Chegg Q3 2026 Earnings Call Transcript

Chegg (NYSE:CHGG) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Chegg Inc. reported Q3 2026 revenue of $46.5 million and adjusted EBITDA of $5.4 million, with $43.6 million in cash and no debt.

The company has repositioned itself from a homework help service to an employability-focused platform, launching new offerings like internships.com with over 100,000 visitors since September.

Chegg signed pilot programs with several universities and added 11 new distribution partners in its skilling business, which is expected to exceed $65 million in revenue this year.

Management highlighted significant cost reductions with a 36% year-over-year decrease in non-GAAP operating expenses and a 71% reduction in CapEx.

For Q4 2026, Chegg anticipates revenue between $38 million and $40 million, with a gross margin of 46% to 48% and adjusted EBITDA of approximately $1 million.

The company remains focused on generating free cash flow and exploring both organic and inorganic growth opportunities, with a strategic interest in acquiring companies with strong IP and customer bases.

Full Transcript

Tracey Ford (Vice President of Investor Relations)

We encourage you to make use of these resources. Before we begin, I would like to point out that during the course of this call we will make forward-looking statements regarding future events, including the future financial and operating performance of the company. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We caution you to consider the important factors that could cause actual results to differ materially from those in the forward-looking statements.

In particular, we refer you to the cautionary language included in today’s earnings release and the Risk Factors described in Chegg’s Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission, as well as our other filings with the SEC. Any forward-looking statements that we make today are based on assumptions that we believe to be reasonable. As of this date, we undertake no obligation to update these statements as a result of new information or future events.

During this call we will present both GAAP and non-GAAP financial measures. Our GAAP results and GAAP-to-non-GAAP reconciliations can be found in our earnings press release and on the investor slide deck found on our IR website, investor.chegg.com. We also recommend you review the Investor Data Sheet, which is also posted on our IR website. Now I will turn the call over to Dan.

Dan Rosensweig (Chief Executive Officer)

Thank you, Tracey, and thanks everyone for joining Chegg’s third quarter 2026 earnings call. Over the last year our focus was re-architecting our cost structure, accumulating cash, eliminating our debt and positioning Chegg to return to growth. I’m happy to report that the balance sheet reset is complete. In Q3 we had revenue of $46.5 million, adjusted EBITDA of $5.4 million and ended the quarter with $43.6 million in cash and no debt. Core to our reinvention, we have repositioned Chegg from being a homework help company to an employability company focused on helping students find internships, assess and learn relevant job skills and find full-time employment. Our mission is simple: to help people get the jobs they want and build the careers they deserve. David will take you through the financials in more detail, but I want to walk you through what we are building. Higher education is going through a dramatic transformation, but one thing that will never change is that students go to college to get a job.

Economic uncertainty and anxiety around AI have made the path to a first job even more daunting for students and the need for what we are building even more urgent. In September, we launched our new employability platform on internships.com, a comprehensive experience that gives students personalized job matching, resume tailoring, one-click apply, interview prep, skills assessment and curated network connections all in one place. We have rapidly expanded the platform’s capabilities and will soon be adding 70,000 early career listings as we move beyond internships into entry-level roles. Since launch, we have had over 100,000 visitors to the site, a clear signal that employability is top of mind for students and their families.

We recently rolled out our first marketing campaign for internships.com, both as a standalone product and bundled with Chegg, and the early results are encouraging. At the same time, we are seeing our first institutional momentum. Since September, we have signed pilot programs with the College of Charleston, Salem College, Radford University, and we have several more schools set to sign in the coming weeks. The reason is straightforward. As institutions, colleges and universities increasingly know that their own success is measured on whether or not their graduates get jobs. We are in active conversations with a meaningful number of schools and we believe that the B2I channel is just getting started.

Every time Chegg has evolved to serve students’ most critical needs, it has entered a new growth chapter. This is that moment. We will continue to expand our offering through 2027 and beyond, but the foundation is live and the momentum is real. As we expand how we serve students on the path from learning to earning, we continue to invest in our skills platform which, thanks to AI, we are able to develop and launch more programs and more capabilities rapidly for more partners at a much lower cost. Our multi-channel approach continues to build and we believe we are on a path to consistent growth in that business. We have signed 11 new distribution partners since the start of the year, including our recent announcement of PowerTrain.

