Chegg Q4 Earnings & Revenues Surpass Estimates, Stock Down

Chegg, Inc. CHGG reported fourth-quarter 2025 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Meanwhile, on a year-over-year basis, both the top and bottom lines declined.

Following the results, shares of CHGG declined 2.7% in the after-hours trading session yesterday.

The quarterly results were pressured by a sharp year-over-year revenue decline, continued traffic headwinds from changes in search interfaces, negative free cash flow due to restructuring-related severance payments and a NYSE compliance notice, underscoring the challenges associated with Chegg’s transition toward a skilling-focused business model.

However, double-digit growth in the Chegg Skilling segment, strong retention in the Academic Services business, expansion of enterprise and institutional partnerships and meaningful cost reductions driven by restructuring initiatives and AI-enabled efficiencies position the company to support long-term growth, improved profitability and a more sustainable operating model.

CHGG’s Q4 Earnings & Revenue Discussion

The company reported an adjusted loss per share of 1 cent, which came narrower than the Zacks Consensus Estimate of a loss of 11 cents. In the year-ago period, the company reported an earnings per share (EPS) of 17 cents.

Net revenues of $72.7 million surpassed the consensus mark of $71 million by 1.9% but declined 49.4% year over year.

Revenues from the Skills and Other product line totaled $17.7 million, reflecting double-digit growth that underscores both the significant market opportunity and strong momentum, while Academic Services revenues reached $54.9 million.

Chegg’s Operating Highlights

Gross profit in the fourth quarter was down 57.4% year over year to $41.7 million, with the gross margin contracting 1,100 basis points (bps) to 57%.

Total operating expenses declined year over year by 39.4% to $75.9 million from $125.2 million.

Adjusted EBITDA was $12.9 million, down from the prior-year quarter’s level of $36.6 million.

Liquidity & Cash Flow of CHGG

As of Dec. 31, 2025, Chegg had cash and cash equivalents of $31.1 million compared with $161.5 million as of 2024.

For 2025, net cash provided by operating activities totaled $15.5 million, down from $125.2 million in the year-ago period. Free cash flow at the end of the fourth quarter was negative $12.6 million, down from $50.3 million a year ago.

CHGG’s 2025 Highlights

Total net revenues for 2025 came in at $376.9 million compared with $617.6 million reported in 2024.

Adjusted EBITDA in 2025 came in at $68.5 million compared with $149.7 million reported in 2024.

In 2025, adjusted EPS came in at 3 cents compared with 75 cents reported in the previous year.

Chegg Unveils Q1 2026 Outlook

For the first quarter of 2026, Chegg expects net revenues in the range of $60-$62 million compared with $121.4 million reported in the year-ago quarter. Chegg Skilling revenues are expected to be between $17.5 million and $18 million, implying continued year-over-year growth in the skilling segment even as legacy Academic Services decline.

The gross margin is expected to be between 57% and 58% compared with 56% reported a year ago. Adjusted EBITDA is projected to be between $11 million and $12 million, down from the $19.3 million reported a year ago.

While Chegg did not issue full-year revenue guidance, the company expects double-digit growth in Chegg Skilling for 2026, with performance weighted more heavily toward the second half of the year as new enterprise, institutional and marketplace partnerships ramp. By contrast, Academic Services is being managed for cash, not growth, with pricing and packaging changes aimed at extending its cash-flow runway amid traffic pressure from evolving search behavior.

Management reiterated its goal of achieving adjusted EBITDA margins of at least 20% over the next couple of years, driven by a structurally lower cost base, AI-enabled efficiency gains and disciplined capital allocation. For 2026 specifically, non-GAAP expenses are expected to fall below $250 million, representing a sharp step down versus prior years.

Chegg expects to generate meaningful free cash flow in 2026 despite remaining restructuring-related cash outflows early in the year. Capital expenditures are projected to decline about 60% year over year, with roughly 90% of CapEx directed toward the Skilling business. Management expects to exit 2026 debt-free with a meaningful cash balance, reinforcing financial flexibility.

CHGG’s Zacks Rank & Key Picks

Currently, Chegg carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the Computer and Technology sector are:

Amphenol Corporation APH presently sports a Zacks Rank #1 (Strong Buy). The company delivered a trailing four-quarter earnings surprise of 16.5%, on average. Amphenol stock has jumped 31.3% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Amphenol’s 2026 sales and EPS indicates growth of 34.9% and 29.3%, respectively, from the year-ago period’s levels.

NVIDIA Corporation NVDA carries a Zacks Rank of 2 (Buy) at present. The company delivered a trailing four-quarter earnings surprise of 2.8%, on average. NVIDIA stock has gained 4.4% in the past six months.

The Zacks Consensus Estimate for NVIDIA’s 2026 sales and EPS indicates growth of 62.9% and 55.9%, respectively, from the prior-year levels.

Vertiv Holdings Co VRT has a Zacks Rank of 2 at present. The company delivered a trailing four-quarter earnings surprise of 14.9%, on average. Vertiv stock has rallied 44.4% in the past six months.

The Zacks Consensus Estimate for Vertiv’s fiscal 2026 sales and EPS indicates growth of 21.1% and 26.4%, respectively, from the prior-year levels.

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This article originally published on Zacks Investment Research (zacks.com).

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