Track market-moving stories before they get noisy

Airbnb maintains a massive marketplace of over 9 million active listings across 220 countries and regions. Chewy continues to grow its high-margin pharmacy business and Autoship subscription program for pet parents.

In the latest trading session, Chewy (CHWY - Free Report) closed at $21.30, marking a -1.09% move from the previous day. This change lagged the S&P 500's 0.58% gain on the day. Elsewhere, the Dow gained 0.69%, while the tech-heavy Nasdaq added 1.05%.

The online pet store's shares have seen an increase of 9.51% over the last month, surpassing the Retail-Wholesale sector's gain of 4.75% and the S&P 500's gain of 0.97%.

The investment community will be closely monitoring the performance of Chewy in its forthcoming earnings report. The company's earnings per share (EPS) are projected to be $0.38, reflecting a 18.75% increase from the same quarter last year. Meanwhile, our latest consensus estimate is calling for revenue of $3.35 billion, up 7.42% from the prior-year quarter.

CHWY's full-year Zacks Consensus Estimates are calling for earnings of $1.53 per share and revenue of $13.52 billion. These results would represent year-over-year changes of +20.47% and +7.32%, respectively.

Additionally, investors should keep an eye on any recent revisions to analyst forecasts for Chewy. These revisions typically reflect the latest short-term business trends, which can change frequently. Therefore, positive revisions in estimates convey analysts' confidence in the business performance and profit potential.

Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which varies between #1 (Strong Buy) and #5 (Strong Sell), carries an impressive track record of exceeding expectations, confirmed by external audits, with stocks at #1 delivering an average annual return of +25% since 1988. Over the past month, there's been a 0.65% fall in the Zacks Consensus EPS estimate. As of now, Chewy holds a Zacks Rank of #4 (Sell).

In terms of valuation, Chewy is presently being traded at a Forward P/E ratio of 14.08. This signifies a discount in comparison to the average Forward P/E of 15.64 for its industry.

It's also important to note that CHWY currently trades at a PEG ratio of 0.45. The PEG ratio is akin to the commonly utilized P/E ratio, but this measure also incorporates the company's anticipated earnings growth rate. As the market closed yesterday, the Internet - Commerce industry was having an average PEG ratio of 1.26.

The Internet - Commerce industry is part of the Retail-Wholesale sector. Currently, this industry holds a Zacks Industry Rank of 162, positioning it in the bottom 35% of all 250+ industries.

The Zacks Industry Rank assesses the vigor of our specific industry groups by computing the average Zacks Rank of the individual stocks incorporated in the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.

Chewy (NYSE: CHWY - Get Free Report) CAO William Billings sold 17,283 shares of the business's stock in a transaction dated Thursday, October 15th. The shares were sold at an average price of $21.00, for a total value of $362,943.00. Following the completion of the transaction, the chief accounting officer directly owned 39,772 shares of the

When deciding whether to buy, sell, or hold a stock, investors often rely on analyst recommendations. Media reports about rating changes by these brokerage-firm-employed (or sell-side) analysts often influence a stock's price, but are they really important?

Before we discuss the reliability of brokerage recommendations and how to use them to your advantage, let's see what these Wall Street heavyweights think about Chewy (CHWY - Free Report) .

Chewy currently has an average brokerage recommendation (ABR) of 1.79, on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by 28 brokerage firms. An ABR of 1.79 approximates between Strong Buy and Buy.

Of the 28 recommendations that derive the current ABR, 16 are Strong Buy and two are Buy. Strong Buy and Buy respectively account for 57.1% and 7.1% of all recommendations.

Brokerage Recommendation Trends for CHWY

Check price target & stock forecast for Chewy here>>>

While the ABR calls for buying Chewy, it may not be wise to make an investment decision solely based on this information. Several studies have shown limited to no success of brokerage recommendations in guiding investors to pick stocks with the best price increase potential.

Are you wondering why? The vested interest of brokerage firms in a stock they cover often results in a strong positive bias of their analysts in rating it. Our research shows that for every "Strong Sell" recommendation, brokerage firms assign five "Strong Buy" recommendations.