In Q3, we made significant product enhancements on how we build and deliver skills programs for our B2B clients. We can now scale tailored learning programs directly from a company’s own systems, documents and objectives, grounded in our proven industrial design methodology and, critically, we measure actual demonstrated proficiency. This is what enterprise buyers need and what sets us apart. And I’m genuinely excited that our language learning product in both B2B and B2C channels is returning to growth. The new capabilities we have added create a better, more powerful experience for learners that combines language courses and workplace skills content delivered through adaptive AI, expert human coaching and real-world practice. Learners build both the language and the communication skills they need to perform in the moments that matter most.

In Q3, our workplace skills content went live for English-speaking Premium subscribers and is now expanding to Spanish, French, German and Italian. The goal is a performance platform designed around real life outcomes, not lesson completions. The last year has been both complicated and exhilarating. Complicated because AI hit our business hard and we had to reinvent the company financially, structurally and across product offerings, and exhilarating because we see all the opportunities ahead of us. We have been operating knowing that our traditional academic service business would wind down over time and while it did, we would generate significant cash. That continues to play out as we anticipated, and that cash has allowed us to pay down our debt and invest in the future of the company.

As I said at the top of the call, we are on our way to being a very different company focused on employability and, as we look ahead, we will be strategic and targeted in how we think about growth across the company with both organic and inorganic opportunities. We are reviewing companies with strong IP and customer bases that could benefit from our new employability platform to help them grow faster at much lower cost. We will be judicious, but the pipeline is real. With a clean balance sheet and a market opportunity that is only getting bigger and the positive signals we are seeing in our most recent product launch on internships.com, we are excited about what’s ahead and I look forward to updating you on our progress next quarter.

And with that I’ll turn it over to David.

David Longo (Chief Financial Officer)

Thank you, Dan, and good morning. Today I will review our financial performance for the third quarter of 2026 along with the company’s outlook for the fourth quarter. We delivered a strong third quarter, exceeding our expectations while making meaningful progress in reshaping our business and balance sheet, executing on our strategic priorities and delivering free cash flow. Over the past year we have significantly reduced our cost structure, repaid our remaining convertible debt and established a stronger financial foundation that expands our ability to invest in future growth.

We are now focused on building our employability business, helping learners develop workforce-ready skills while enabling employers to build and maintain a more skilled workforce. We believe this represents an attractive opportunity to create long-term value as we execute our strategy. We remain focused on identifying additional cost savings, improving operational performance and leveraging AI across the business. In the quarter, total revenue was $46.5 million, exceeding our expectations.

Our legacy Homework Help business continued to decline as expected while we focused investment on the areas we believe offer the greatest long-term opportunity. We entered into new skilling distribution partnerships, enhanced our language offering and continued to build our employability platform, which we expect to contribute more meaningfully in 2027. Turning to expenses, Q3 non-GAAP operating expenses were $31.2 million, down 36% year over year. This reduction reflects the impact of our cost management initiatives and the use of AI to streamline operations and improve productivity across the organization. Adjusted EBITDA for the quarter was $5.4 million, representing a margin of 12%. Third quarter CapEx was $1.7 million, down 71% year over year. For the full year 2026, we are targeting a greater than 60% reduction in CapEx.

Free cash flow in the quarter was $5.5 million, reflecting our continued focus on cash generation and disciplined financial management. Looking at the balance sheet, we ended the quarter with $43.6 million in cash and investments and fully repaid our remaining convertible debt. Eliminating our debt was a key objective for 2026 and marks an important milestone in strengthening our balance sheet. Moving to guidance: Looking ahead to the fourth quarter, we expect total revenues between $38 million and $40 million, gross margin in the range of 46% to 48% and adjusted EBITDA of approximately $1 million. With our debt eliminated, our capital allocation strategy remains focused on generating free cash flow, maintaining a strong balance sheet and thoughtfully deploying capital to create long-term shareholder value.

In closing, we have made significant progress repositioning Chegg for its next phase. We have strengthened both the business and the balance sheet, creating a more focused, efficient and financially flexible organization. As we continue to build our employability platform, we believe we are well positioned to create long-term value through disciplined execution and thoughtful investment in future growth opportunities. With that, I will turn the call over to the operator for your questions.

OPERATOR

Thank you. We will now be conducting a question-and-answer session. If you’d like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you’d like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.

Our first question is from Ryan McDonald with Needham and Company. Please proceed with your question.

