CHGG

You should read the following discussion of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and the related notes included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. See the section titled “Note about Forward-Looking Statements” for additional information. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q. Overview Chegg is a learning platform helping businesses bring new skills to their workforce and giving lifelong learners and students the skills and confidence to succeed. Focused on the large and growing skilling market, Chegg offers innovative tools for workplace readiness, professional upskilling, and language learning. Chegg also continues to offer students artificial intelligence (AI)-driven, personalized support. Chegg remains committed to its mission of improving learning outcomes and career opportunities for millions of people around the world. Our long-term strategy is focused on helping learners achieve better outcomes by combining academic support with practical, career-relevant skills across the learning lifecycle. We are evolving our platform to support learners both in the classroom and beyond, leveraging AI to deliver faster, more personalized, and more effective learning experiences. We continue to invest in expanding our skilling offerings and integrating them with our core academic services to provide a differentiated, end-to-end solution that supports the whole learner. Our use of AI in our platform is designed to enable us to scale personalized support, improve learning outcomes, and increase course completion while maintaining high standards of quality and accuracy. We believe these investments position us to drive deeper engagement, expand our addressable market, and return the business to sustainable revenue growth over time. Our ability to achieve these long-term objectives is subject to numerous risks and uncertainties, which are described in greater detail below and in Part II, Item 1A, “Risk Factors.” Business Updates and Developments Increased availability and adoption of AI tools and products, including the continued increase in availability and adoption of free and paid generative AI services by students, has reduced, and is expected to continue to reduce, traffic to our website and customers subscribing to our services. For example, the AI Overview feature of Google's search results, which includes questions and solutions for education, keeps users on Google search results instead of leading them to our site. As sites like Google seek to shift from being a search origination tool to a destination, we expect traffic to our platform to continue to be reduced, adversely affecting our business, operating results and financial condition. Students are increasingly turning to generative AI for academic support, such as homework and exams, as well as assistance in other areas of daily life, where they see generative AI products like ChatGPT and others as strong alternatives to vertically specialized solutions for education. This has negatively impacted our industry and is expected to continue to negatively impact traffic to our platform and accelerate the decline in the number of new subscribers that sign up for our services, adversely affecting our business, operating results and financial condition. Our service and product offerings fall into two categories: Chegg Skilling and Academic Services, which are described below. 21 Table of Contents Chegg Skilling Our language learning platform provides subscribers access to a premium language learning platform that offers comprehensive support through self-paced lessons, live classes with expert tutors and a community of members to practice alongside. A team of leading experts have developed our online learning instruction to bring students from novice to advanced speakers in a fast-paced, enjoyable environment and we currently offer comprehensive courses taught by highly qualified teachers in 14 languages. We also provide workforce skilling programs that help employers develop and retain talent. Our workforce skilling programs align workforce needs with learner outcomes by combining in-demand technical skills such as AI, coding, data analytics, and cybersecurity, with foundational business and human-centered durable skills. We keep our portfolio current by working closely with employers, including Fortune 1000 companies, to understand emerging role requirements and workforce needs. Programs feature engaging, modular online content, practice opportunities, and support. Our platform tracks learner progress in real time, delivering predictive nudges and timely interventions that improve engagement, retention, and completion rates. Our approach is informed by learning science to help skills stick, so learners can apply what they learn with confidence at work. Academic Services Our legacy academic learning services are headlined by Chegg Study Pack, a premium subscription bundle that includes all of the benefits of Chegg Study, Chegg Writing and Chegg Math. Chegg Study subscribers have access to personalized, step-by-step learning support powered by AI, computational engines, and subject matter experts. Subscribers engage with our conversational experience that delivers the right support at the right time. Our Chegg Writing subscription service consists of a suite of essential tools including plagiarism detection scans, grammar and writing fluency checking, expert personalized writing feedback, and premium citation generation. Subscribers can also have a writing professional proofread papers for personalized feedback. Our Chegg Math subscription service provides students with a computational engine to help them understand and solve math problems. We opportunistically monetize our content library through licensing and partnerships. We work with leading brands and programmatic partners to deliver advertising across our platforms. 