Strategic Review and Financial Performance
Chegg (CHGG) recently reported strong results for its second quarter of 2025, with the company showing significant progress in several key areas. The CEO, Nathan Schultz, provided an update on the ongoing strategic review, which includes exploring options such as a potential acquisition, go-private transaction, or remaining a public company. He emphasized that Chegg is actively engaging with select parties during this process.
Schultz highlighted that Q2 was a solid quarter for the company, with revenue reaching $105 million and adjusted EBITDA of $23 million, surpassing expectations. This performance reflects improved financial management and cost control, which have been central to the company’s strategy.
Expense Management and Cost Reduction
The company has made notable strides in managing expenses. An additional $17 million in capital expenditures and expense savings were identified for realization in 2026. Schultz reiterated that Chegg remains on track to achieve the targets outlined in its restructuring efforts, aiming to reduce non-GAAP expenses by $165 million to $175 million in 2025. For 2026, the company now expects total non-GAAP expense savings between $110 million and $120 million.
This focus on cost efficiency is part of a broader strategy to enhance profitability while investing in growth areas. The CFO, David Longo, noted that the company continues to prioritize disciplined cost management aligned with its business outlook. Additional operating expense savings of $10 million and CapEx savings of $7 million were identified for 2026.
Strategic Focus on Skills and Language Learning
Chegg is shifting its focus toward a skills-based organization, with language learning (Busuu) and workplace readiness/upskilling (Skills) positioned as primary growth engines. Busuu demonstrated strong performance, with a 15% year-over-year revenue increase in Q2. The B2B segment showed even more impressive growth, with a 39% year-over-year increase, continuing a robust double-digit growth trajectory.
The company expects Busuu to reach $48 million in revenue in 2025 and become adjusted EBITDA-positive in Q1 2026. Enrollments in Skills increased by 16% quarter-over-quarter, and monthly active users rose by 11% across new programs.
Chegg Study remains a core product, with AI-driven improvements leading to better retention rates. The monthly retention rate increased by 117 basis points in Q2, indicating stronger engagement from users.
Outlook and Financial Results
For Q3, Chegg expects total revenue between $75 million and $77 million, with Subscription Services revenue ranging from $67 million to $69 million. The gross margin is expected to be between 56% and 57%, and adjusted EBITDA is projected to be between $7 million and $8 million.
The company reaffirmed its goals for Busuu to achieve $48 million in revenue in 2025 and to reach adjusted EBITDA-positivity in Q1 2026. It also continues targeting non-GAAP expense savings of $165 million to $175 million in 2025 and $100 million to $110 million in 2026, with additional savings identified for 2026.
In terms of financial results, total revenue for Q2 was $105 million, with subscription services revenue at $90 million and 2.6 million subscribers. Busuu posted a 15% year-over-year revenue increase, with B2B revenue up 39%. Skills and other revenue reached $15 million, including $7 million from content licensing. Non-GAAP operating expenses for the quarter were $64 million, a 33% year-over-year reduction. Adjusted EBITDA was $23 million, representing a margin of 22%.
Capital expenditures were $7 million, down 60% year-over-year. Free cash flow was negative $12 million, impacted by $12.5 million in severance payments. The quarter ended with $114.1 million in cash and investments, and a net cash balance of $52 million.
Analyst Questions and Market Sentiment
Analysts raised questions about Busuu's B2B growth and future partner strategies. Schultz emphasized that Chegg is not reliant on a reseller market and is confident in its direct sales approach and partnerships with companies like Guild. He also discussed the growth prospects of Chegg Study in institutional markets, highlighting the need to prove value to schools.
Regarding competition in the AI education space, Schultz described a shift from traditional boot camps to micro learning moments, emphasizing the modern and effective nature of Chegg's course offerings.
Analysts’ tone was neutral to slightly positive, with questions focused on growth sustainability and competitive positioning. Management maintained a confident and optimistic tone, using phrases like “we are really excited” and “absolutely” to describe future growth prospects.
Key Developments and Risks
Compared to the previous quarter, analyst sentiment shifted from concerns about structural risks to a focus on growth opportunities. Management remained forward-looking and confident, with more concrete evidence of traction in Busuu and Skills.
Key developments included increased B2B growth for Busuu, rising from 29% in Q1 to 39% in Q2, and an increase in Chegg Study institution pilots from 15 to 23. The company sharpened its strategic focus on Busuu and Skills, providing more details on product innovation and market penetration.
Risks include ongoing declines in traffic and subscribers, attributed to factors such as Google AI overviews. Macroeconomic trends and competition from free AI education offerings remain headwinds. Additionally, expense management and restructuring charges, including significant severance payments, continue to impact free cash flow.
Final Takeaway
Chegg’s second quarter 2025 call highlighted the company’s transformation into a skills and language learning-focused organization, with Busuu and Skills as primary growth engines. Strong B2B momentum, disciplined cost control, and ongoing product innovation are central to the company’s strategy. While the strategic review process continues, Chegg remains committed to investing in AI-driven solutions and institutional partnerships to support future growth and profitability.