Chegg Q2 2026 Earnings: Cost Cuts Support Cash Flow as Revenue Falls 51%

Chegg (NYSE: CHGG) reported Q2 2026 revenue of $51.8 million, down 51% year over year, and a GAAP net loss of $3.0 million. Cost reductions helped the company generate $9.1 million of adjusted EBITDA and $6.4 million of free cash flow despite the steep revenue contraction. Chegg Skilling delivered modest growth, while Q3 guidance points to another sequential decline in revenue and profitability.

Core earnings data

The quarter combined continued topline pressure with positive adjusted operating profit and cash generation. Chegg Skilling was the only disclosed business with year-over-year growth, while lower operating expenses helped limit the effect of falling revenue on adjusted EBITDA.

The table separates GAAP and non-GAAP measures for the quarter ended June 30, 2026.

Adjusted EBITDA, non-GAAP net loss, non-GAAP gross margin, and free cash flow exclude or adjust for items specified in Chegg’s non-GAAP definitions and should be considered alongside the GAAP results.

Business and segment performance

Chegg Skilling revenue increased 2% to $17.5 million, but this modest growth was not enough to offset the contraction across the rest of the company. Management said Chegg had signed six new distribution partners during 2026, including OpenSesame and Dale Carnegie, with launches scheduled for the second half of the year.

Chegg continues to manage its Academic Services products with an emphasis on cash generation. Management described Chegg Study’s monthly retention as strong, although it did not provide a retention rate or separate Academic Services revenue for the quarter.

The company is also expanding from academic support and skills training into employability services. More than 10,000 students have used the beta product, which is designed to assist with job matching, applications, resumes, interview preparation, and targeted skills development. A soft launch across Chegg and Internships.com is scheduled to begin in Q3, followed by a broader rollout through 2027.

Cost cuts sustained cash flow despite falling revenue

Non-GAAP operating expenses fell to $32.3 million, nearly half the level reported a year earlier. This reduction, which management attributed to expense controls and greater use of AI, allowed Chegg to produce a 17% adjusted EBITDA margin even as revenue declined 51%. However, the GAAP and non-GAAP net losses show that positive adjusted EBITDA did not translate into net profitability.

Quarterly capital expenditures were $3.7 million, down 49% year over year. Free cash flow totaled $6.4 million after approximately $1.5 million of severance payments. For the first half of 2026, Chegg generated $9.5 million of free cash flow while making $14.4 million of severance payments; these figures are year-to-date amounts and are separate from the quarterly results.

Chegg ended June with $72.3 million in cash and investments and a $38.5 million net cash position. It repurchased $1.7 million of common stock during the quarter and had $120.7 million remaining under its repurchase authorization. Management also expects to repay the company’s convertible debt fully in Q3.

Q3 2026 guidance

Chegg began providing consolidated revenue guidance rather than separate guidance for Academic Services and Chegg Skilling, citing the increasing integration of the two businesses. The new outlook implies lower revenue, gross margin, and adjusted EBITDA compared with Q2.

The guidance indicates that Chegg’s cost reductions have not removed near-term earnings sensitivity to lower revenue. It also coincides with the initial launch phase of the employability platform and continued investment in the company’s strategic transition.

Recent insider transactions

Yahoo Finance’s six-month summary reported 799,136 shares under purchases across nine transactions and 8,293 shares under sales in one transaction, resulting in net reported purchases of 790,843 shares. Total insider holdings were listed at 4.22 million shares, with net purchases equal to 23.1%.

Eight of the latest 10 reported transactions were zero-price director stock awards. Consequently, the aggregate net purchase figure should not be interpreted as entirely open-market insider buying.

Risks investors should watch

• Continued revenue contraction: Total revenue fell 51% year over year, and Q3 guidance implies a further sequential decline of approximately 15% to 17%.
• Lower near-term margins: Q3 gross margin guidance of 48% to 49% is below Q2’s 55%, while adjusted EBITDA is expected to fall to $1 million-$2 million.
• Employability platform execution: More than 10,000 students have tested the beta, but the product is only beginning its soft launch. Its ability to produce sustained adoption and revenue has not yet been demonstrated in the reported figures.
• Balancing investment and cash commitments: Chegg is funding its strategic transition while continuing to incur restructuring payments, repurchase shares, and prepare to repay convertible debt.
• Reliance on cost efficiency: Expense reductions supported positive adjusted EBITDA and free cash flow, but returning to revenue growth while preserving those efficiencies remains an important test.

Summary

Chegg’s Q2 2026 results showed a business still facing substantial revenue pressure but operating with a much leaner cost structure. Lower expenses and capital spending supported positive adjusted EBITDA and free cash flow, while Skilling posted modest growth. The next points to monitor are the sequential deterioration embedded in Q3 guidance, contributions from new distribution partners, and whether the employability platform can begin converting early usage into durable growth.