Chegg or Udemy: Weighing the Long Edge and Short Edge Heading Into 2026

The edtech sector is at an inflection point. As artificial intelligence reshapes learning delivery and investor appetite shifts toward profitable growth, two California-based players—Chegg, Inc. (CHGG) and Udemy, Inc. (UDMY)—reveal starkly different paths forward. While both operate in the expanding digital learning market, their positioning, cost dynamics and earnings trajectories suggest divergent risk-reward profiles for 2026. Understanding where each company holds its edge—whether near-term or longer-term—is crucial for making the right call now.

Chegg’s Aggressive Cost Reset: A Structural Advantage

Chegg’s long edge in 2026 rests on a aggressive financial restructuring that few investors fully appreciate. The company has fundamentally separated its legacy academic tutoring business from higher-growth skill-development operations, creating operational clarity and enabling sharper cost discipline.

The numbers speak for themselves. In Q3 2025, non-GAAP operating expenses dropped 46% year over year. More striking: management projects total non-GAAP expenses will fall from $536 million in 2024 to under $250 million by 2026. This represents a structural shift in the company’s cost profile and signals genuine operating leverage ahead.

Revenue headwinds remain real—Q3 2025 saw total revenues decline 42% year over year due to traffic declines in legacy academic services. However, the company’s consolidated Busuu and Chegg Skills unit is expected to grow 14% year over year in Q4 2025, with sustained double-digit growth projected beyond. This creates a clear recovery narrative as the old business stabilizes and the new unit scales.

The earnings picture validates this trajectory. Chegg’s 2026 EPS estimates have moved higher over the past 60 days and imply 228.6% year-over-year growth. That’s the kind of earnings momentum that doesn’t emerge by accident—it reflects genuine operational improvement and margin expansion.

Udemy’s Stability Trade-Off: A Short Edge Story

Udemy’s position is more immediately compelling but offers less upside surprise potential. The company has successfully pivoted toward subscriptions, which now represent 74% of total revenues and grew 43% year over year in Q3 2025. Total revenues reached $196 million in Q3, slightly exceeding guidance, while adjusted EBITDA margins expanded to 12% from 6% a year earlier.

On the surface, this reads as disciplined execution. But dig deeper and the constraints become apparent. Udemy Business revenues grew just 5% year over year in Q3, with net dollar retention at 93%—pressured by customers optimizing spend. Consumer subscription growth is strong, but the company has intentionally deemphasized transactional sales, creating near-term drag.

Looking forward, Udemy expects subscription revenue growth to approach double digits in 2026. That’s steady, but it’s not explosive. The company’s 2026 EPS estimate has actually trended downward over the past 60 days and implies year-over-year growth of just 0.8%. That’s the short edge—near-term predictability at the cost of meaningful surprise potential.

Valuation and Risk Positioning

On a forward 12-month price-to-sales basis, Udemy currently trades at a premium to Chegg. Yet when you factor in earnings trajectory, Chegg’s valuation discount reflects opportunity rather than weakness. Over the past six months, Chegg’s share price has underperformed Udemy and the broader internet software sector, creating a asymmetry between risk and reward.

For investors seeking immediate stability and margin expansion, Udemy holds tactical appeal. For those with a horizon through 2026 and comfort with turnaround execution, Chegg’s restructuring provides the sharper risk-reward profile. Chegg’s Zacks Rank of #1 (Strong Buy) versus Udemy’s #3 (Hold) reflects this fundamental difference in positioning.

The choice ultimately depends on your investing edge: do you prioritize near-term visibility, or do you back the company with the tighter cost structure and accelerating earnings inflection?