Chegg Suffers A 24% Revenue Loss, Sues Google

“AI will make the world a better place!” That’s what all the companies tell us. However, along with the benefits, we’re seeing some pretty significant pitfalls. A good example would be the numerous companies losing money because of Google’s AI Overviews. One company is the educational company Chegg, and it’s suing Google over its AI overviews.

Most people know this, but here’s a refresher. Last year, Google released AI Overviews. This is a tool that puts AI-generated overviews of what you searched for on top of its search results. As you can guess, this feature steals traffic from numerous websites across the internet, as it gives people the ability to bypass going to websites and contributing to their ad revenue.

Several companies have reported massive losses in their revenue because of this, yet the company maintains that AI Overviews lead people to a wider variety of websites. So, someone in this scenario is obviously lying.

Chegg is suing Google over its AI Overviews

Chegg is an online education company that provides tools to students. It also allows people to rent textbooks. The company has partnered with certain AI companies like OpenAI and Meta to provide AI-powered tools to students.

However, there’s one AI tool that it’s not too happy about. On Monday, Chegg filed a lawsuit in federal district court. The California-based company reported a $6.1 million loss in revenue in Q4 2024, which was a 24% loss year-over-year. Its stock was just above $1 per share in after-hours trading.

Chegg isn’t only losing eyes on its website, but it’s losing customers. It recently reported 3.6 million students in Q4 2024, which is 21% lower year-over-year.

The company blames this on Google’s AI Overviews. This is the fuel for the lawsuit. Google drives billions of eyes to websites every day, but it launched AI Overviews, which diverts these eyes. Obviously, it knows that this is happening, but it doesn’t care.

What makes things worse is that Google, allegedly, trained its models on Chegg’s 135 million questions and answers. If this is true, then it only shows Google in a harsher light.

Chegg has been forced to make drastic choices

At this point, we don’t know what Chegg is demanding in its lawsuit, but we know that it’s making some tough decisions. The company is looking to Goldman Sachs for a possible acquisition. It’s also considering going private.

This means that things could be dire at the company. We don’t know if Chegg has gone full Code Red, but the fact that it’s looking into such options means that things aren’t looking up.