CHEGG, INC

Previous wording

Chegg is a learning platform helping businesses bring new skills to their workforce and giving lifelong learners and students the skills and confidence to succeed. Focused on the large and growing skilling market, Chegg offers innovative tools for workplace readiness, professional upskilling, and language learning. Chegg also continues to offer students artificial intelligence (AI)-driven, personalized support. Chegg remains committed to its mission of improving learning outcomes and career opportunities for millions around the world.

Current wording

Chegg is a learning platform helping businesses bring new skills to their workforce and giving lifelong learners and students the skills and confidence to succeed. Focused on the large and growing skilling market, Chegg offers innovative tools for workplace readiness, professional upskilling, and language learning. Chegg also continues to offer students artificial intelligence (AI)-driven, personalized support. Chegg remains committed to its mission of improving learning outcomes and career opportunities for millions of people around the world.

Previous wording

Recent technological shifts, notably Google's AI Overviews search experience, or AIO, and continued increase in adoption of free and paid generative AI services by students, have created and are expected to continue to create headwinds for our industry and our business, most notably a reduction in traffic to our website and customers subscribing to our services. In August 2024, Google broadly rolled out AIO, which displays AI-generated content at the top of its search results. This experience, which includes questions and solutions for education, keeps users on Google search results versus leading them onto our site. AIO’s prevalence has grown and will only continue to increase. We expect Google to continue its shift from being a search origination point to the destination, which we believe has materially adversely affected our business, operating results and financial condition.

Current wording

Recent technological shifts, notably Google's AI Overviews search experience, or AIO, and continued increase in adoption of free and paid generative AI services by students, have created and are expected to continue to create headwinds for our industry and our business, most notably a reduction in traffic to our website and customers subscribing to our services. In August 2024, Google broadly rolled out AIO, which displays AI-generated content at the top of its search results. This experience, which includes questions and solutions for education, keeps users on Google search results versus leading them onto our site. AIO’s prevalence has grown and will only continue to increase. We expect Google to continue its shift from being a search origination point to the destination, which we believe has materially adversely affected our business, operating results and financial condition by reducing traffic to our platform, and we expect that we will continue to be adversely impacted by this continued shift in the future.

Previous wording

In addition, across our industry, there has been a continued increase in the adoption of free and paid generative AI products for academic support, and students are increasingly turning to generative AI for academic support, such as homework and exams, as well as assistance in other areas of daily life. This issue impacts education technology companies broadly, where students see generative AI products like Chat GPT and others as strong alternatives to vertically specialized solutions for education such as Chegg. These developments have negatively impacted our industry and our business and are expected to continue to impact our overall traffic and accelerate the decline in the number of new subscribers that sign up for our services, resulting in continued negative impacts to our growth, business, operating results and financial condition. See Part II, Item 1A, “Risk Factors” for additional details.

Current wording

In addition, across our industry, there has been a continued increase in the adoption of free and paid generative AI products for academic support, and students are increasingly turning to generative AI for academic support, such as homework and exams, as well as assistance in other areas of daily life. This issue impacts education technology companies broadly, where students see generative AI products like ChatGPT and others as strong alternatives to vertically specialized solutions for education such as Chegg. These developments have negatively impacted our industry and our business and are expected to continue to impact our overall traffic and accelerate the decline in the number of new subscribers that sign up for our services, resulting in continued negative impacts to our growth, business, operating results and financial condition.

Previous wording

Three and Nine Months Ended September 30, 2025 and 2024

Current wording

Three Months Ended March 31, 2026 and 2025

Previous wording

The following tables present our total net revenues for the periods shown for our Subscription Services and Skills and Other product lines (in thousands, except percentages):

Current wording

The following tables present our total net revenues for the periods shown for our Chegg Skilling and Academic Services product lines (in thousands, except percentages):

Previous wording

Cost of revenues decreased $11.7 million, or 27%, during the three months ended September 30, 2025, compared to the same period in 2024. The decrease was primarily due to lower payment processing and other order fees of $4.3 million, primarily due to the decrease in subscribers who have paid to access our services, lower depreciation and amortization expense of $4.0 million, lower web hosting fees of $1.7 million and lower employee-related expenses of $1.1 million. Gross margins decreased to 59% during the three months ended September 30, 2025, from 68% during the same period in 2024.

Current wording

Cost of revenues decreased $28.6 million, or 53%, during the three months ended March 31, 2026, compared to the same period in 2025. The decrease was primarily due to lower depreciation expense of $17.9 million, primarily due to the accelerated depreciation recorded in 2025, lower payment processing and other order fees of $6.0 million, primarily due to the decrease in subscribers who have paid to access our services, lower web hosting fees of $2.6 million, and lower employee-related expenses of $1.6 million. Gross margins increased to 60% during the three months ended March 31, 2026, from 56% during the same period in 2025.