Ryan McDonald (Analyst at Needham & Company)

Thanks for taking my questions, and congrats on the balance sheet stability and the progress on the new initiatives. Dan, maybe to start, be curious to see what you’re seeing thus far with the employability platform in terms of student engagement as they’re coming to the site. Is it simply sort of right now sort of building that engagement sort of through the browsing of the internship opportunities, or are you starting to see, you know, early signs of good attach rates for, you know, some of the upselling to the, you know, resume, cover letter tailoring, you know, or the Chegg Complete offering?

Dan Rosensweig (Chief Executive Officer)

Yeah, great question, and thank you for the comment, because this has been a really challenging first year back, and the fact that we eliminated our debt so we’re debt-free, the fact that we have almost $45 million of cash on our balance sheet, and the fact that we have a skilling business, even before the employability platform you’re talking about, that is going to be over $65 million this year. I think we could acknowledge that the company finally is back in much healthier shape and should be valued a lot higher than seen today.

But the internship question is sort of fascinating because we asked ourselves the Jeff Bezos question, which is not what’s changing, but what isn’t going to change. And every student needs an internship and every student needs a job, no matter what school they go to or no matter what classes they take. And I think we were right. The fact that in less than eight weeks we had over 100,000 visitors to internships.com, and those are all people that were not current Chegg customers.

So of course our current Chegg customers also get to access the service as part of Chegg. So we actually have a lot more people using it than that. And that’s pretty exciting and honestly ahead of what I expected since we only rolled it out at the beginning of September. So the product-market fit is clearly there. On the engagement metrics that you asked about, obviously the first thing is can they find us? So traffic has gone like tenfold in terms of the number of people coming per day from when we launched it. So clearly people are finding us organically. We started a very limited paid marketing campaign, and that’s working. So once they find us, the goal is to get them to upload a resume. The percentage of people that come in and upload the resume is actually pretty high.

And once they upload the resume, we’re able to start to do the things that AI is able to do for them, and the data that we have and the history of them is able to do for them. So we’re actually seeing significant growth week over week as we go into probably what will be the internship season. So the engagement is high in terms of resume uploads, searches, letters that we’re writing, applications for jobs, all which we automatically do for the students.

So I would say right now we have real optimism around it, and it’s all small numbers, obviously, because we’re just getting started. But each day, each week is a record over the previous week, and that’s really all we can ask for at this time.

Ryan McDonald (Analyst at Needham & Company)

Makes sense. And then on the pilot programs you signed up with College of Charleston, Salem, Radford, I guess what are sort of some of the goals, or what are these universities sort of looking to see during the pilot period that, you know, what are they judging sort of Chegg from a success perspective when they’re thinking about the pilot programs they’re going through?

Dan Rosensweig (Chief Executive Officer)

Yeah, that’s a great question, because as you know, historically, Chegg has not been able to work with colleges and universities. So we’re ecstatic that we’ve got this many to sign up already, really, just as a pilot program. And there’s a lot more that are reaching out to us now because if you understand the economics of colleges, at the end of the day, enrollment is dependent now really on whether or not people think they’re going to be able to get a job when they go to that college.

And so the career services office is becoming really a hub of why parents or students agree to go to school. So the goal of the pilot program is we do two things. The first thing is we set up a set of data which colleges historically have not had, which we’re able to track and go back over the last five years every student that’s gone to that school, which companies they work for, what jobs they have, where they had internships, what they get paid, job descriptions, skills necessary, so the colleges can actually track the success of their students.

They always reached out to students for alumni to be able to get money, but now they really are tracking their employment so that they can say to a student at their school, if you take this major and this class from this individual, these are the kinds of companies that are likely going to recruit you for an internship or for a job. And these are the skills that you need. They’ve never had access to that information. So the first thing is we set up college pages for all of the colleges.

We’re also going to do the same thing for employers on the other side so they can see which students from which schools are actively interested in working at their companies. The second thing is a certain number of students will be given access to our platform at no charge for several months so that we can actually track what the students do and we can work with the career services centers. So we’re actually willing to install people in the career services centers to help these students not only use the product, but really improve their ability to understand what it is that they need to do to get a job and an internship.

So what the colleges are expecting is us to be able to give them data that they’ve never had before to help their students understand which jobs and internships are likely possible for them. And the second thing is they want to use our app as a way to help those students actually get the job. So, you know, when we started to talk to universities, we were concerned that, you know, over the historical situation as related to Chegg we’ve come up against.

None of it makes sense.

