Chegg's Q2 Earnings Call Places Emphasis on Employability

CHGG Recasts Its Growth Story Around Jobs

Rosensweig said that Chegg’s long-term goal is a return to growth with high margins and strong free cash flow, but the route now centers on helping students move from education to employment.

The planned platform will combine job search and matching with coaching on majors, courses and skills. It will also support resumes, applications, alum outreach, interview preparation and targeted skill building.

More than 10,000 students have used the beta. Management plans to roll out the service through Chegg and Internships.com beginning in the third quarter and continue expanding it throughout 2027.

Chegg Builds Out Employability Stack

Rosensweig positioned Chegg Skills as a key component of the employability strategy. Skilling revenues rose 2% year over year to $17.5 million in the second quarter.

The company has signed six new partners, including OpenSesame and Dale Carnegie, with launches planned for the second half. Management also intends to expand Skills into enterprises, schools and Europe.

Chegg is recasting language learning as a workplace performance offering. Rosensweig said that an agentic coach would help learners prepare for client calls, presentations and interviews, with workflow integration planned for early next year.

CHGG Uses AI to Reset Cost Base

CFO David Longo said that second-quarter non-GAAP operating expenses were $32.3 million, nearly half the prior-year level, reflecting restructuring and greater use of AI to improve productivity.

Adjusted EBITDA was $9.1 million, with a 17% margin. The second-quarter free cash flow was $6.4 million despite $1.5 million in severance payments, while the first-half free cash flow reached $9.5 million.

Longo said that Chegg ended the quarter with $72.3 million in cash and investments, and $38.5 million in net cash. The company repurchased $1.7 million worth of stock and expects to fully repay its convertible debt in the third quarter.

Chegg Guides for Softer Q3

Management plans to guide on total revenues rather than separate Academic Services and Chegg Skilling revenues, citing integration around employability.

For the third quarter, Chegg expects total revenues of $43-$44 million, a gross margin of 48-49% and an adjusted EBITDA of $1-$2 million.

CHGG Q&A Sharpens Employability Case

A Needham analyst asked how Chegg would differentiate its new offering from other job and networking platforms, and build student awareness. Rosensweig emphasized Chegg’s existing student reach, data and Internships.com traffic.

He said that the platform is designed to connect academic history, skills, alum relationships and job applications in one place. Management plans to use AI to make related content more personalized and affordable.

On cash flow, Longo said that nearly all restructuring-related severance payments are behind the company. He called the third quarter traditionally slower and the fourth quarter the strongest cash-generation quarter, while maintaining an expectation for a positive second-half free cash flow.

Chegg Keeps Transition Disciplined

Management framed restructuring, debt reduction and cash generation as the financial base for a broader strategic reset. The employability product remains early in its rollout, with management describing the buildout as a multi-year effort.

The priorities coming out of the call are to launch the employment experience, broaden Skills distribution, use AI to lower costs and preserve free cash flow, while pursuing a return to growth.

Zacks Signals for CHGG

CHGG currently carries a Zacks Rank #3 (Hold). Its Momentum Score of A, Growth Score of B and VGM Score of B are favorable grades within the Style Score framework, while its Value Score of C is less strong. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The framework emphasizes Zacks Rank #1 and #2 (Buy) stocks paired with A or B Style Scores. CHGG’s Zacks Rank of 3 is more neutral despite favorable Momentum, Growth and VGM scores, and the Zacks Rank can change as earnings estimates are revised after the results.

Research Chief Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research