Chegg (CHGG) Sophon Profile

Transitioning from physical rentals to digital subscriptions, but facing some challenges

Since launch, our goal with Sophon Microcap Atlas has been to build the definitive research hub for underfollowed sub-$500M companies. Each month we’re adding deep-dive coverage, proprietary scoring frameworks, and differentiated insights you won’t find anywhere else. With every report, the value of the platform compounds — but so does the subscription price.

We’ve structured it this way deliberately: to reward early adopters who believe in what we’re building. Subscribers who joined at launch are still paying their original rate, and they’ll keep that price for life. By contrast, new readers coming in today are already paying more than they did six months ago.

That’s by design. We’re investing heavily in research, and we want to keep the economics aligned with our most loyal readers.

When you join Sophon Microcap Atlas, your subscription price is locked in for life. We raise rates by $15 every two months to reflect the growing value of our research library, but early subscribers keep their lower rate forever. On November 1, the price rises to $60/month or $540/year — lock in now at $45/month or $400/year and you’ll still be paying that rate years from now, even when the service is worth thousands.

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Disclaimer: Not financial advice

View: Pass

Sophon Score: 57/100

Chegg is a defensible but increasingly challenged digital learning platform. Its proprietary content, retention, and scalable subscription model provide some buffer, but falling subscribers, competition from GenAI, and Google AIO are severe near-term headwinds. Margins and revenue quality are under pressure, international and Skills expansion are unproven, and growth may be difficult without a significant new catalyst. Chegg is better described as a niche player fighting to maintain relevance rather than a clear long-term compounder. For these reasons, we pass.

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Chegg is navigating a major transition from its textbook rental roots to a digital-first learning platform. In Q2 2025, total revenue was $105M, down 36% YoY, with subscription services contributing $90M, ~86% of revenue, serving 2.6M subscribers, a 40 % decline from Q2 2024. Chegg Study and Chegg Study Pack accounted for 1.8M subscribers, down 48%. U.S. subscribers totaled 1.9M, down 42%, while international subscribers were 0.7M, down 33 %.

The decline reflects weaker new customer acquisition rather than churn, driven by Google AI Overviews, GenAI tools like ChatGPT, and post-COVID normalization as nearly 1.5M students left higher education for the workforce. Retention remains strong, with global monthly retention for Chegg Study/Pack at 79.7%, up 117 bps, international retention at 70.8%, up 427 bps, and U.S. retention at 80.8%, up 23 bps. Engagement metrics indicate high usage among remaining users, with 2.3M questions asked in Q2 2025, longer sessions, and widespread adoption of AI-powered conversational instruction.