22 Table of Contents Results of Operations The following table presents our historical condensed consolidated statements of operations (in thousands, except percentage of total net revenues): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Net revenues $ 51,849 100 % $ 105,120 100 % $ 115,111 100 % $ 226,507 100 % Cost of revenues(1) 23,567 45 35,478 34 48,941 43 89,451 39 Gross profit 28,282 55 69,642 66 66,170 57 137,056 61 Operating expenses: Research and development(1) 7,398 14 28,717 27 16,537 14 58,145 26 Sales and marketing(1) 9,468 18 17,417 17 20,074 17 43,031 19 General and administrative(1) 14,591 29 59,966 57 33,771 30 99,340 44 Impairment expense — — — — — — 2,000 1 Total operating expenses 31,457 61 106,100 101 70,382 61 202,516 89 Loss from operations (3,175) (6) (36,458) (35) (4,212) (4) (65,460) (29) Total interest expense, net and other income, net 616 1 2,018 2 1,741 2 14,548 6 Loss before provision for income taxes (2,559) (5) (34,440) (33) (2,471) (2) (50,912) (22) Provision for income taxes (392) (1) (1,223) (1) (252) — (2,235) (1) Net loss $ (2,951) (6) % $ (35,663) (34) % $ (2,723) (2) % $ (53,147) (23) % (1) Includes share-based compensation expense as follows: Cost of revenues $ 15 $ 131 $ 35 $ 369 Research and development 235 1,584 681 4,796 Sales and marketing 103 413 255 1,474 General and administrative 1,971 5,784 4,064 12,530 Total share-based compensation expense $ 2,324 $ 7,912 $ 5,035 $ 19,169 23 Table of Contents Three and Six Months Ended June 30, 2026 and 2025 Net Revenues The following tables present our total net revenues for the periods shown for our Chegg Skilling and Academic Services product lines (in thousands, except percentages): Three Months Ended June 30, Change 2026 2025 $ % Chegg Skilling $ 17,534 $ 17,217 $ 317 2 % Academic Services 34,315 87,903 (53,588) (61) Total net revenues $ 51,849 $ 105,120 $ (53,271) (51) Six Months Ended June 30, Change 2026 2025 $ % Chegg Skilling $ 35,112 $ 33,352 $ 1,760 5 % Academic Services 79,999 193,155 (113,156) (59) Total net revenues $ 115,111 $ 226,507 $ (111,396) (49) Chegg Skilling revenues increased $0.3 million, or 2%, and $1.8 million, or 5%, during the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025, primarily due to an increase in our workforce skilling programs primarily related to our AI-focused programs. Chegg Skilling revenues as a percentage of net revenues were 34% and 31% during the three and six months ended June 30, 2026, respectively, compared to 16% and 15% during the same periods in 2025, respectively. Academic Services revenues decreased $53.6 million, or 61%, during the three months ended June 30, 2026, compared to the same period in 2025. The decrease was primarily due to a decrease in subscription revenue of $46.7 million and advertising services revenue of $1.1 million, primarily related to reduced traffic which led to fewer subscribers, as well as a decrease in content licensing revenue of $5.6 million. Academic Services revenues as a percentage of net revenues were 66% during the three months ended June 30, 2026 compared to 84% during the same period in 2025. Academic Services revenues decreased $113.2 million, or 59%, during the six months ended June 30, 2026, compared to the same period in 2025. The decrease was primarily due to a decrease in subscription revenue of $104.4 million and advertising services revenues of $3.0 million, primarily related to reduced traffic which led to fewer subscribers, as well as a decrease in content licensing revenue of $4.9 million. Academic Services revenues as a percentage of net revenues were 69% during the six months ended June 30, 2026 compared to 85% during the same period in 2025. Cost of Revenues The following tables present our cost of revenues for the periods shown (in thousands, except percentages): Three Months Ended June 30, Change 2026 2025 $ % Cost of revenues(1) $ 23,567 $ 35,478 $ (11,911) (34) % (1)Includes share-based compensation expense of: $ 15 $ 131 $ (116) (89) % Six Months Ended June 30, Change 2026 2025 $ % Cost of revenues(1) $ 48,941 $ 89,451 $ (40,510) (45) % (1)Includes share-based compensation expense of: $ 35 $ 369 $ (334) (91) % Cost of revenues decreased $11.9 million, or 34%, during the three months ended June 30, 2026, compared to the same period in 2025. The decrease was primarily due to lower payment processing and other order fees of $4.0 million, primarily due 24 Table of Contents to the decrease in subscribers who have paid to access our services, lower depreciation