Chegg’s Collapse: How AI Tools Eroded a $15 Billion Tech Giant in Four Years Chegg, the American education technology company that rose to prominence during the pandemic, has faced a dramatic decline in value, with its market capitalization plummeting from over $14.7 billion in 2021 to roughly $156 million by 2025. The company, once a dominant force in online learning with a stock price peaking at $113.51 per share in February 2021, now trades at just $0.99 per share, reflecting a staggering 99% loss in value. Chegg’s recent quarterly results for the first quarter of 2026, set to be released on May 6, show total net revenues of $72.7 million—a 49% year-over-year decline. The company’s struggles began as generative AI tools like ChatGPT disrupted its core business model. By October 2023, Chegg announced the layoff of 45% of its workforce, or 388 employees, as it grappled with falling demand for its textbook rental and homework help services. Students increasingly turned to free AI chatbots, which could solve math problems and draft essays in seconds, rendering Chegg’s paid subscriptions obsolete. “The new realities of artificial intelligence... have led to plummeting revenue,” the company admitted in a statement at the time. Chegg’s challenges extended beyond AI. The company filed a lawsuit against Google, alleging that the search engine’s AI-generated summaries at the top of search results were “stealing” its traffic. By providing instant answers to students, Google cut off the flow of visitors to Chegg’s website, a claim echoed by other publications. The combined impact of ChatGPT’s instant solutions and Google’s AI-driven search results squeezed Chegg’s traditional business model into near-extinction. The decline was rapid and severe.#google #ai #chatgpt #new_york_stock_exchange #chegg
Chegg Becomes First Company Wiped Out by AI Disruption The collapse of Chegg, once a dominant player in the EdTech sector, marked a historic moment in the evolution of artificial intelligence’s impact on traditional industries. The company’s downfall, which unfolded over a three-year period, was triggered by the rapid rise of AI-powered tools like ChatGPT, which fundamentally disrupted Chegg’s business model and eroded its market value. In early 2021, Chegg was at the peak of its success, valued at $14.5 billion. The company had built its empire on a proprietary database of 79 million step-by-step homework solutions, which it sold to college students for $19.95 per month. This model had been a cornerstone of its growth, particularly during the pandemic, when demand for online learning tools surged. However, the company’s dominance was short-lived. The turning point came on May 2, 2023, during an earnings call where then-CEO Dan Rosensweig admitted that ChatGPT, the free AI chatbot launched just five months earlier, was actively harming Chegg’s new customer growth. This admission sent shockwaves through Wall Street, leading to an immediate 50% drop in Chegg’s stock price. The company’s market capitalization plummeted by nearly $1 billion in a single day, marking the first time a publicly traded company officially blamed AI for its financial decline. The core of Chegg’s problem lay in the stark contrast between its paid service and the free, AI-driven alternatives. Students who once paid for access to human-generated solutions now had an instant, cost-free alternative in ChatGPT. The AI tool could not only solve equations but also explain underlying concepts and answer follow-up questions, rendering Chegg’s offerings obsolete. This shift created a “free vs.#chatgpt #new_york_stock_exchange #chegg #dan_rosensweig #ai_disruption
