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Key Takeaways Chewy sees pet healthcare as a major growth opportunity, supported by its Vet Care clinic network.CHWY's Vet Care clinics attract new customers and increase spending from existing customers.CHWY expects Modern Animal to accelerate clinic expansion to about 60 locations by fiscal 2026. Chewy, Inc. (CHWY - Free Report) believes pet healthcare remains one of its largest long-term growth opportunities, supported by an estimated total addressable market of around $54 billion. Chewy Vet Care clinics continue to generate strong stand-alone economics while serving as effective customer acquisition and retention channels for the broader ecosystem. The shortage of veterinarians also provides Chewy with a structural advantage as it expands its veterinary clinic network.

To support this strategy, the company completed the acquisition of Modern Animal. Management noted that Modern Animal adds a complementary clinic footprint, strong clinical expertise and a technology-enabled operating model aligned with Chewy Vet Care. The acquisition is expected to accelerate clinic expansion by combining Chewy Vet Care’s organic growth with Modern Animal’s existing footprint and development pipeline, with the combined business projected to operate approximately 60 clinics by the end of fiscal 2026 and generate an embedded steady-state revenue contribution of about $290 million.

The company noted that Chewy Vet Care continues to strengthen the broader Chewy ecosystem by attracting new customers to the platform while encouraging existing customers to increase their spending following their initial clinic visit. This demonstrates the strategic value of its integrated pet healthcare offering by supporting customer acquisition, retention and a greater share of wallet, while reinforcing the company's long-term growth strategy.

Additionally, technology-enabled workflows and AI-assisted tools are driving strong veterinary productivity, retention and employee satisfaction. Combined with Chewy’s recurring revenue model, scaled fulfillment network and expanding healthcare platform, these capabilities support its long-term 10% adjusted EBITDA margin target. Overall, Chewy's expanding healthcare ecosystem strengthens its competitive moat by enhancing customer acquisition, retention and share of wallet while supporting long-term profitability.

Zacks Rundown for CHWYCHWY shares have lost 25.3% in the past three months compared with the industry’s 2.6% decline. The company carries a Zacks Rank #5 (Strong Sell) at present.

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From a valuation standpoint, CHWY trades at a forward price-to-earnings ratio of 21.74, lower than the industry’s average of 21.84.

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The Zacks Consensus Estimate for earnings for the current and next fiscal year indicates year-over-year growth of 20.5% and 21.7%, respectively.

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Stocks to ConsiderSome better-ranked stocks have been discussed below:

Phibro Animal Health Corporation (PAHC - Free Report) operates as an animal health and mineral nutrition company in the United States, Latin America and Canada, Europe, the Middle East, Africa, and the Asia Pacific. PAHC currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for PAHC's current fiscal-year sales and earnings implies growth of 14.8% and 47.4%, respectively, from the year-ago actuals. PAHC delivered a trailing four-quarter earnings surprise of 16.3%, on average.

Carvana Co. (CVNA - Free Report) , currently carrying a Zacks Rank #2, operates an e-commerce platform for buying and selling used cars.

The Zacks Consensus Estimate for CVNA’s current financial-year sales implies growth of 38.5%, and the same for earnings implies a decline of 6.5% from the year-ago reported numbers. CVNA delivered a negative trailing four-quarter earnings surprise of 71.6%, on average.

Amazon.com Inc. (AMZN - Free Report) engages in the retail sale of consumer products, advertising, and subscription services through online and physical stores in North America and internationally. At present, Amazon carries a Zacks Rank of 2.

The consensus estimate for Amazon’s current fiscal-year sales and earnings implies growth of 15.2% and 29.6%, respectively, from the year-ago figures. AMZN delivered a trailing four-quarter earnings surprise of 11.4%, on average.

Key Takeaways Chewy is scaling AI across customer service, pharmacy, fulfillment and marketing workflows.CHWY expects AI initiatives to deliver efficiency gains in the low tens of millions of dollars in fiscal 2026.Chewy reported 90 basis points of year-over-year SG&A leverage, aided by productivity and early AI benefits. Chewy, Inc. (CHWY - Free Report) is expanding the use of artificial intelligence ("AI") and automation across its business to enhance customer service and improve operational efficiency. During the first quarter of fiscal 2026, the company built the infrastructure required to deploy AI at scale and began integrating these capabilities across multiple functions to support its long-term growth strategy.

Chewy is applying AI and automation across customer service, pharmacy operations, fulfillment and marketing workflows. Management noted that these initiatives are helping lower the cost of serving customers by improving workflow speed, service quality and productivity. The company is utilizing AI to enhance search relevance, personalization and marketing effectiveness.

Chewy expects AI-driven initiatives to generate efficiency benefits in the low tens of millions of dollars during fiscal 2026, with a more meaningful contribution anticipated in 2027 and beyond. In the first quarter, the company delivered roughly 90 basis points of year-over-year SG&A leverage, supported by fulfillment productivity gains, operating discipline and early benefits from technology, automation and AI-enabled initiatives.

At the same time, Chewy continues to invest in strategic growth initiatives, including expanding Chewy Health, scaling Chewy Vet Care, optimizing its fulfillment network and strengthening customer acquisition capabilities. Management emphasized that investments in AI infrastructure and automation are designed not only to improve near-term productivity but also to reinforce the company's long-term competitive positioning.

Looking ahead, management believes continued investments across health, AI, automation, fulfillment and customer experience will strengthen the Chewy ecosystem. The company reiterated the long-term adjusted EBITDA margin target of 10%, reflecting confidence in the operating model as it balances innovation, automation and disciplined execution.

CHWY’s Price Performance, Valuation & EstimatesChewy, which competes with BARK, Inc. (BARK - Free Report) and Petco Health and Wellness Company, Inc. (WOOF - Free Report) , has fallen 28% over the past three months against the industry’s growth of 5.5%. Meanwhile, BARK's shares have declined 5.4% and Petco has dipped 1%.

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From a valuation standpoint, CHWY trades at a trailing price-to-sales ratio of 0.63X, below the industry’s average of 2.10X. It has a Value Score of A. CHWY is trading at a premium to BARK (with a trailing 12-month P/S ratio of 0.21) and Petco (0.13).

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The Zacks Consensus Estimate for CHWY’s fiscal 2026 and 2027 earnings implies year-over-year growth of 20.5% and 21.9%, respectively. Estimates for fiscal 2026 and 2027 have been revised downward by 9 cents and 13 cents, respectively, over the past 30 days.

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Although the company continues to invest in AI, healthcare and fulfillment capabilities to support long-term growth, short-term challenges remain. Management expects margin expansion to moderate amid difficult comparisons, higher transportation-related costs and continued strategic investments. A softer consumer spending environment and a more cautious outlook for discretionary categories could limit revenue growth and operating leverage in the near term. CHWY currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.