expense of $2.9 million, lower web hosting fees of $2.3 million and lower employee-related expenses of $1.1 million. Gross margins decreased to 55% during the three months ended June 30, 2026, from 66% during the same period in 2025. Cost of revenues decreased $40.5 million, or 45%, during the six months ended June 30, 2026, compared to the same period in 2025. The decrease was primarily due to lower depreciation expense of $20.7 million primarily due to the accelerated depreciation recorded in 2025, lower payment processing and other order fees of $10.0 million, which is primarily due to the decrease in subscribers who have paid to access our services, lower web hosting fees of $4.4 million, and lower employee-related expenses of $2.7 million. Gross margins decreased to 57% during the six months ended June 30, 2026, from 61% during the same period in 2025. Operating Expenses The following tables present our total operating expenses for the periods shown (in thousands, except percentages): Three Months Ended June 30, Change 2026 2025 $ % Research and development(1) $ 7,398 $ 28,717 $ (21,319) (74) % Sales and marketing(1) 9,468 17,417 (7,949) (46) General and administrative(1) 14,591 59,966 (45,375) (76) Total operating expenses $ 31,457 $ 106,100 $ (74,643) (70) (1) Includes share-based compensation expense as follows: Research and development $ 235 $ 1,584 $ (1,349) (85) % Sales and marketing 103 413 (310) (75) General and administrative 1,971 5,784 (3,813) (66) Share-based compensation expense $ 2,309 $ 7,781 $ (5,472) (70) Six Months Ended June 30, Change 2026 2025 $ % Research and development(1) $ 16,537 $ 58,145 $ (41,608) (72) % Sales and marketing(1) 20,074 43,031 (22,957) (53) General and administrative(1) 33,771 99,340 (65,569) (66) Impairment expense — 2,000 (2,000) (100) Total operating expenses $ 70,382 $ 202,516 $ (132,134) (65) (1) Includes share-based compensation expense as follows: Research and development $ 681 $ 4,796 $ (4,115) (86) % Sales and marketing 255 1,474 (1,219) (83) General and administrative 4,064 12,530 (8,466) (68) Share-based compensation expense $ 5,000 $ 18,800 $ (13,800) (73) Operating expenses decreased $74.6 million, or 70%, and $132.1 million, or 65%, during the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025, primarily due to lower employee-related expenses as a result of prior year restructuring actions. See Note 10, “Restructuring Charges” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q for additional information regarding the prior year restructuring actions. Research and Development Research and development expenses decreased $21.3 million, or 74%, during the three months ended June 30, 2026, compared to the same period in 2025. The decrease was primarily due to lower employee-related expenses of $9.3 million including share-based compensation expense, lower restructuring charges of $6.8 million, lower technology-related expenses of $2.7 million, and lower web hosting fees of $2.2 million. Research and development expenses as a percentage of net revenues were 14% during the three months ended June 30, 2026 compared to 27% during the same period in 2025. 25 Table of Contents Research and development expenses decreased $41.6 million, or 72%, during the six months ended June 30, 2026 compared to the same period in 2025. The decrease was primarily due to lower employee-related expenses of $23.2 million including share-based compensation expense, lower restructuring charges of $7.1 million, lower technology-related expenses of $5.8 million, and lower web hosting fees of $3.5 million. Research and development expenses as a percentage of net revenues were 14% during the six months ended June 30, 2026 compared to 26% during the same period in 2025. Sales and Marketing Sales and marketing expenses decreased by $7.9 million, or 46%, during the three months ended June 30, 2026, compared to the same period in 2025. The decrease was primarily attributable to lower employee-related expenses of $2.9 million including share-based compensation expense, lower paid marketing expenses of $2.7 million, and lower restructuring charges of $2.0 million. Sales and marketing expenses as a percentage of net revenues were 18% during the three months ended June 30, 2026 compared to 17% during the same period in 2025. Sales and marketing expenses decreased by $23.0 million, or 53%, during the six months ended June 30, 2026, compared to the same period in 2025. The decrease was primarily attributable to lower paid marketing expenses of $13.9 million, lower employee-related expenses of $6.9 million including share-based compensation expense, and lower restructuring charges of $2.0 million. Sales and marketing expenses as a percentage of net revenues were 17% during the six months ended June 30, 2026 compared to 19% during the same period in 2025. General and Administrative General and administrative expenses decreased $45.4 million, or 76%, during the three months ended June 30, 2026 compared to the same period in 2025. The decrease was due to lower employee-related expenses of $12.2 million including share-based compensation expense, a reduction in litigation settlements of $10.5 million, lower restructuring charges