Chegg to lay off 22% of workforce as AI tools shake up edtech industry

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(Reuters) -Chegg said on Monday it would lay off about 22% of its workforce, or 248 employees, to cut costs and streamline its operations as students increasingly turn to AI-powered tools such as ChatGPT over traditional edtech platforms.

The company, an online education firm that offers textbook rentals, homework help and tutoring, has been grappling with a decline in web traffic for months and warned that the trend would likely worsen before improving.

Google’s expansion of AI Overviews is keeping web traffic confined within its search ecosystem while gradually shifting searches to its Gemini AI platform, Chegg said, adding that other AI companies including OpenAI and Anthropic were courting academics with free access to subscriptions.

As part of the restructuring announced on Monday, Chegg will also shut its U.S. and Canada offices by the end of the year and aim to reduce its marketing, product development efforts and general and administrative expenses.

The majority of the resulting charges of $34 million to $38 million are expected to be incurred in the second and third quarters.

Chegg expects cost savings of between $45 and $55 million in 2025 and $100 to $110 million in 2026 due to the restructuring.

It also reported first-quarter results on Monday, saying subscribers declined 31% in the period to 3.2 million. Revenue declined 30% to $121 million, as its subscription services revenue fell by nearly a third to $108 million.

In February, Chegg sued Google saying Google’s internet search engine was eroding demand for original content and undermining publishers’ ability to compete with its artificial intelligence-generated overviews, thereby causing a drop in visitors and subscribers.

Chegg had 1,271 employees as of December 31.

(Reporting by Kritika Lamba in Bengaluru; Editing by Devika Syamnath)