Previous wording

Operating expenses decreased $252.3 million, or 80%, and $782.9 million, or 75%, during the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024, primarily due to the absence of impairment expenses of $195.7 million and $677.2 million recognized in the three and nine months ended September 30, 2024, respectively. The remaining decrease was primarily related to lower employee-related expenses and contractor spend as a result of restructuring actions. See "Note 1, “Background and Basis of Presentation” and Note 11, “Restructuring Charges” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q for additional information regarding impairment expense and the restructuring actions, respectively.

Current wording

Operating expenses decreased $57.5 million, or 60%, during the three months ended March 31, 2026, compared to the same period in 2025, primarily due to lower employee-related expenses as a result of prior year restructuring actions. See Note 10, “Restructuring Charges” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q for additional information regarding the prior year restructuring actions.

Previous wording

Research and development expenses decreased $23.0 million, or 56%, during the three months ended September 30, 2025, compared to the same period in 2024. The decrease was primarily due to lower employee-related expenses of $20.2 million including share-based compensation expense, lower web hosting fees of $1.9 million, lower contractor spend of $1.2 million, and lower technology expenses of $0.7 million, partially offset by higher restructuring charges of $1.7 million. Research and development expenses as a percentage of net revenues were 24% during the three months ended September 30, 2025 compared to 30% during the same period in 2024.

Current wording

Research and development expenses decreased $20.3 million, or 69%, during the three months ended March 31, 2026 compared to the same period in 2025. The decrease was primarily due to lower employee-related expenses of $13.9 million, including share-based compensation expense, lower technology expenses of $3.1 million, and lower web hosting fees of $2.3 million. Research and development expenses as a percentage of net revenues were 14% during the three months ended March 31, 2026 compared to 24% during the same period in 2025.

Previous wording

Sales and marketing expenses decreased by $14.9 million, or 56%, during the three months ended September 30, 2025, compared to the same period in 2024. The decrease was primarily attributable to lower paid marketing expenses of $11.2 million and lower employee-related expenses of $4.4 million including share-based compensation expense, partially offset by higher indirect marketing expenses of $0.9 million. Sales and marketing expenses as a percentage of net revenues were 15% during the three months ended September 30, 2025 compared to 19% during the same period in 2024.

Current wording

Sales and marketing expenses decreased by $15.0 million, or 59%, during the three months ended March 31, 2026, compared to the same period in 2025. The decrease was primarily attributable to lower paid marketing expenses of $11.2 million and lower employee-related expenses of $4.0 million, including share-based compensation expense. Sales and marketing expenses as a percentage of net revenues were 17% during the three months ended March 31, 2026 compared to 21% during the same period in 2025.

Previous wording

General and administrative expenses decreased $18.7 million, or 36%, during the three months ended September 30, 2025 compared to the same period in 2024. The decrease was due to lower employee-related expenses of $15.6 million including share-based compensation expense, $5.1 million in lower loss contingency accruals, lower contractor spend of $0.9 million, and lower professional fees of $0.7 million, partially offset by higher restructuring charges of $4.3 million. General and administrative expenses as a percentage of net revenues were 43% during the three months ended September 30, 2025 compared to 38% during the same period in 2024.

Current wording

General and administrative expenses decreased $20.2 million, or 51%, during the three months ended March 31, 2026 compared to the same period in 2025. The decrease was due to lower employee-related expenses of $14.6 million, which is primarily due to share-based compensation expense, lower professional fees of $3.4 million, and lower restructuring charges of $2.7 million. General and administrative expenses as a percentage of net revenues were 31% during the three months ended March 31, 2026 compared to 33% during the same period in 2025.

Previous wording

The following tables present our interest expense, net and other income, net, for the periods shown (in thousands, except percentages):

Current wording

The following tables present our interest expense and other income, net, for the periods shown (in thousands, except percentages):

Previous wording

Other income, net decreased $9.1 million, or 36%, during the nine months ended September 30, 2025 compared to the same period in 2024, primarily due to a decrease in interest income of $13.8 million due to lower investment balances and $3.0 million of lower realized gains on investments, partially offset by the $7.4 million gain on early extinguishment of a portion of the 2026 notes.

Current wording

Other income, net decreased $11.8 million, or 91%, during the three months ended March 31, 2026 compared to the same period in 2025, primarily due to a decrease in interest income of $4.2 million due to lower investment balances and a decrease in gain on partial early extinguishments of the 2026 notes of $6.8 million.

Previous wording

The following tables present our provision for income taxes for the periods shown (in thousands, except percentages):

Current wording

The following tables present our benefit from (provision for) income taxes for the periods shown (in thousands, except percentages):

Previous wording

Provision for income taxes increased $4.4 million during the three months ended September 30, 2025 compared to the same period in 2024 primarily due to the absence of discrete one-time tax benefits from fiscal year 2024 and restructuring losses in foreign jurisdictions. Provision for income taxes decreased $140.8 million during the nine months ended September 30, 2025 compared to the same period in 2024, primarily due to the valuation allowance established in fiscal year 2024 against our U.S. federal and state deferred tax assets.

Current wording

Benefit from (provision for) income taxes decreased $1.2 million, or 114% during the three months ended March 31, 2026 compared to the same period in 2025, primarily due to a decrease in worldwide forecasted income and the valuation allowance against our U.S. federal and state deferred tax assets.

