(Bloomberg) — Chegg Inc. is weighing “strategic alternatives” for its business, saying that traffic to its web-based education platform has been decimated following Google’s launch of an artificial intelligence-powered summary tool.
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The company, which offers online homework help, has also filed a lawsuit against the search engine and its parent Alphabet Inc. over what it says is unfair competition caused by the Google AI Overviews (AIO) product.
“These two actions are connected, as we would not need to review strategic alternatives if Google hadn’t launched AI Overviews,” Chief Executive Officer Nathan Schultz said on Monday.
“Traffic is being blocked from ever coming to Chegg because of Google’s AIO and their use of Chegg’s content to keep visitors on their own platform,” he added.
Chegg shares fell 18% in after-hours trading following the announcement, making it one of the worst performing stocks in the Russell 3000 Index. The stock has lost about 95% of its value since the OpenAI first revealed its ChatGPT tool in 2022.
The California-headquartered company also posted a first-quarter sales outlook that missed consensus expectations.
Schultz said Google’s AI Overviews had a “clear” impact on Chegg.
“Our non-subscriber traffic plummeted to negative 49% in January 2025, down significantly from the modest 8% decline we reported in 2Q 2024,” he said.
Chegg’s complaint against Google and Alphabet has been filed in the US District Court for the District of Columbia.
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