Education technology group Chegg recently announced plans to cut 23% of its global workforce as part of a broad restructuring plan. Following the announcement, its stock price surged by more than 19% in after-hours trading.
Chegg expects to achieve adjusted cost savings of $40 million to $50 million by 2025 through employee departures, closing two offices outside of the United States, and other cost-cutting measures. The company forecasts that the related reforms will incur costs of $10 million to $14 million, most of which will occur in the fourth quarter of 2024.
Nathan Schultz, the company's newly appointed CEO who took over on June 1, stated on Monday that these changes will make the group "more focused, efficient, streamlined, and responsive."
Schultz added, "Our renewed focus on our core audience—students—will enable us to meet unmet needs and deliver a comprehensive, differentiated, and vertically integrated educational product."
Following the announcement, BMO analysts predicted that Chegg's stock would "react positively." Since the beginning of the year, the stock has fallen by more than three-quarters amid investor concerns that enhanced AI chatbots like OpenAI's ChatGPT might impact the demand for its core products.
In May, Chegg warned that student interest in ChatGPT could affect new customer growth. This warning, coupled with Chegg's decision to suspend its full-year outlook, led to a sharp decline in the company's stock, wiping out nearly $1 billion in market value.
