Chegg’s second quarter was marked by ongoing challenges in its core academic business, as the company reported a sharp drop in subscribers and year-over-year revenue. Management attributed this to lower traffic, particularly due to changes in Google’s AI-driven search overviews, which reduced student discovery of Chegg’s services. CEO Nathan Schultz described the quarter as a period of transformation, highlighting that, despite the subscriber decline, “retention and ARPU increased year-over-year, demonstrating that when students find Chegg, they value the service and are retaining as well as ever.” Disciplined cost management and progress in restructuring initiatives were central to the company’s performance, as Chegg identified additional savings to be realized in the coming year.
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Revenue: $105.1 million vs analyst estimates of $101.2 million (35.6% year-on-year decline, 3.8% beat)
Adjusted EPS: $0.10 vs analyst estimates of $0.05 (significant beat)
Adjusted EBITDA: $23.11 million vs analyst estimates of $16.67 million (22% margin, 38.6% beat)
Revenue Guidance for Q3 CY2025 is $76 million at the midpoint, below analyst estimates of $87.16 million
EBITDA guidance for Q3 CY2025 is $7.5 million at the midpoint, below analyst estimates of $13.15 million
Operating Margin: -34.7%, up from -297% in the same quarter last year
Services Subscribers: 2.62 million, down 1.75 million year on year
Market Capitalization: $120.2 million
While we enjoy listening to the management’s commentary, our favorite part of earnings calls are 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.
Matthew Dineen Shea (Needham): Asked about the sustainability of Busuu’s B2B growth with current channel partners. CEO Nathan Schultz explained that strong internal sales force performance and direct client relationships, in addition to partnerships, position Busuu to continue expanding without relying solely on resellers.
Matthew Dineen Shea (Needham): Inquired about the expansion of Chegg Study’s institutional pilots. Schultz emphasized that future growth depends on efficacy studies with partner schools, aiming to demonstrate academic outcomes and build a business case for broader adoption in 2026 and beyond.
Devin Au (KeyBanc Capital Markets): Queried the drivers of resilience in Busuu’s B2C business. Schultz credited a focus on “success seeker” personas—users with a career or life need for language learning—and highlighted the role of AI-powered features in improving user engagement and conversions.
Devin Au (KeyBanc Capital Markets): Asked about Chegg’s positioning in the evolving AI education market, particularly as large tech companies increase their own upskilling offerings. Schultz responded that Chegg’s approach is to offer shorter, modular courses aligned with current workforce demand, distinguishing its Skills business from traditional, long-form boot camps.
No further analyst questions were asked during the call.
