A well-known Silicon Valley education technology company, Chegg, laid off nearly half of its staff, sending 388 people home in a single day.
This is the most significant single layoff percentage among major education technology firms since the widespread adoption of free AI chatbots, such as ChatGPT, by students.
Chegg’s executives blamed artificial intelligence for undermining their old business, which once served millions of paying students, as fewer people now want to pay for homework help that can be obtained for free from AI.
Free Beats Paid
In 2025, many students stopped paying for Chegg because they could get the same help instantly—and for free—from AI like ChatGPT.
By mid-year, Chegg had lost 40% of its subscribers compared to last year, dropping to 2.6 million.
Revenue fell 36% in the second quarter, as even Google began providing AI-generated answers in search, resulting in fewer students visiting Chegg’s website.
Students no longer wanted to pay $20 a month when they could get similar help for free.
Pandemic Winner, AI Loser
Chegg started in 2000 as a textbook rental business but grew rapidly during the pandemic, when remote learning made it a leader in online homework help.
Its stock peaked in 2021, but the launch of ChatGPT changed everything. Chegg’s leaders initially believed AI wasn’t a serious competitor, thinking students would prefer step-by-step human assistance.
They badly underestimated how quickly AI would replace their main product.
Traffic Apocalypse
When Google introduced AI Overviews—AI answers at the top of search—the number of people visiting Chegg’s site dropped nearly 50% by early 2025.
Most students got their answers from Google, so they never clicked over to Chegg.
The company even attempted to sue Google for stealing its content and traffic, but it made no difference: fewer students visited, signed up, or paid for Chegg.
Mass Layoff Spiral
On October 27, Chegg announced it was cutting 388 employees, nearly 45% of its staff. This came after the company fired 22% more workers in May.
Altogether, about two-thirds of Chegg’s workforce was let go in 2025.
The company also replaced its CEO again, bringing back longtime chief Dan Rosensweig to handle the crisis as Chegg stock fell 99% from its high, now trading barely above $1.
Bay Area Devastation
The layoffs hit hardest in the San Francisco Bay Area, home to Chegg’s main offices and tech teams.
With other education tech companies also shrinking, many highly specialized workers in Santa Clara County suddenly found themselves seeking jobs as the sector contracted.
The region, once booming with edtech, faced a surge in unemployment in 2025.
Silent Exits
Unlike other Silicon Valley layoffs, former Chegg employees have mostly stayed silent online.
Insiders suggested that workers were either concerned about speaking out publicly or were compelled to remain quiet due to strict confidentiality agreements.
The outgoing CEO received over $3 million in severance pay, frustrating many staff who lost their jobs and saw top executives rewarded even as the company fell apart.
Competitor Strategies
Other tech education companies also felt the effects of AI, but the ones that adapted survived better.
Sites like Khan Academy added AI helpers, some sites stayed focused on community answers, and others began charging for live lessons that AI can’t match.
It’s only the traditional homework help subscription companies, like Chegg, that saw the worst drop in demand and revenue.
Industry Reckoning
Globally, the education technology sector lost over 181,000 jobs by October 2025.
While some companies failed because they hired too many people, Chegg’s fall occurred because AI rendered its paid service largely unwanted almost overnight.
In countries like India, job cuts occurred more slowly, but U.S. firms like Chegg and Byju’s demonstrated how rapidly technology can disrupt entire businesses.
The Delisting Scare
Six months before the October layoffs, Chegg’s stock price dropped below $1, putting it at risk of being delisted from the stock market.
The company attempted to sell itself but was unable to find any buyers, as no one wanted a business that was losing customers so rapidly to AI.
Chegg decided to stay independent instead, but its troubles only grew larger.
Boardroom Dysfunction
A director on the Chegg board quit a week before the major layoff—a sign of possible disagreement over just how severe the cuts should be.
Employees stated that leaders had ignored their calls to develop AI tools years earlier, leaving Chegg completely unprepared for the AI revolution that ultimately led to the loss of most of their jobs.
The Comeback Architect
Dan Rosensweig, age 63, returned as CEO, with a possible payout of millions if he can somehow turn Chegg around.
Yet most financial experts are skeptical that anyone can save a company whose old business—paid homework help—was wiped out by free AI: Rosensweig and the board hope to find new ways to make money with far fewer employees.
Pivot to B2B
The company’s new plan is to sell its content and services to other businesses, such as AI chatbot makers and colleges, rather than relying solely on direct subscriptions from students.
They are also expanding language learning and professional upskilling products, since these areas are doing better than traditional homework help.
Yet, this is a much smaller business than what Chegg once had.
Analyst Pessimism
Most financial analysts now recommend selling Chegg stock or waiting for a change, expecting little chance that the company can recover.
Chegg attempted to launch its own AI tutors, but students opted for free ChatGPT instead.
Experts say Chegg lost its reason to exist as soon as free AI became good enough for most homework.
Existential Question
Chegg’s collapse demonstrates that even large, successful companies can be quickly destroyed when free technology replaces their key service.
This could happen to many industries, not just education: any business that sells answers, information, or content could see rapid job losses and new AI competitors.
Jobs in knowledge industries may become rare or shift primarily to supervising the technology that replaces traditional workers.