What They Did
Chegg was an online education platform offering homework help, textbook solutions, and tutoring subscriptions for around $240/year. It was the go-to service for students who needed quick answers to homework questions and step-by-step textbook solutions.
How LLMs Killed Them
Students switched to free AI tools — ChatGPT, Bing AI, Google Bard — for homework answers instead of paying for Chegg subscriptions. Chegg became the first publicly traded company to explicitly blame ChatGPT for hurting its business.
Timeline
- May 2, 2023: Stock crashed ~50% in one day after CEO Dan Rosensweig told analysts ChatGPT was hurting the business. Lost $1 billion in market cap overnight.
- April 2023: Announced partnership with OpenAI to build "CheggMate" powered by GPT-4.
- August 2023: Pivoted again to partner with Scale AI for proprietary LLMs.
- Q1 2024: Revenue of $174.4M, down 7% YoY and 14% from Q1 2022. Lost 500,000+ paid subscribers.
- Late 2024: Announced restructuring, laid off 441 employees (23% of workforce).
- December 2025: Received NYSE non-compliance notice (stock below $1.00).
By the Numbers
- Stock down 99% from 2021 highs
- $14.5 billion in market value erased
- Altman Z-Score of -3.83 (distress zone)
- 79% probability of bankruptcy
- 500,000+ paid subscribers lost