Chegg seen on the Latest York Stock Exchange on Feb. 13, 2025.
Danielle DeVries | CNBC
Chegg on Monday filed suit in federal district court against Google, claiming that artificial intelligence summaries of search results have hurt the net education company’s traffic and revenue.
The legal move come nearly two years after former CEO Dan Rosensweig said students engaging with OpenAI’s ChatGPT assistant were cutting into Chegg’s latest customer growth.
Chegg is price lower than $200 million, and in after-hours trading Monday, the stock was trading just above $1 per share. Chegg has engaged Goldman Sachs and can have a look at strategic options, including getting acquired and going private, President and CEO Nathan Schultz told analysts on a Monday earnings call.
Chegg reported a $6.1 million net loss on $143.5 million in fourth-quarter revenue, a 24% decline yr over yr, in response to a statement. Analysts polled by LSEG had expected $142.1 million in revenue. Management called for first-quarter revenue between $114 million and $116 million, but analysts had been targeting $138.1 million. The stock was down 24% in prolonged trading.
Google forces firms like Chegg to “supply our proprietary content with the intention to be included in Google’s search function,” said Schultz, adding that the search company uses its monopoly power, “reaping the financial advantages of Chegg’s content without having to spend a dime.”
Despite the suit, Chegg has its own AI strategy. It has drawn on Meta’s open-source Llama, in addition to models from privately held Anthropic and Mistral, Schultz said. Chegg has also partnered with OpenAI, which the education company views as a competitor, alongside Google. The corporate reported that 3.6 million students had subscriptions within the fourth quarter, down 21%. Subscriptions include access to AI-powered learning assistance. Chegg also rents and sells textbooks.
AI Overviews, as Google’s artificial intelligence summaries are called, can be found in the corporate’s search engine in over 100 countries, with greater than 1 billion users, the corporate said in October. They show up above links to other pages in search results.
A Google spokesperson told CNBC that the corporate will defend itself against Chegg’s suit, which asserted that the search company violated sections one and two of the Sherman Antitrust Act of 1890.
“Each day, Google sends billions of clicks to sites across the net, and AI Overviews send traffic to a greater diversity of web sites,” the Google spokesperson said.
Chegg claimed that Google drew on Chegg’s collection of 135 million questions and answers on quite a lot of subjects in its model training data sets.
After training its models, Google can generate content that competes with information that publishers have on offer in search results, Chegg argued in its grievance. The net learning company included a screenshot of a Google AI Overview that borrows details from Chegg’s website but doesn’t attribute the knowledge. Nonetheless, the relevant Chegg page does show up lower down in search results.
Chegg cited a federal judge’s ruling last August that Google holds a monopoly within the search market. The choice got here after the Department of Justice in 2020 filed its landmark case, alleging that Google controlled the final search market by creating strong barriers to entry and a feedback loop that sustained its dominance.
WATCH: Google unrolls AI Overviews in six more countries
