Chegg Q1 Earnings Call Highlights

Key Points

• Chegg beat Q1 expectations on revenue, profitability, and free cash flow, with management saying the company has been reshaped around AI and is now operating with a much leaner cost structure.
• Chegg Skilling is the growth engine, posting $17.6 million in revenue, up 9% year over year, while management reiterated it expects double-digit full-year growth and highlighted new enterprise partnerships, including Cornerstone and Woolf.
• Profitability improved sharply as non-GAAP operating expenses fell 55% year over year, adjusted EBITDA reached a 24% margin, and Chegg reported positive net income for the first time in two years while continuing to target debt repayment and lower capex.

Chegg NYSE: CHGG reported first-quarter 2026 results that exceeded its internal expectations for revenue, profitability and free cash flow, as executives said the company continues to reshape itself around artificial intelligence and a growing workforce-skilling business.

President and CEO Dan Rosensweig said Chegg’s financials, corporate structure and product experience have been “optimized around AI,” adding that the company is now leaner and better positioned for future growth with higher margins. He said Chegg has removed approximately 40% of its costs over the past six months, increased free cash flow, and put the company “on a path to 0 debt.”

“Q1 was a strong quarter,” Rosensweig said. “We exceeded our expectations for revenue, profitability, free cash flow, while still significantly reducing debt, and we continue to optimize our cost base and capital expenditure.”

Chegg Skilling Grows as Company Targets Double-Digit Expansion

Chegg Skilling generated $17.6 million in revenue in the first quarter, up 9% from the prior year, according to CFO David Longo. Management said it continues to expect double-digit revenue growth for Chegg Skilling for full-year 2026, with acceleration as the year progresses.

Rosensweig said the company is seeing traction across Chegg Skilling, including new enterprise and channel partners, and momentum in manufacturing, consulting, professional services and technology. He highlighted a newly signed partnership with Cornerstone, a learning and talent management platform, which Chegg expects to create a meaningful enterprise distribution channel for Chegg Skills.

Chegg is also expanding its skilling platform into accredited offerings. Rosensweig said the company is launching its first AI master’s program through a partnership with Woolf, combining applied learning with recognized credentials.

In language learning, Rosensweig said Chegg is moving beyond structured lessons toward “real-time, in-workflow coaching,” with AI helping learners apply skills when needed. He said the company’s approach allows it to provide skills performance data that human resources and learning and development leaders can use, shifting the focus from learning activity to measurable workplace capability.

Academic Services Managed for Cash Generation

Academic services revenue was $45.7 million in the quarter. Longo said the company continues to manage that business with a focus on maximizing cash generation, which exceeded expectations in the quarter.

Rosensweig said search-related headwinds continue to affect traffic for Chegg Study, but retention remained strong, which he said indicates that students still find value in the product. He added that free cash flow generated by Chegg Study is funding the company’s investments in skilling.

Longo said monthly retention rates in academic services were “very strong” in the quarter, extending the operational runway of the business despite ongoing traffic pressure.

Cost Cuts Boost Profitability and Cash Flow

Chegg’s non-GAAP operating expenses were $36.4 million in the first quarter, down $44.1 million, or 55%, year over year. Longo attributed the decline to disciplined expense management and said the company will continue to look for additional efficiencies, including through expanded use of AI.

Adjusted EBITDA was $15.5 million, representing a 24% margin. Longo also said Chegg delivered positive net income in the first quarter for the first time in two years.

Capital expenditures were $1 million, down 88% year over year. For 2026, Chegg is targeting a 60% reduction in capital expenditures, with approximately 90% of remaining spending dedicated to the growing skilling business.

Free cash flow was $3.1 million in the first quarter, which included approximately $12.9 million in severance payments related to prior restructuring actions. Longo said Chegg expects another $2.1 million in severance payments in the second quarter, while still expecting “meaningful free cash flow” for the full year.

The company ended the quarter with $67.9 million in cash and investments and a net cash position of $34.1 million. Longo said Chegg’s 2026 capital allocation priorities are focused on maximizing free cash flow, strengthening the balance sheet and fully repaying convertible debt by September. He also said the company will continue to evaluate capital deployment opportunities, including through its remaining securities repurchase authorization.

Second-Quarter Guidance

For the second quarter, Chegg expects:

• Chegg Skilling revenue of $17.5 million to $18 million;
• Total revenue of $49 million to $50 million;
• Gross margin of 51% to 52%;
• Adjusted EBITDA of $5 million to $6 million.

Management Details AI-Driven Product Shift

During the question-and-answer portion of the call, Rosensweig said Chegg has redesigned its products and services to be more AI-centric, with the goal of lowering costs and improving student outcomes. He said AI is being applied across both traditional skilling and language skilling, and that customers increasingly buy both as skills offerings.

Rosensweig also said Chegg had previously relied on Guild as a single distribution channel, but renegotiated that agreement to allow the company to work with additional partners. He said Chegg has signed multiple distribution agreements, some of which have not yet been announced at the request of partners.

“None of them have to build particularly large for us to achieve the 10% year-over-year growth rate target that we desire for this year,” Rosensweig said.

In response to a question about “learning in the flow of work,” Rosensweig said that concept is central to Chegg’s product strategy. He pointed to a language-learning capability the company is building called Pulse, designed to provide real-time prompts during workplace tasks such as negotiations.

He said AI is also enabling Chegg to create and update content faster, reduce friction for users and customers, and deliver more consistent quality at scale.

“We think we’re ahead of most people,” Rosensweig said, adding that partner interest has helped Chegg sign deals quickly.

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&A support; Chegg Writing, offering plagiarism checks and guided writing assistance; and Chegg Math Solver, a tool for solving mathematical problems with detailed explanations.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.