Considering Sesame Street Workshop attempted to sue The Happytime Murders for referencing its brand earlier in the year, it’s safe to speculate it’s the latter.
Either Sesame Street has gotten a little more raunchy with its writing since its partial acquisition by HBO, or the world has another auditory illusion on its hands.
Regardless, it definitely sounds to me like Grover said “fucking” in his response to Rosita’s idea.