Chegg Inc., a prominent online homework help provider, is exploring “strategic alternatives” for its business as traffic to its web-based education platform has plummeted following the launch of Google’s AI-powered summary tool. The company has also filed a lawsuit against Google and its parent company Alphabet Inc., alleging unfair competition stemming from Google’s AI Overviews product.
Chegg’s CEO, Nathan Schultz, explained that the company’s need to review strategic options is directly linked to Google’s new tool. He stated, “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.”
Following this announcement, Chegg’s shares fell by 18% in after-hours trading, marking one of the worst performances in the Russell 3000 Index. The stock has seen a dramatic decline of approximately 95% since OpenAI unveiled its ChatGPT tool in 2022, highlighting the increasing challenges faced by Chegg in the evolving digital landscape.
In its lawsuit, Chegg criticizes Google’s conduct, arguing that it “threatens to leave the public with an increasingly unrecognizable internet experience,” where users are kept within Google’s ecosystem and provided with synthetic, error-ridden answers. The lawsuit claims that Google’s AI Overviews are preventing users from visiting external websites, costing publishers valuable traffic and undermining the integrity of the information ecosystem.
This legal action comes amid growing concerns from website publishers about Google’s dominance in search. A federal court ruled last year that Google holds an illegal monopoly in the online search market, with its power extending into the AI sector. Many publishers have raised concerns about Google’s crawler, Googlebot, which not only indexes sites for search but also helps generate AI-powered summaries that appear at the top of search results. These summaries, critics argue, reduce the need for users to visit individual websites, which diminishes web traffic for content creators.
Chegg’s financial performance has also been affected, with the company posting a first-quarter sales outlook that fell short of analyst expectations. Schultz highlighted the impact of Google’s AI Overviews, noting that Chegg’s non-subscriber traffic plummeted by 49% in January 2025, a sharp decline from the 8% drop reported in the second quarter of 2024.
The lawsuit was filed in Washington D.C., where a federal judge recently ruled that Google’s monopoly in the online search market is illegal. The U.S. Justice Department is currently seeking remedies, which include restrictions on Google’s acquisitions related to AI and expanded opt-out options for websites from Google’s AI-powered products. Judge Amit Mehta has scheduled a multi-week hearing to address the proposed remedies in April.
Chegg’s lawsuit is part of a broader wave of legal actions against Google by smaller tech companies in the wake of the antitrust ruling. Yelp Inc., a longtime critic of Google, also filed a lawsuit last year accusing the search giant of antitrust violations.
