Chegg Q2 Earnings Call Highlights
Key Points
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- Q2 results exceeded expectations: Chegg reported $51.8 million in revenue, $9.1 million in adjusted EBITDA with a 17% margin, and $6.4 million in free cash flow. The company reduced non-GAAP operating expenses nearly 50% year over year and expects to remain free-cash-flow positive in the second half.
- Chegg is pivoting toward AI-powered employability: The company plans to soft launch a platform in Q3 that will help students with career coaching, job matching, resumes, applications, interview preparation and skills gaps, building on a beta used by more than 10,000 students.
- Near-term outlook remains weak but the balance sheet is improving: Chegg expects Q3 revenue of $43 million to $44 million and adjusted EBITDA of $1 million to $2 million. It ended the quarter with $72.3 million in cash and investments and expects to fully repay its convertible debt in Q3.
Chegg (NYSE:CHGG) said its second-quarter 2026 results exceeded its expectations for revenue, adjusted EBITDA and cash generation as the education technology company prepares to launch a broader employability-focused platform for students.
Total revenue in the second quarter was $51.8 million. Adjusted EBITDA was $9.1 million, representing a 17% margin, while free cash flow totaled $6.4 million, including about $1.5 million in severance payments related to prior restructuring actions.
President and CEO Dan Rosensweig said the company has been restructuring its operations to become “AI-first,” with the aim of returning to growth while maintaining high margins and generating strong free cash flow. He said Chegg’s next strategic chapter will center on helping students move from learning into internships and employment.
Employability Platform Rollout
Beginning in the third quarter, Chegg plans to soft launch a new service designed to automate elements of job searching, matching and career coaching. The company expects to roll out the offering across its Chegg platform and Internships.com during the third quarter and throughout 2027.
Rosensweig said the platform is intended to help students identify appropriate majors, courses and skills, while also assisting with job applications. Planned capabilities include tailoring resumes, drafting cover letters, filling out and submitting applications, initiating alumni outreach, providing company-specific interview preparation and identifying skill gaps.
Chegg said more than 10,000 students have used the beta version and provided feedback. Rosensweig said the company believes it can build awareness through its existing customer base, substantial traffic and the organic traffic to Internships.com, which Chegg acquired more than a decade ago.
“Nobody was putting all of this together in one place,” Rosensweig said, describing the company’s view that students need more integrated support in selecting courses, developing skills, building networks and preparing for interviews.
He said the company intends to use its academic data, AI capabilities and historical question-and-answer content to expand from academic support into career-related assistance. Chegg also expects to develop shorter and more accessible skills content over time, with courses tailored to the skills employers identify as important.
Skills and Language Strategy
Chegg said its Chegg Skills business remains a component of its growth strategy and has been developed as a multi-channel platform serving enterprise, institutional, employer and marketplace customers. The company signed six new partners during the year, including OpenSesame and Dale Carnegie, with launches planned for the second half of 2026.
The company also plans to broaden its language-learning offering into what Rosensweig described as a performance platform. Its agentic coach is designed to help learners prepare for situations such as client calls, presentations and interviews. Chegg expects to integrate the coach into learners’ workflows early next year and is expanding its skills offerings into Europe.
Management said AI is central to the strategy, both for personalization and operating efficiency. Rosensweig said AI had created headwinds for Chegg’s business but is now enabling the company to operate with a leaner cost structure and pursue the employability opportunity.
Cost Reductions, Cash Flow and Balance Sheet
Chief Financial Officer David Longo said second-quarter non-GAAP operating expenses were $32.3 million, nearly half the level reported in the second quarter of the prior year. The reduction reflected expense management and the increased use of AI to improve productivity, he said.
Capital expenditures were $3.7 million in the quarter, down 49% year over year. Chegg is targeting a 60% reduction in capital expenditures for full-year 2026.
For the first half of the year, Chegg generated $9.5 million in free cash flow despite $14.4 million in severance payments. Longo said severance payments are “almost all behind us,” and that the company expects to remain free-cash-flow positive in the second half of the year. He noted that the third quarter is traditionally a slower period for the company, while the fourth quarter has historically been its strongest period for cash generation.
Chegg ended the quarter with $72.3 million in cash and investments and a net cash position of $38.5 million. The company repurchased $1.7 million of common stock during the quarter and had $120.7 million remaining under its repurchase authorization.
Longo also said Chegg expects to fully repay its convertible debt in the third quarter, which management said would further strengthen its balance sheet and financial flexibility.
Third-Quarter Outlook
Chegg changed its reporting approach for guidance, saying that as Academic Services and Chegg Skills become more integrated, total revenue and adjusted EBITDA are the most meaningful performance measures. The company will no longer provide separate revenue guidance for the businesses.
- Total revenue of $43 million to $44 million.
- Gross margin of 48% to 49%.
- Adjusted EBITDA of $1 million to $2 million.
Management said it believes its academic products continue to have durable cash-generation potential, supported by strong monthly retention in Chegg Study, while the company invests in distribution partnerships, skills offerings and its new employability platform.
About Chegg (NYSE:CHGG)
Chegg, Inc (NYSE: CHGG) is a leading education technology company headquartered in Santa Clara, California. Originally founded in 2005, Chegg has evolved from a textbook rental service into a comprehensive digital learning platform. Its suite of subscription-based offerings addresses a wide range of academic needs, catering primarily to high school and college students seeking homework help, study resources, and career guidance.
The company's core services include Chegg Study, which provides step-by-step solutions and expert Q support; Chegg Writing, offering plagiarism checks and guided writing assistance; and Chegg Math Solver, a tool for solving mathematical problems with detailed explanations.
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