Chegg Inc (NYSE:CHGG) Reports Mixed Q3 2025 Results Amid Strategic Shift to Skilling Business

Chegg Inc (NYSE:CHGG) reported financial results for the third quarter of 2025, delivering a performance that narrowly surpassed revenue expectations while signaling a profound strategic shift for the company. The earnings release, coupled with forward guidance that fell short of analyst projections, has elicited a mixed reaction from the market as investors digest the company's ongoing transformation.

Earnings Versus Estimates

The company's top-line performance for the quarter ended September 30, 2025, slightly exceeded the consensus forecast. However, the year-over-year comparison reveals the significant challenges the company has faced over the past year.

• Q3 2025 Revenue: $77.74 million, compared to analyst estimates of $77.73 million.
• Year-over-Year Revenue Change: A decrease of 43.1% from the $136.59 million reported in Q3 2024.
• Q3 2025 Non-GAAP EPS: $0.00 per share, a significant improvement over the estimated loss of $0.064 per share.

While the company beat on the bottom line for the quarter just ended, its outlook for the next quarter appears to be the primary focus for investors. The guidance for the fourth quarter of 2025 came in below what the market was anticipating.

• Q4 2025 Revenue Guidance: $70 to $72 million, at the midpoint falling 13.7% below the analyst consensus estimate of $85.41 million.

Market Reaction and Strategic Pivot

The market's initial reaction appears to be balancing the slight earnings beat against the weaker-than-expected guidance and the company's dramatic restructuring. The stock has experienced significant volatility in recent weeks, reflecting investor uncertainty about Chegg's future trajectory. The immediate after-market movement following the earnings release showed an uptick, suggesting some investors viewed the cost-cutting measures and strategic refocus positively.

The core of the earnings report was not just the financial figures but the announcement of a fundamental strategic overhaul. Under the returned leadership of CEO Dan Rosensweig, Chegg is splitting its operations into two distinct units. The legacy academic services business will be managed for cash flow, while the company's growth efforts are now squarely focused on the "Chegg Skilling" business, which combines assets like Busuu and Chegg Skills to target the corporate and lifelong learning market.

Financial Restructuring and Cost-Cutting

A major theme of the quarter was aggressive cost reduction. The company has undertaken a significant restructuring, which included a reduction in workforce, to streamline operations and fund its new strategic direction.

• Non-GAAP Operating Expenses: Were reduced to $49 million, down 46% year-over-year.
• Adjusted EBITDA: Was $13.3 million for the quarter, surpassing company guidance by $5 million.
• Capital Expenditures: Fell 63% year-over-year to $6 million, with further reductions planned for 2026.

Management emphasized that these actions are designed to position the company for a return to sustainable growth and profitability, with a target to reduce total non-GAAP expenses from $536 million in 2024 to under $250 million by 2026.

Business Outlook and Analyst Comparison

The company's forward-looking statements provide a clear, albeit conservative, picture of its near-term expectations. For the fourth quarter of 2025, Chegg anticipates its Skilling business to generate $18 million in revenue, representing 14% year-over-year growth. Total revenue is projected to be between $70 and $72 million, with adjusted EBITDA between $10 and $11 million.

For the full year 2025, the company expects Skilling revenues of approximately $70 million. When compared to the full-year analyst sales estimate of $394.29 million, it is evident that the legacy academic services still constitute the majority of the business, but are in a state of decline, which the growing Skilling segment is not yet large enough to offset.

Conclusion

Chegg's third-quarter earnings depict a company in the midst of a difficult but decisive transition. While it managed to control costs and exceed lowered EPS expectations for the quarter, the substantial year-over-year revenue decline and cautious fourth-quarter guidance highlight the persistent headwinds from the impact of AI on its core business. The market's reaction reflects a wait-and-see approach, weighing the potential of the new Skilling-focused strategy against the current financial contraction. The success of this pivot will be the critical factor in determining Chegg's long-term value.

For a detailed breakdown of future earnings estimates and historical performance, you can review the data here.

Disclaimer: This article is for informational purposes only and does not constitute investment advice, nor does it recommend buying or selling any securities. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.