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If you invested $100 into Chegg (CHGG) in 2021, you’d have less than a dollar to show for it today, thanks to LLMs like ChatGPT.
Interestingly, AI was mentioned 0 times in Chegg’s 2022 annual report.
In its 2023 annual report, AI was mentioned 47 times and was a focal point for its corporate narrative.
Most recently, in its 2025 annual report, AI was named as one of the biggest risks facing the company.
Since it hit an all-time high of $108 a share in 2021, Chegg has fallen over 99% into penny-stock territory, reaching an all-time low of $0.48 a share in April 2025. Today it’s trading in the $1.20 range.
So how did a company that once cornered the study aid market and had a $14 billion market cap fall so far, so fast?
After reading through its last five annual reports, it became apparent that Chegg’s story is that of a company that was already struggling before AI made its business model irrelevant.
AI Commoditized Chegg’s Proprietary Service
Chegg built its business around gated educational content, study guides, textbook answers, and homework help for $14.95 a month. Students paid because there was no free alternative that was actually good.
Then ChatGPT debuted.
The same answer a student used to pay for is now one free prompt away. Chegg’s own 2025 10-K revealed that executives could see the writing on the wall: “students see generative AI products like ChatGPT and others as strong alternatives to vertically specialized solutions for education such as Chegg.”
The change in language used in Chegg’s annual reports clearly corresponds to when the reality set in that AI was eating its lunch:
- 2022: AI goes unmentioned, and the core business model is considered stable.
- 2023: AI appears 47 times, framed as an opportunity. Chegg partnered with OpenAI to integrate GPT-4, describing plans to deliver “faster, more personalized, and more effective learning experiences.”
- 2025: AI is listed as a primary existential risk. The same filing concedes the AI pivot “has not attracted as many new students as anticipated.”
A three-act Shakespearean tragedy.
Profitability Was Always an Uphill Battle
Even at its peak valuation, Chegg’s finances were shakier than the stock price suggested. The $14 billion market cap was built on COVID-era tailwinds and narrative instead of durable earnings growth.
- Revenue fell 39% in a single year, from $618 million in 2024 to $377 million in 2025, and the core homework subscription business dropped 43% in that same period.
- By the end of 2025, Chegg’s accumulated deficit since incorporation was approaching $1 billion. Cash and investments fell 84% in one year, mostly consumed by paying off debt.
- In December 2025, the NYSE sent a formal warning: the stock had traded below $1.00 for 30 consecutive days, putting Chegg at risk of delisting.
Chegg was a COVID-era darling in the same category as Peloton (PTON) and Zoom (ZM), companies that looked unstoppable when the world was locked inside and looked structurally misaligned the moment it wasn’t.
The difference is that Peloton and Zoom still have products people use.
Chegg Failed to Improvise, Adapt, or Overcome…
To its credit, Chegg did attempt to respond.
In 2023, the company launched CheggMate, an AI assistant built on GPT-4 and trained on its proprietary content library. The argument was that 100+ million pieces of curated academic material gave it an edge over general-purpose chatbots, and that students would pay for a specialized, academically rigorous AI over a free one.
The students disagreed.
The failed AI product was followed by two rounds of mass layoffs in 2025, cutting more than half of the company’s workforce. Both rounds of job cuts were explicitly attributed to “increased competition and student adoption of generative AI products.” U.S. offices were closed. A strategic review explored being acquired or going private, found no acceptable path, and concluded with an announced pivot to corporate workforce training.
That pivot represents a fundamentally different business operating under the same name with a shrinking balance sheet.
Chegg also filed a federal antitrust lawsuit against Google (GOOGL) in February 2025, arguing that AI Overviews, Google’s feature that displays AI-generated answers at the top of search results, constituted anticompetitive behavior that siphoned traffic away from Chegg. The case is ongoing.
…And Went the Way of the Dinosaurs
Chegg’s downfall is less about mismanagement and more about how a technological revolution can render a business’s purpose obsolete, with the window to adapt closing sooner than anticipated.
The company’s 2025 10-K lists declining revenue, no clear path to profitability, an unproven transformation strategy, and possible NYSE delisting as formal risk factors, back-to-back, without commentary.
When a company’s own SEC filing discloses that it might be kicked off the stock exchange, the turnaround story is already over.
On the date of publication, Justin Estes did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
