine learning into its product stack, resulting in a remarkable reduction in content creation costs by over 70%. This integration has allowed the company to maintain high-quality content while optimizing operational efficiency.

Busuu Revenue Growth

The language learning service Busuu has shown promising growth, with a 9% year-over-year increase in revenue for 2024. Notably, enterprise revenue surged by 46%, indicating a strong demand for language learning solutions in the enterprise sector.

Satisfaction Guarantee Implementation

In a bid to demonstrate confidence in its content quality, Chegg has implemented a Satisfaction Guarantee. This move underscores the company’s commitment to maintaining high standards and ensuring customer satisfaction.

Innovative Marketing Campaign

Chegg’s brand marketing campaign on TikTok has been successful, resulting in a 16% increase in awareness among underclassmen. This campaign has improved click-through and conversion rates, showcasing the effectiveness of innovative marketing strategies.

Enterprise Strategy Expansion

The enterprise segment of Chegg’s business is performing well, with plans to expand business-to-institution programs and other enterprise offerings. This expansion is expected to bolster Chegg’s position in the enterprise market.

Revenue and Subscriber Decline

Chegg reported a total revenue of $143.5 million for Q4 2024, marking a 24% year-over-year decrease. Subscription services revenue also fell by 23%, with a 21% decline in subscribers, highlighting significant challenges in retaining and growing its customer base.

Impact of Google’s AI Overview

Google’s AI Overview has significantly impacted Chegg’s traffic, revenue, and workforce, leading to a 49% drop in non-subscriber traffic in January 2025. This development has posed a major challenge for Chegg, affecting its overall business performance.

Challenges in Skills and Other Revenue

Chegg faced a 31% year-over-year decline in skills and other revenue, attributed to a market shift away from traditional boot camps and reduced advertising revenue. This trend poses a challenge for Chegg’s diversification efforts.

Temporary Retention Rate Dip

A temporary dip in retention rate during November and December affected subscription services ARPU, which decreased by 3% year-over-year. This dip highlights the need for Chegg to focus on improving customer retention strategies.

Forward-Looking Guidance

Looking ahead, Chegg provided detailed guidance for the upcoming quarter and year. The company expects total revenue between $114 million and $116 million for the first quarter of 2025, with subscription services revenue ranging from $104 million to $106 million. Despite challenges, Chegg remains focused on stabilizing business trends and achieving significant non-GAAP savings through restructuring activities.

In conclusion, Chegg Inc.’s earnings call reflected a mixed sentiment, with notable advancements in AI integration and enterprise growth overshadowed by significant revenue and subscriber declines. The impact of Google’s AI Overview has been a major challenge, prompting strategic reviews and legal actions. However, Chegg remains committed to stabilizing its business and achieving future growth through strategic initiatives and cost-saving measures.