Chegg’s second quarter was marked by a 50.7% year-over-year revenue decline, which contributed to a significant negative market reaction. Management attributed the results to ongoing transformation efforts, particularly the company’s shift toward an AI-driven platform and the integration of academic, skilling, and employability services. CEO Dan Rosensweig acknowledged the business impact of artificial intelligence on the legacy model, stating, “AI created real headwinds for this company, and we responded by strengthening our balance sheet, rebuilding an AI-first cost structure and expanding our vision towards a much larger opportunity.”
Is now the time to buy CHGG? Find out in our full research report (it’s free for active Edge members).
Chegg (CHGG) Q2 CY2026 Highlights:
- Revenue: $51.85 million vs analyst estimates of $49.5 million (50.7% year-on-year decline, 4.8% beat)
- Adjusted EPS: -$0.02 vs analyst estimates of -$0.05 (60% beat)
- Adjusted EBITDA: $9.05 million vs analyst estimates of $5.51 million (17.5% margin, 64.2% beat)
- Revenue Guidance for Q3 CY2026 is $43.5 million at the midpoint, below analyst estimates of $48.28 million
- EBITDA guidance for Q3 CY2026 is $1.5 million at the midpoint, below analyst estimates of $6.02 million
- Operating Margin: -6.1%, up from -13.8% in the same quarter last year
- Market Capitalization: $88.76 million
While we enjoy listening to the management’s commentary, our favorite part of earnings calls is 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 Q2 Earnings Call
- Ryan MacDonald (Needham & Company) asked about the rationale for Chegg’s employability focus and differentiation from competitors such as LinkedIn and Handshake. CEO Dan Rosensweig explained that Chegg’s student-centric approach and integration of job search, networking, and application automation set it apart.
- MacDonald (Needham & Company) followed up on how the new employability platform informs content creation and whether more content will be created in-house or via AI. Rosensweig described a shift toward producing modular, AI-driven content tailored to specific skill and job requirements.
- MacDonald (Needham & Company) questioned the approach to driving awareness for the employability platform among students. Rosensweig pointed to Chegg’s existing high web traffic and legacy brand presence, as well as the relaunch of Internships.com, as key channels.
- MacDonald (Needham & Company) inquired about expectations for free cash flow and the impact of severance payments. CFO David Longo indicated that most severance costs are behind the company and expects positive free cash flow in the second half of the year.
- No other analysts participated in the call or asked questions during the session.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) user adoption rates and engagement metrics for Chegg’s new employability platform, (2) the company’s ability to secure and scale new distribution partnerships in the skilling segment, and (3) further AI-driven cost reductions and operational streamlining. Progress on integrating language, skills, and career support into a unified platform will also be a key indicator of execution.
Chegg currently trades at $0.82, down from $1.03 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).
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