Chegg vs. Udemy: Which EdTech Stock Offers More Upside Now?

The article contrasts edtech players Chegg (CHGG) and Udemy (UDMY), both leveraging AI in a growing market for personalized learning. Chegg, rated a "Strong Buy," is transforming its Chegg Study into an AI-powered Personalized Learning Assistant and aggressively cutting costs, achieving a 72% decline in H1 2025 operating expenses, and trades at a discount. In contrast, Udemy, a "Hold," is scaling its subscription model and B2B partnerships but contends with macroeconomic headwinds, foreign exchange pressures, and a 6% decline in H1 2025 consumer segment revenue, alongside a premium valuation, despite projected strong EPS growth. Consequently, Chegg is deemed a more compelling near-term investment due to its strategic repositioning, cost discipline, and relative valuation.

Analysis

A comparative analysis of Chegg (CHGG) and Udemy (UDMY) reveals two distinct investment theses within the AI-driven edtech sector. Chegg is undergoing a significant strategic and operational overhaul, repositioning its core Chegg Study product into an AI-powered Personalized Learning Assistant while aggressively managing its cost structure. This restructuring has led to a 72% year-over-year decline in total operating expenses for the first half of 2025 and projected adjusted expense savings of $165-$175 million for 2025. Although 2025 EPS estimates show a loss, they have contracted, and a breakeven point is forecasted for 2026, implying 100% growth. This turnaround is reflected in its recent stock outperformance and a discounted valuation on a forward price-to-sales basis relative to Udemy. In contrast, Udemy's strategy focuses on scaling its subscription model, which now accounts for approximately 70% of its top line, and expanding its B2B ecosystem through partnerships with Indeed and UKG. While the company projects strong EPS growth of 193.8% in 2025 and aims to double consumer subscriptions by the end of 2026, it faces considerable headwinds. These include a 6% year-over-year revenue decline in its Consumer segment in H1 2025, exposure to macroeconomic uncertainties, and foreign exchange pressures, all while trading at a premium valuation.

Key Decisions for Investors

• Given Chegg's aggressive cost-cutting, AI-led product repositioning, and discounted valuation, investors may consider it a compelling near-term turnaround play, with execution on its AI strategy and 2026 breakeven EPS as key catalysts to monitor.
• For Udemy, a cautious stance is warranted; investors should weigh its strong subscription growth and B2B partnerships against the pronounced weakness in its consumer segment, macroeconomic sensitivity, and premium valuation, making it a potential long-term hold for those willing to tolerate near-term volatility.
• A relative value or pairs trade strategy could be considered, favoring a long position in Chegg against a short position in Udemy, to capitalize on their diverging near-term fundamentals, stock performance momentum, and valuation multiples.