Chegg (CHGG) Q1 2026 earnings summary

Executive summary

• Q1 2026 exceeded expectations for revenue, adjusted EBITDA, and free cash flow, achieving positive GAAP net income for the first time in two years despite a 48% year-over-year revenue decline driven by a sharp drop in Academic Services.

• Business restructured around AI, resulting in a leaner organization, significant cost reductions, and high margins, positioning for future growth in the Skilling segment.

• Skilling business grew 9% year-over-year, with strong momentum from new enterprise and channel partnerships, and is expected to deliver double-digit revenue growth for full-year 2026.

• Chegg Study and Academic Services retention remained strong, supporting free cash flow despite ongoing search and traffic headwinds.

• Approximately 40% of costs removed in the past six months, with priorities for 2026 including accelerating Skilling growth, increasing free cash flow, and ending the year with zero debt.

Financial highlights

• Q1 2026 total net revenues were $63.3 million, down 48% year-over-year, with Chegg Skilling revenue up 9% to $17.6–$18 million.

• Academic Services revenue was $45.7 million, with strong monthly retention rates.

• Adjusted EBITDA was $15.5 million (24% margin); free cash flow was $3.1 million, including $12.9 million in severance payments.

• Gross margin improved to 60% (non-GAAP: 62%), and net income was $0.2 million.

• Ended Q1 with $67.9–$68 million in cash and investments and a net cash position of $34–$34.1 million.

Outlook and guidance

• Q2 2026 guidance: Chegg Skilling revenue of $17.5–$18 million, total revenue of $49–$50 million, gross margin of 51–52%, adjusted EBITDA of $5–$6 million, and CapEx of ~$1 million.

• Double-digit Skilling revenue growth expected for full-year 2026, with acceleration in the second half.

• Targeting a 60% reduction in CapEx for 2026, with 90% allocated to Skilling.

• Plan to fully repay convertible debt by September 2026.

• Liquidity expected to be sufficient for at least the next 12 months, but future capital needs may require additional financing.