Chegg — Second Quarter 2026 Earnings Summary

Financial Performance

• Total Net Revenues were $51.8 million, a 51% decrease year-over-year.
• Chegg Skilling Revenues were $17.5 million, a 2% increase year-over-year.
• GAAP Gross Margin was 55%; Non-GAAP Gross Margin was 57%.
• Net Loss was $3.0 million; Non-GAAP Net Loss was $2.5 million.
• Adjusted EBITDA was $9.1 million, representing a 17% margin.
• Free Cash Flow was $6.4 million for the quarter, including approximately $1.5 million in severance payments related to prior restructuring actions.
• For the first half of 2026, the company generated $9.5 million in free cash flow despite $14.4 million in severance payments.
• Second Quarter CapEx was $3.7 million, down 49% year-over-year.
• The company ended the quarter with $72.3 million in cash and investments and a net cash position of $38.5 million.
• Deferred revenue was $26.57 million as of June 30, 2026, down from $29.67 million as of December 31, 2025.
• Current portion of convertible senior notes, net, was $33.8 million as of June 30, 2026, down from $53.8 million as of December 31, 2025.

Guidance and Future Outlook

• Third Quarter 2026 Total Net Revenues are guided to be between $43 million and $44 million.
• Third Quarter 2026 Gross Margin is guided to be between 48% and 49%.
• Third Quarter 2026 Adjusted EBITDA is guided to be between $1 million and $2 million.
• The company targets a 60% reduction in CapEx for the full year 2026.
• Management expects to fully repay the convertible debt in the third quarter.
• The new employability platform is scheduled to begin rolling out across Chegg and Internships.com in the third quarter and throughout 2027.
• The company plans to expand Skills offerings into Europe in the coming years.

Business Segments and Product Lines

• Academic Services and Chegg Skilling businesses are becoming increasingly integrated as the company focuses on building an employability platform.
• Chegg Study monthly retention continued to be very strong.
• The company signed six new skilling partners this year, including OpenSesame and Dale Carnegie, with launches scheduled for the second half of the year.
• The language learning offering is being transformed into a performance platform featuring an "agentic coach" designed to help learners prepare for specific professional scenarios.
• Early next year, the company plans to integrate the agentic coach into the learner's actual workflow.
• The new employability beta has been used by more than 10,000 students.

Market and Competitive Landscape

• The company is pivoting to an employability business model to address the needs of nearly 20 million students entering the job market over the next few years.
• AI is being leveraged to personalize learning, improve outcomes, and scale more efficiently to create a leaner operating model.
• Management notes that AI created real headwinds for the company previously, but the company has responded by strengthening its balance sheet and rebuilding an AI-first cost structure.
• The company aims to automate job search, matching, and application processes to reduce friction for students.

Risks and Challenges

• The press release highlights risks related to AI technology effects, the ability to attract and retain learners amidst declining revenue, and competition in the AI and educational landscape.
• Risks include the possibility of NYSE delisting, changes in regulation concerning privacy and education, and the outcome of current litigation (including against Google).
• The company faces challenges related to international operations, cybersecurity threats, and the effectiveness of restructuring activities.

Management Commentary and Tone

• CEO Dan Rosensweig stated the company outperformed expectations on revenue, adjusted EBITDA, and cash, expressing confidence in returning Chegg to growth with high margins and strong free cash flow.
• CFO David Longo noted that Q2 non-GAAP operating expenses were $32.3 million, nearly cutting expenses in half compared to the second quarter of the prior year.
• Management described the company as "leaner, more efficient, and well positioned to generate meaningful free cash flow in 2026."
• The tone reflects confidence in the strategic pivot to an employability platform and the ability to leverage AI for cost control and operational efficiency.

Other Key Points

• The company repurchased $1.7 million of common stock during the second quarter.
• There is $120.7 million remaining on the securities repurchase authorization.
• The company is providing guidance for Total Revenue rather than separate revenue guidance for Academic Services and Chegg Skilling, citing their increasing integration.
• The company is rearchitecting to be AI-first to build a sustainable cost structure and strengthen the balance sheet.
• The new employability platform aims to help students transition from "I need a job" to "I am prepared, applied, and connected."