Ryan McDonald (Analyst at Needham & Company)

Makes sense. Okay, that’s helpful. And then maybe on the skilling—sorry, go ahead, Oh, on the skilling business, you mentioned we’re above $65 million in skilling revs this year. You’ve now got 11 distribution partners that have signed up since the start of the year. I guess, you know, I think we talked last quarter a bit about that, maybe some of the ramping on some of those distribution partnerships was a little bit slower than what you were initially expecting. It sounds like, obviously, it’s a little bit of a tougher environment on the B2B side out there, just broadly in L&D. But I guess how are those new distribution partners ramping relative to your expectations? And how is that informing your view on sort of the potential growth of that skilling business?

Dan Rosensweig (Chief Executive Officer)

Yes, great question. And so to your great point, at the beginning of the year, we had one partner, Skilld, and that partner has been flat to down, unfortunately, based on their business. So our growth comes from adding new partners. And we were able to renegotiate a contract that would allow us to sign new partners. When I came back, we expected to have four. We’re now up to 11. And so now what we’re learning is the length of time once you sign it to the actual rollout.

Almost every rollout, regardless of when we signed the contract, really didn’t roll out till the beginning of the fourth quarter, the very end of the third quarter. So we’re learning those ramps now. But we have excellent partners like Coursera, which are starting to show progress. And so I think my expectation is by our next earnings call, we’ll be able to understand which of these partnerships, what their value will be over a period of time. But they are starting to ramp and that’s been really positive.

It’s just, as you point out, it takes time because you have to pick the right set of skills, you have to get into the distribution networks, you have to be rolled out by the partner. Then the companies need to put you inside the catalog of choices for their employees. And those were things we just needed to learn along the way. But the fact that we have 11 versus 4 is a really good sign for us. And the fact that they’re beginning to yield shows that these are going to be good partners for us.

But it’s just too early to give you a solid number.

Ryan McDonald (Analyst at Needham & Company)

Makes sense. Okay, maybe just last one for David, obviously, clean balance sheet. Now have some cash, no debt. Can you just kind of walk us through sort of prioritization in terms of capital allocation strategy moving forward and whether or not you can sort of achieve your strategic goals organically or if you start to look at small tuck-ins from an M&A perspective to sort of enhance what you’re doing? Thanks.

David Longo (Chief Financial Officer)

Yeah, thanks, Ryan. All of the above, really. And what we set out to do at the beginning of the year was make sure that the debt was paid off. We achieved that at the beginning of September, which was a large milestone for us, and then continue to prioritize cash flow, cash generation. And every quarter this year we’ve had free cash flow, including in the beginning half of the year when we were paying down some of the restructuring events that we’ve had.

So now that the debt is paid off, as we mentioned in the call, we are looking at ways to continue to grow organically, inorganically. If we find the right opportunities to tuck in that can be accretive to our P&L, we’ll take a look at all of those. But they’ve got to make sense strategically for what we’re trying to do, but always focused on cash flow, cash generation.

Dan Rosensweig (Chief Executive Officer)

So just one other point to add to that is there are a lot of assets that are good assets that have been underfunded or abandoned by their VC investors that we’ve been meeting and talking with over the course of the last year in anticipation of growing both organically and inorganically. And I don’t think there’s going to be a shortage of opportunities. But to David’s point, we’re going to be very judicious. We’re in no rush to, you know, to take an asset that doesn’t fit our goals.

And our goals are both organic growth, inorganic growth and increased profitability with these transactions. And one of the great things about the employability platform that we mentioned is our ability to take other companies and grow them faster at much lower cost because we’ve done the work that they haven’t done yet. And so we’ll be able to hang those companies on top of our platform, and that gives us a lot more opportunities. So we will be patient, but there will be opportunities and we’re pretty excited about it.

Ryan McDonald (Analyst at Needham & Company)

Awesome. Thanks for taking my questions.

OPERATOR

Thank you. We have reached the end of the question and answer session. I would like to turn the floor back over to Dan for closing comments.

Dan Rosensweig (Chief Executive Officer)

So thanks. For those of you who listened to the call, it’s been a really interesting year. Obviously, AI affected our business first, and we’re using AI to reinvent the business going forward. So we’re trying to go from a headwind to a tailwind. We stabilized the business. We substantially improved the balance sheet. We have no debt. We have about $45 million in cash. We’ll have produced cash every quarter this year, which is something the company hasn’t done in a long time.

We’ve got a skilling business alone that is over $65 million of revenue expected this year. So we think that we are now in a position for people to take a look at us and understand that the value that we can create over the next few years could be pretty substantial. The team’s excited and we’re excited. And I just want to thank everybody for joining the call. Thank you.

OPERATOR

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.