Yahoo Finance Chegg announces deep job cuts in restructuring plan, sending shares surging 19%
Investing.com - Shares in Chegg (NYSE:CHGG) surged by more than 19% in U.S. premarket dealmaking after the education technology group announced plans to slash 23% of its global workforce as part of a broader restructuring push.
By 2025, the company said it expects to realize adjusted savings of $40 million to $50 million from the employee departures, as well as the closure of two offices outside of the United States and other cost reductions. Chegg predicts it will incur $10 million to $14 million in charges related to the overhaul, with the majority incurred by the fourth quarter of 2024.
In a statement on Monday, Chief Executive Nathan Schultz, who took over at the helm of the business on June 1, said the changes will make the group "more focused, more efficient, uncomplicated, and quicker-moving."
"Our renewed focus on our core audience – the student – will allow us to address an unmet need with an offering that is differentiated, holistic, and verticalized for education,” Schultz added.
After the announcement, BMO analysts anticipated that Chegg's stock would react "positively." The shares have shed more than three-fourths of their value year-to-date, as investors fret over how artificial intelligence-enhanced chatbots like OpenAI's ChatGPT could impact demand for its core offerings.
In May, Chegg flagged that student interest in ChatGPT would dent new customer growth. The warning, along with a decision by Chegg to suspend its full-year outlook, contributed to a slide in the company's shares that wiped almost a $1 billion off its market capitalization.
Schultz noted that while Chegg believes it can return to durable subscriber additions, the process will "take time." He added that, as a result, an improvement in total revenue declines may not be seen "until next year."
Analysts at Jefferies said the new initiatives "seem promising," but noted that they are waiting to receive "proof points of the strategy working out."
Oliver Gray contributed to this report.
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