Chegg — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total net revenues for the quarter ended September 30, 2026, were $46.5 million, a 40% decrease year-over-year compared to $77.7 million in Q3 2025.
• Gross margin was 52%, down from 59% in the prior year quarter; non-GAAP gross margin was 54%.
• Net loss was $4.7 million, compared to a net loss of $17.5 million in Q3 2025.
• Non-GAAP net loss was $5.7 million, compared to a non-GAAP net income of $0.4 million in Q3 2025.
• Adjusted EBITDA was $5.4 million, representing a 12% margin, compared to $13.3 million in Q3 2025.
• Non-GAAP operating expenses were $31.2 million, a 36% decrease year-over-year.
• Free cash flow for the quarter was $5.5 million.
• Cash and investments ended the quarter at $43.6 million.
• The company fully repaid its remaining convertible senior notes, eliminating all debt.
• Deferred revenue was $25.7 million as of September 30, 2026, down from $29.7 million as of December 31, 2025.

Guidance and Future Outlook:

• Fourth quarter 2026 total net revenue is guided to be between $38 million and $40 million.
• Fourth quarter 2026 gross margin is guided to be in the range of 46% to 48%.
• Fourth quarter 2026 adjusted EBITDA is guided to be approximately $1 million.
• Management targets a greater than 60% reduction in capital expenditures for the full year 2026.
• Q3 2026 CapEx was $1.7 million, down 71% year-over-year.
• The company expects the employability platform to contribute more meaningfully to revenue in 2027.
• Management plans to expand the employability platform through 2027 and beyond.

Business Segments and Product Lines:

• Chegg is transitioning from a homework help company to an employability company focused on internships, job skills, and full-time employment.
• Launched a new employability platform on Internships.com in September, featuring personalized job matching, resume tailoring, one-click apply, interview prep, skills assessment, and curated network connections.
• The Internships.com platform received over 100,000 visitors since launch.
• Plans to add 70,000 early career listings to the Internships.com platform to move beyond internships into entry-level roles.
• Signed pilot programs with College of Charleston, Salem College, and Radford University for the B2I channel.
• Signed 11 new distribution partners since the start of the year, including Power Train.
• Enhanced skills platform capabilities to scale tailored learning programs directly from client systems and measure demonstrated proficiency.
• Language learning product returned to growth in both B2B and B2C channels, adding workplace skills content for English-speaking premium subscribers and expanding to Spanish, French, German, and Italian.

Market and Competitive Landscape:

• Higher education is undergoing a dramatic transformation, with institutions increasingly measuring success by graduate employment outcomes.
• Economic uncertainty and anxiety around AI have increased the urgency for students to secure jobs.
• Management views the market opportunity as growing, driven by the need for employability solutions.
• Competition is expected to increase, particularly regarding AI and Chegg's ability to innovate.

Risks and Challenges:

• AI technology has significantly impacted the traditional academic services business, necessitating a company reinvention.
• The legacy homework-help business continues to decline as expected.
• Risks include the ability to attract and retain learners amidst declining revenue and user traffic.
• Potential risks involve the ability to diversify revenue streams, maintain brand reputation, and navigate evolving educational landscapes.
• Risks related to cybersecurity, data privacy regulations, and litigation outcomes are noted.
• There is a risk that the NYSE may delist the company's common stock.

Management Commentary and Tone:

• Executive Chairman and CEO Dan Rosensweig stated the balance sheet reset is complete and the company is positioned to return to growth.
• Management expressed excitement about the employability pivot, describing the current moment as the start of a new growth chapter.
• CFO David Longo noted the quarter exceeded expectations and highlighted the successful execution of cost management and debt elimination.
• Management emphasized a strategic and targeted approach to growth, including potential inorganic opportunities.
• The tone was confident regarding the clean balance sheet and the momentum of the new employability platform.

Other Key Points:

• The company eliminated its debt as a key objective for 2026.
• Management is reviewing companies with strong IP and customer bases for potential acquisition to leverage the new employability platform.
• The company operates with a focus on generating free cash flow and maintaining a strong balance sheet.
• An updated investor presentation and investor data sheet are available on the Chegg Investor Relations website.
• The company reported a gain on lease termination and litigation settlement credits in the reconciliation of non-GAAP measures.