of $9.5 million, the absence of an impairment loss on an equity investment of $6.0 million, lower professional fees of $3.1 million, the absence of an impairment of lease-related assets of $3.0 million, and lower facility expenses of $2.1 million, partially offset by higher contractor spend of $1.1 million. General and administrative expenses as a percentage of net revenues were 29% during the three months ended June 30, 2026 compared to 57% during the same period in 2025. General and administrative expenses decreased $65.6 million, or 66%, during the six months ended June 30, 2026 compared to the same period in 2025. The decrease was due to lower employee-related expenses of $26.8 million including share-based compensation expense, lower restructuring charges of $12.2 million, a reduction in litigation settlements of $10.5 million, lower professional fees of $6.5 million, the absence of an impairment loss on an equity investment of $6.0 million, lower facility expenses of $3.5 million, the absence of an impairment of lease-related assets of $3.0 million, and lower technology-related expenses of $1.2 million, partially offset by higher contractor spend of $2.0 million. General and administrative expenses as a percentage of net revenues were 30% during the six months ended June 30, 2026 compared to 44% during the same period in 2025. Impairment Expense Impairment expense decreased $2.0 million during the six months ended June 30, 2026 compared to the same period in 2025 as we impaired property and equipment in 2025. Interest Expense, net and Other Income, Net The following tables present our interest expense, net and other income, net, for the periods shown (in thousands, except percentages): Three Months Ended June 30, Change 2026 2025 $ % Interest expense, net $ (22) $ (41) $ 19 (46) % Other income, net 638 2,059 (1,421) (69) Interest expense, net and other income, net: $ 616 $ 2,018 $ (1,402) (69) 26 Table of Contents Six Months Ended June 30, Change 2026 2025 $ % Interest expense, net $ (53) $ (508) $ 455 (90) % Other income, net 1,794 15,056 (13,262) (88) Interest expense, net and other income, net: $ 1,741 $ 14,548 $ (12,807) (88) Interest expense, net decreased during the three months ended June 30, 2026 compared to the same period in 2025 due to the early extinguishment of a portion of the 2026 notes. Interest expense, net decreased $0.5 million, or 90%, during the six months ended June 30, 2026 compared to the same period in 2025, due to the maturity of the 2025 notes and the early extinguishment of a portion of the 2026 notes. Other income, net decreased $1.4 million, or 69%, during the three months ended June 30, 2026 compared to the same period in 2025, primarily due to a decrease in interest income due to lower investment balances. Other income, net decreased $13.3 million, or 88%, during the six months ended June 30, 2026 compared to the same period in 2025, primarily due to a decrease in gain on early extinguishment of a portion of the 2026 notes of $6.8 million and a decrease in interest income of $5.1 million due to lower investment balances. Provision for income taxes The following tables present our provision for income taxes for the periods shown (in thousands, except percentages): Three Months Ended June 30, Change 2026 2025 $ % Provision for income taxes (392) (1,223) $ 831 (68) % Six Months Ended June 30, Change 2026 2025 $ % Provision for income taxes (252) (2,235) $ 1,983 (89) % Provision for income taxes decreased $0.8 million, or 68%, and $2.0 million, or 89%, during the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025, primarily due to a decrease in foreign income taxes. Liquidity and Capital Resources The following table presents our cash, cash equivalents and investments and convertible senior notes as of the periods shown (in thousands, except percentages): Change June 30, 2026 December 31, 2025 $ % Cash, cash equivalents and investments $ 72,314 $ 85,212 $ (12,898) (15) % Convertible senior notes, net(1) 33,845 53,765 (19,920) (37) ______________________________________ (1) Consists of the current and long-term portion. Cash, cash equivalents, and investments decreased $12.9 million, or 15%, during the six months ended June 30, 2026 primarily due to the net cash used for the early extinguishment of a portion of the 2026 notes of $19.5 million, purchases of property and equipment of $4.7 million, and repurchase of shares of our common stock of $1.7 million, partially offset by the net cash provided by operating activities of $14.2 million. Convertible senior notes, net decreased $19.9 million, or 37%, during the six months ended June 30, 2026 primarily due to the partial early extinguishments of the 2026 notes. The 2026 notes mature on September 1, 2026 unless converted, redeemed, or repurchased in accordance with their terms prior to such date. Holders of the 2026 notes may convert their notes at any time on or after June 1, 2026 until the close of business on the second scheduled trading day immediately preceding the respective maturity dates. See Note 6, "Convertible Senior Notes” of our accompanying Notes to Condensed Consolidated 27 Table of Contents Financial Statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q