Chegg reports 24% revenue drop, sues Google over AI impact on online learning

Chegg has filed a lawsuit against Google, alleging that the tech giant’s AI-powered search summaries have severely impacted its business by diverting web traffic that previously directed students to its platform.

The lawsuit, filed in federal court this week, claims that Google’s AI-generated responses unfairly retain traffic and reduce user engagement with Chegg’s paid services.

The legal action comes as Chegg experiences a steep decline in revenue and subscriber numbers. The company reported a 24% drop in total net revenues for Q4 2024, with subscription service revenue falling by 23% year-over-year. Chegg’s total subscriber base declined 21% year-over-year to 3.6 million, continuing a downward trend that has raised concerns about the company’s financial stability.

Chegg’s declining financial performance

Chegg’s recent earnings report highlights the extent of its struggles. Total revenue for 2024 was $617.6 million, a 14% decrease from the previous year, while subscription service revenue also declined by 14% to $549.2 million. The company reported a net loss of $837.1 million for the full year.

CEO Nathan Schultz stated that Chegg has launched a strategic review process to explore options, including a potential sale or transition into a private company. He directly tied the company’s financial decline to Google’s AI search results.

“We made two important and connected decisions to maximize the future of our business and shareholder value. We are launching a strategic review process and filed a complaint against Google, which has unjustly retained traffic that has historically come to Chegg, impacting our acquisitions, revenue, and employees,” Schultz said.

Despite its challenges, Chegg emphasized its commitment to improving its product offering. Schultz described 2025 as a potential “turning point” for the company, citing its well-established brand, large subscriber base, and investments in AI-driven education tools.

Alleged impact of Google’s AI search summaries

Chegg’s lawsuit alleges that Google’s AI-powered search summaries prevent students from visiting Chegg’s platform by providing answers directly within search results. The company claims that this has significantly reduced site traffic, particularly among non-subscribers.

According to Chegg, non-subscriber traffic plummeted by 49% in January 2025 compared to the same period in 2024. This decline followed the introduction of Google’s AI search summaries in mid-2024, which Chegg argues have fundamentally altered the way students access academic assistance online.

The company’s complaint makes three key allegations against Google:

• Reciprocal dealing: Google forces companies like Chegg to supply proprietary content in order to be included in search results.

• Monopoly maintenance: Google uses its dominance in search to suppress competitors and limit traffic to external sites.

• Unjust enrichment: Google benefits financially from AI-generated content while reducing the need for users to visit third-party sources.

Google’s response and industry concerns

Google has dismissed Chegg’s claims, stating that its AI-powered search features help users discover content and navigate search results more efficiently.

“These claims are meritless. Google’s AI overviews send traffic to more sites and create opportunities for users to discover content and craft helpful searches,” Google spokesperson José Castañeda told The Washington Post.

Search engine optimization (SEO) specialists have noted that AI-generated responses have had the most significant impact on websites that provide clear-cut, factual information, such as educational resources and homework help platforms.

“In the case of websites that purely make money through traffic and page views, it’s a devastating threat to the whole business model,” said Lily Ray, vice president of SEO strategy at Amsive, according to The Washington Post.

Chegg’s strategy moving forward

As part of its efforts to stabilize the business, Chegg is expanding its AI-powered academic tools and improving its subscription services. The company has integrated multiple AI models, including Llama, Anthropic, Mistral, and GPT, to enhance its educational offerings.

Chegg also reported that it has reduced the cost of generating content by over 70% through AI integration, while maintaining the quality of its academic solutions. Schultz emphasized that the company remains committed to delivering a personalized and structured learning experience rather than simply providing quick answers.

“We believe this isn’t just about Chegg—it’s about students losing access to quality, step-by-step learning in favor of low-quality, unverified AI summaries,” Schultz stated.

Despite financial pressures, Chegg aims to expand its business-to-institution partnerships and increase brand awareness through targeted marketing campaigns. The company also launched a new subscription-based learning platform that includes AI-driven study aids, practice tests, and live instructional sessions.

However, the company acknowledged that its long-term future remains uncertain, with Schultz describing 2025 as a critical year for determining Chegg’s viability in an evolving digital education landscape.