CHGG · Chegg, Inc.

Chegg, Inc. delivered Q1 2026 results exceeding expectations despite a 48% year-over-year decline in total net revenues to $63.3 million, driven primarily by weakness in Academic Services at $45.7 million amid ongoing search traffic headwinds. However, Chegg Skilling revenues grew 9% to $17.6 million, underscoring momentum in this high-margin segment, with management reiterating double-digit growth for full-year 2026 and acceleration expected later in the year. Key partnerships, including with Cornerstone for enterprise distribution and Woolf for accredited AI master's programs, position Skilling for expansion in manufacturing, consulting, and technology sectors. Profitability metrics strengthened significantly: GAAP gross margin at 60%, non-GAAP at 62%, adjusted EBITDA of $15.5 million (24% margin), and GAAP net income of $0.2 million—the first positive figure in two years. This was fueled by aggressive cost reductions, with non-GAAP operating expenses down 55% YoY to $36.4 million, CapEx slashed 88% to $1 million, and free cash flow of $3.1 million despite severance outflows. Balance sheet shows $67.9 million in cash and investments, net cash of $34.1 million, supporting plans to repay convertible debt by September 2026. Q2 guidance signals sequential revenue pressure with total net revenues of $49-50 million but steady Skilling at $17.5-18 million, gross margin 51-52%, and adjusted EBITDA $5-6 million. CEO Dan Rosensweig highlighted AI-driven efficiencies, leaner operations post-40% cost cuts, and strong retention in Chegg Study funding Skilling investments, expressing confidence in sustained profitability and shareholder value creation.