for additional information on our 2026 notes. As of June 30, 2026, our principal sources of liquidity were cash, cash equivalents, and investments totaling $72.3 million, which were held for working capital purposes. We believe that our existing sources of liquidity will be sufficient to fund our operations and debt service obligations for at least the next 12 months. Our future capital requirements will depend on many factors, including our rate of revenue growth, our investments in research and development activities, our acquisition of new products and services, and our sales and marketing activities. To the extent that existing sources of liquidity are insufficient to fund our future operations, we may need to raise additional funds through public or private equity or debt financing. Additional funds may not be available on terms favorable to us or at all. If adequate funds are not available on acceptable terms, or at all, we may be unable to adequately fund our business plans and it could have a negative effect on our business, operating cash flows and financial condition. As of June 30, 2026, we have incurred cumulative losses of $995.6 million from our operations and we may incur additional losses in the future. Most of our cash, cash equivalents, and investments are held in the United States. As part of our ongoing cash planning, we continue to assess whether to repatriate a portion of earnings from our subsidiary in India. Accordingly, the net cumulative tax expense as of June 30, 2026 is $1.1 million, related to a potential future distribution of such earnings. This reflects our continued assessment of cash needs and the absence of an indefinite reinvestment assertion for our subsidiary in India. As a result of the Tax Cuts and Jobs Act, we anticipate the U.S. federal impact for the remaining foreign jurisdictions to be minimal if these funds are repatriated. In addition, based on our current and future needs, we believe our current funding and capital resources for our international operations are adequate. Aside from the changes in convertible senior notes as disclosed in Note 6, "Convertible Senior Notes” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (Unaudited)” of this Quarterly Report on Form 10-Q, there were no other material changes in our commitments under contractual obligations, as disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2025. The following table presents our condensed consolidated statements of cash flows data (in thousands): Six Months Ended June 30, Change 2026 2025 $ % Net cash flows provided by operating activities $ 14,161 $ 19,686 $ (5,525) (28) % Net cash flows provided by investing activities 21,010 272,180 (251,170) (92) % Net cash flows used in financing activities (21,877) (417,138) 395,261 (95) % The substantial majority of our cash inflows from operating activities are from e-commerce transactions with learners, which are settled immediately through payment processors, as opposed to cash outflows from bill payments, which are settled based on contractual payment terms with our suppliers. Net cash flows provided by operating activities decreased $5.5 million, or 28%, during the six months ended June 30, 2026 compared to the same period in 2025 and was primarily related to the net effect of lower depreciation and amortization of $21.3 million, lower share-based compensation expense of $14.1 million, an increase in the change in accrued liabilities of $24.7 million primarily due to payments from our restructuring actions partially offset by a decrease in net loss of $50.4 million and a decrease in the gain on partial early extinguishments of convertible senior notes of $6.8 million. Net cash flows provided by investing activities decreased $251.2 million, or 92%, during the six months ended June 30, 2026 compared to the same period in 2025 and was primarily related to lower proceeds from the sale of investments of $175.5 million and lower proceeds from the maturities of our investments of $87.7 million, partially offset by lower purchases of property and equipment of $11.2 million. Net cash flows used in financing activities decreased $395.3 million, or 95%, during the six months ended June 30, 2026 compared to the same period in 2025 and was primarily related to lower repayments of our convertible senior notes. 28 Table of Contents Critical Accounting Policies, Significant Judgments and Estimates Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP). The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. These estimates form the basis for judgments we make about the carrying values of our assets and liabilities, which are not readily apparent from other sources. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions. There have been no material changes in our critical accounting policies and estimates during the six months ended June 30, 2026 as compared to the critical accounting policies and estimates disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2025. Recent Accounting Pronouncements For relevant recent accounting pronouncements, see Note 1, “Background and Basis of Presentation,” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q. 29 Table of Contents