Previous wording

(1) Consists of the current and long-term portion of convertible senior notes, net.

Current wording

(1) Consists of the current and long-term portion.

Previous wording

As of September 30, 2025, our principal sources of liquidity were cash, cash equivalents, and investments totaling $111.7 million, which were held for working capital purposes. We believe that our existing sources of liquidity as well as net cash flows from operations will be sufficient to fund our operations and debt service obligations for at least the next 12 months. Our future capital requirements will depend on many factors, including our rate of revenue growth, our investments in research and development activities, our acquisition of new products and services and our sales and marketing activities. To the extent that existing sources of liquidity are insufficient to fund our future operations, we may need to raise additional funds through public or private equity or debt financing. Additional funds may not be available on terms favorable to us or at all. If adequate funds are not available on acceptable terms, or at all, we may be unable to adequately fund our business plans and it could have a negative effect on our business, operating cash flows and financial condition. As of September 30, 2025, we have an accumulated deficit of $960.1 million from our operations and we may incur additional losses in the future.

Current wording

As of March 31, 2026, our principal sources of liquidity were cash, cash equivalents, and investments totaling $67.9 million, which were held for working capital purposes. We believe that our existing sources of liquidity will be sufficient to fund our operations and debt service obligations for at least the next 12 months. Our future capital requirements will depend on many factors, including our rate of revenue growth, our investments in research and development activities, our acquisition of new products and services, and our sales and marketing activities. To the extent that existing sources of liquidity are insufficient to fund our future operations, we may need to raise additional funds through public or private equity or debt financing. Additional funds may not be available on terms favorable to us or at all. If adequate funds are not available on acceptable terms, or at all, we may be unable to adequately fund our business plans and it could have a negative effect on our business, operating cash flows and financial condition. As of March 31, 2026, we have incurred cumulative losses of $992.6 million from our operations and we may incur additional losses in the future.

Previous wording

Accordingly, we do not assert an indefinite reinvestment of earnings and accrued a withholding tax of $2.4 million as of September 30, 2025, related to a potential future distribution of such earnings. This reflects our continued assessment of cash needs and the absence of an indefinite reinvestment assertion for our subsidiary in India. As a result of the Tax Cuts and Jobs Act, we anticipate the U.S. federal impact for the remaining foreign jurisdictions to be minimal if these funds are repatriated. In addition, based on our current and future needs, we believe our current funding and capital resources for our international operations are adequate.

Current wording

Most of our cash, cash equivalents, and investments are held in the United States. As part of our ongoing cash planning, we continue to assess whether to repatriate a portion of earnings from our subsidiary in India. Accordingly, the net cumulative tax expense as of March 31, 2026 is $1.0 million, related to a potential future distribution of such earnings. This reflects our continued assessment of cash needs and the absence of an indefinite reinvestment assertion for our subsidiary in India. As a result of the Tax Cuts and Jobs Act, we anticipate the U.S. federal impact for the remaining foreign jurisdictions to be minimal if these funds are repatriated. In addition, based on our current and future needs, we believe our current funding and capital resources for our international operations are adequate.

Previous wording

There were no material changes in our commitments under contractual obligations, as disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2024.

Current wording

Aside from the changes in convertible senior notes as disclosed in Note 6, “Convertible Senior Notes” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (Unaudited)” of this Quarterly Report on Form 10-Q, there were no other material changes in our commitments under contractual obligations, as disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2025.

Previous wording

The substantial majority of our cash inflows from operating activities are from e-commerce transactions with students, which are settled immediately through payment processors, as opposed to cash outflows from bill payments, which are settled based on contractual payment terms with our suppliers.

Current wording

The substantial majority of our cash inflows from operating activities are from e-commerce transactions with learners, which are settled immediately through payment processors, as opposed to cash outflows from bill payments, which are settled based on contractual payment terms with our suppliers.

Previous wording

Net cash flows from investing activities increased $353.3 million during the nine months ended September 30, 2025 compared to the same period in 2024 and was primarily related to higher proceeds from the sale of investments of $181.2 million, fewer purchases of investments of $133.4 million, higher proceeds from the maturities of our investments of $14.2 million, fewer purchases of property and equipment of $40.0 million partially offset by the absence of proceeds from the sale of our strategic investment of $15.5 million that occurred in the nine months ended September 30, 2024.

Current wording

Net cash flows provided by investing activities decreased $256.8 million, or 93%, during the three months ended March 31, 2026 compared to the same period in 2025 and was primarily related to lower proceeds from the sale of investments of $175.5 million and lower proceeds from the maturities of our investments of $89.7 million, partially offset by lower purchases of property and equipment of $7.6 million.

Previous wording

There have been no material changes in our critical accounting policies and estimates during the nine months ended September 30, 2025 as compared to the critical accounting policies and estimates disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2024.

Current wording

There have been no material changes in our critical accounting policies and estimates during the three months ended March 31, 2026 as compared to the critical accounting policies and estimates disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2025.