Chegg’s fourth quarter was met with a significant negative market reaction, as investors focused on the sharp year-over-year revenue decline and the company’s ongoing restructuring. Management attributed the performance to continued headwinds in its legacy academic business, including traffic losses from changes in search engine interfaces. CEO Daniel Rosensweig emphasized that, despite these challenges, the company saw "high retention rates" in its core Chegg Study service, while the new Skilling business delivered early revenue traction. Efforts to streamline operations and reduce costs were highlighted as necessary steps to preserve cash flow and fund future growth initiatives.
Is now the time to buy CHGG? Find out in our full research report (it’s free for active Edge members).
Chegg (CHGG) Q4 CY2025 Highlights:
- Revenue: $72.66 million vs analyst estimates of $71 million (49.4% year-on-year decline, 2.3% beat)
- Adjusted EPS: -$0.01 vs analyst estimates of -$0.02 (in line)
- Adjusted EBITDA: $12.89 million vs analyst estimates of $10.76 million (17.7% margin, 19.8% beat)
- Revenue Guidance for Q1 CY2026 is $61 million at the midpoint, below analyst estimates of $64.58 million
- EBITDA guidance for Q1 CY2026 is $11.5 million at the midpoint, above analyst estimates of $7.23 million
- Operating Margin: -18.9%, down from -2.3% in the same quarter last year
- Market Capitalization: $62.56 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Chegg’s Q4 Earnings Call
- Bryan Smilek (JPMorgan) asked about the primary drivers of skilling growth and the focus between different credentialing areas. CEO Daniel Rosensweig explained that the core business is now skilling and noted strong retention in the legacy academic business, while skilling growth is fueled by expanding distribution partners and curriculum.
- Bryan Smilek (JPMorgan) inquired about early results from pricing tests and product mix in the legacy business. Rosensweig stated that retention remains high, which is positive for free cash flow, but emphasized it is too early to draw definitive conclusions from ongoing price testing.
- Ryan MacDonald (Needham & Company) asked about potential opportunities arising from the Coursera-Udemy merger in the B2B skilling market. Rosensweig responded that Chegg does not view these companies as direct competitors, but rather as potential partners, and sees value in distributing Chegg’s proprietary content through their marketplaces.
- Ryan MacDonald (Needham & Company) pressed for clarity on AI learning content demand. Rosensweig confirmed increased enterprise interest in AI training, describing it as a “very big growth market,” and noted the importance of integrating Chegg courses into accredited degree pathways through partners like Wolfe University.
- No further analyst questions on the call.
Catalysts in Upcoming Quarters
In the coming quarters, our analysts will monitor (1) the pace at which new enterprise and institutional partnerships are formed in the skilling division, (2) the rate of curriculum expansion into high-demand AI and technical skills, and (3) the sustainability of cost reductions and resulting margin improvements. Execution in transitioning legacy users and capturing B2B market share will also be critical markers of progress.
Chegg currently trades at $0.58, down from $0.75 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
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