Chegg (NYSE:CHGG) used its fourth-quarter 2025 earnings call to outline what CEO Dan Rosensweig described as a “period of reinvention,” as the company shifts focus from its legacy academic learning services to a skilling-led model aimed at the roughly $40 billion workforce skilling market. Management said the company has reorganized into two business units: Chegg Skilling, positioned as the growth engine, and academic learning services, which the company is managing for free cash flow.
Strategic reset centers on skilling growth
Rosensweig said Chegg is rebuilding around skilling areas including AI, language, technical fluency, and “durable skills,” and is transitioning from a direct-to-consumer business toward a B2B skills learning platform. He highlighted Chegg’s emphasis on learning science, data-driven instructional design, and platform features that track learner progress and deliver interventions intended to improve engagement and completion. Rosensweig said channel partners have reported stronger outcomes versus competitors, including conversion, completion, and renewals.
In a leadership update, Rosensweig said Karine Allouche will join the company to run its European language learning and skills operation. He cited her prior experience at Microsoft, NetApp, GlobalEnglish, and Coursera, where he said she led a transformation of Coursera’s enterprise business.
Legacy academic business managed for cash amid traffic pressure
Rosensweig said changes in search interfaces have continued to impact Chegg’s traffic. However, he emphasized that service quality and accuracy are supporting high retention rates, which management views as important to extending the legacy business’s runway and generating cash to fund skilling investments.
During the Q&A, Rosensweig said the company was roughly “40% through the quarter” in the academic learning business and tracking largely as expected, with retention “a little bit stronger than we thought.” He said that when traffic “gets through,” Chegg continues to convert well, and retention is at the highest levels he has seen. He also discussed ongoing pricing and packaging tests, noting that early results are being evaluated based on month-one retention and that performance has been “quite well” so far, though he said it was too early to draw firm conclusions.
Financial results show lower cost base and adjusted EBITDA outperformance
CFO David Longo said the company exceeded revenue expectations and came in $2 million above the high end of adjusted EBITDA guidance, attributing part of the performance to early impacts from the company’s new structure and turnaround efforts.
Longo detailed the quarter’s revenue mix:
- Skilling revenue: $18 million, which management characterized as double-digit growth
- Academic services revenue: $55 million, with the business operated for cash generation
On costs, Longo said non-GAAP operating expenses were $44.8 million, down $39.8 million, or 47%, year-over-year, reflecting restructuring execution and what he described as continued fiscal discipline. Chegg posted adjusted EBITDA of $13 million, representing an 18% margin. Longo also pointed to the company’s adoption of AI and revised structure as drivers of lower expenses “while preserving our ability to grow.”
Longo said Chegg is on track to reduce total non-GAAP expenses to less than $250 million in 2026, which he described as a 53% decline from 2024. Capital expenditures in Q4 were $6 million, down 51% year-over-year, and Longo said the company is targeting a further 60% reduction in 2026, with approximately 90% of Capex dedicated to the skilling business.
Free cash flow in Q4 was negative $15 million, which Longo said was primarily impacted by $12 million in employee severance payments tied to restructuring. For 2026, he said Chegg expects $18 million in severance-related cash expenditures from the last two restructurings, with about 80% occurring in Q1, while still expecting “meaningful” free cash flow for the full year.
Balance sheet actions and NYSE notice
Longo said Chegg repurchased $9 million of its 2026 convertible notes at a discount during the quarter. The company ended the quarter with $85 million in cash and investments and a net cash balance of $31 million.
Longo also addressed a NYSE delisting notice, stating it has no immediate impact on Chegg’s listing status and that the company has “ample time and multiple avenues” to regain compliance, including a potential reverse stock split. He said management’s primary focus is strengthening the fundamentals of the business.
Q1 2026 outlook and skilling priorities
For the first quarter of 2026, Longo guided to:
- Chegg Skilling revenue: $17.5 million to $18.0 million
- Total revenue: $60 million to $62 million
- Gross margin: 57% to 58%
- Adjusted EBITDA: $11 million to $12 million
Longo said Chegg expects double-digit skilling growth through 2026, with stronger performance in the second half driven by continued investment and additional distribution partners.
Rosensweig summarized the company’s priorities for 2026 as accelerating skilling growth through expanded offerings and partner networks, increasing free cash flow to invest in skilling, and strengthening the balance sheet with a goal of ending the year with zero debt and a meaningful cash balance. In Q&A, he said Chegg’s skilling KPIs are centered on expanding distribution channels and expanding curriculum to sell more into existing and new channels, and he characterized early progress as slightly faster than he would have expected.
About Chegg (NYSE:CHGG)
Chegg, Inc (NYSE: CHGG) is a leading education technology company headquartered in Santa Clara, California. Originally founded in 2005, Chegg has evolved from a textbook rental service into a comprehensive digital learning platform. Its suite of subscription-based offerings addresses a wide range of academic needs, catering primarily to high school and college students seeking homework help, study resources, and career guidance.
The company’s core services include Chegg Study, which provides step-by-step solutions and expert Q&A support; Chegg Writing, offering plagiarism checks and guided writing assistance; and Chegg Math Solver, a tool for solving mathematical problems with detailed explanations.
