At the start of 2021, Chegg’s stock soared past $113 per share, giving it a market capitalization of $14.7 billion. Its subscription-based model—built on a proprietary database of tens of millions of homework solutions—seemed unshakable. But by 2026, Chegg’s market cap had collapsed to just $114 million, with shares trading at $0.99, a staggering 99% loss in value in just over three years.

From Untouchable to Obsolete

For two decades, Chegg paid thousands of contractors to build a database of 79 million step-by-step homework answers, charging students $19.95 per month for access. It also offered textbook rentals and a vast online learning platform.

But the arrival of ChatGPT in late 2022 changed everything. On May 2, 2023—just five months after ChatGPT’s launch—CEO Dan Rosensweig admitted on an earnings call that the free chatbot was severely hurting new customer growth. Wall Street panicked, and Chegg’s stock plunged nearly 50% in a single day, erasing $1 billion in market value.

Why pay $20 a month for delayed solutions when ChatGPT could instantly solve equations, explain concepts, and answer unlimited follow-up questions—for free? AI shattered every link in Chegg’s value chain overnight.

Failed Pivot: CheggMate

In April 2023, Chegg partnered with OpenAI to launch CheggMate, an AI tutoring tool built on GPT-4. But students quickly realized it was just a paid wrapper around technology they could already access for free. Subscriber numbers continued to bleed, dropping by half a million paid users.

Double Blow: ChatGPT and Google AI Overviews

While ChatGPT drained Chegg’s subscriber base, Google’s AI Overviews destroyed its web traffic. Previously, students searching “solve this physics problem” would click Chegg links. But starting in 2024, Google began displaying AI-generated answers directly in search results, cutting Chegg off at the source.

By October 2025, Chegg announced layoffs of 45% of its workforce (388 employees), following a 22% cut earlier that year. In total, 67% of staff were let go in just five months, and all U.S. and Canadian offices were closed.

Chegg even sued Google, claiming AI-generated summaries were “stealing” its traffic. But the damage was already done.

Financial Collapse

Chegg’s Q4 2025 earnings showed net revenue of $72.7 million, down 49% year-over-year. Paid subscribers fell from 5 million to under 3 million. The company narrowly avoided delisting from the New York Stock Exchange after its stock price hovered below $1 for months.

A Cautionary Tale

In just 39 months, Chegg’s traditional business model was obliterated by the combined force of ChatGPT and Google’s AI Overviews. The speed of the collapse was brutal.

Chegg’s story is a stark warning: even a $15 billion company with decades of proprietary data can become obsolete almost overnight when a more powerful technology emerges. In the AI era, no amount of accumulated user data is a guaranteed shield against disruption.