This means that the interests of these institutions are not always aligned with those of retail investors, giving little insight into the direction of a stock's future price movement. It would therefore be best to use this information to validate your own analysis or a tool that has proven to be highly effective at predicting stock price movements.

Zacks Rank, our proprietary stock rating tool with an impressive externally audited track record, categorizes stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), and is an effective indicator of a stock's price performance in the near future. Therefore, using the ABR to validate the Zacks Rank could be an efficient way of making a profitable investment decision.

ABR Should Not Be Confused With Zacks RankAlthough both Zacks Rank and ABR are displayed in a range of 1--5, they are different measures altogether.

Broker recommendations are the sole basis for calculating the ABR, which is typically displayed in decimals (such as 1.28). The Zacks Rank, on the other hand, is a quantitative model designed to harness the power of earnings estimate revisions. It is displayed in whole numbers -- 1 to 5.

Analysts employed by brokerage firms have been and continue to be overly optimistic with their recommendations. Since the ratings issued by these analysts are more favorable than their research would support because of the vested interest of their employers, they mislead investors far more often than they guide.

On the other hand, earnings estimate revisions are at the core of the Zacks Rank. And empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

In addition, the different Zacks Rank grades are applied proportionately to all stocks for which brokerage analysts provide current-year earnings estimates. In other words, this tool always maintains a balance among its five ranks.

There is also a key difference between the ABR and Zacks Rank when it comes to freshness. When you look at the ABR, it may not be up-to-date. Nonetheless, since brokerage analysts constantly revise their earnings estimates to reflect changing business trends, and their actions get reflected in the Zacks Rank quickly enough, it is always timely in predicting future stock prices.

Is CHWY Worth Investing In?Looking at the earnings estimate revisions for Chewy, the Zacks Consensus Estimate for the current year has declined 0.7% over the past month to $1.53.

Analysts' growing pessimism over the company's earnings prospects, as indicated by strong agreement among them in revising EPS estimates lower, could be a legitimate reason for the stock to plunge in the near term.

The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #4 (Sell) for Chewy. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Therefore, it could be wise to take the Buy-equivalent ABR for Chewy with a grain of salt.

Chewy (CHWY +2.76%) and MercadoLibre (MELI +1.57%) both sell online, but they serve different customers in different markets. Chewy is a U.S. online pet retailer, and MercadoLibre runs a marketplace and a fintech platform across Latin America.

Chewy's fiscal 2025 ended Feb. 1, 2026, and its latest quarter ended Aug. 2, 2026. MercadoLibre reports in U.S. dollars and uses a calendar year, so its annual figures run through Dec. 31, 2025, and its latest quarter ended June 30, 2026. They sit side by side here as two online retailers with sharply different growth rates and risks.

The case for ChewyChewy describes itself as "the preeminent online source for pet products, supplies and prescriptions," and its annual report cites roughly 190,000 products and service offerings from approximately 4,000 brands. Its Autoship subscription program accounted for $2.8 billion, or 84.6% of net sales, in the quarter ended Aug. 2, 2026.

Chewy is also expanding into veterinary care. It had 18 Chewy Vet Care clinics at the end of fiscal 2025. On May 21, 2026, it completed its roughly $400 million purchase of Modern Animal, a veterinary operator that Chewy said had 29 owned clinics when it announced the deal in April 2026. Chewy's annual report also says about 20,000 veterinary practices were enrolled in its PracticeHub e-commerce platform for veterinarians as of Feb. 1, 2026.

In fiscal 2025, revenue reached $12.6 billion, up 6.2% from fiscal 2024. Fiscal 2024 had 53 weeks, and Chewy says its growth was 8.3% on a 52-week basis. Net income was $222.8 million, down from $392.7 million, because fiscal 2024 included a $275.7 million tax benefit from the release of a valuation allowance on deferred tax assets. Operating income rose to $254.3 million from $112.6 million, and net income in fiscal 2023 was $39.6 million.

Chewy had no borrowings under its credit facility as of Feb. 1, 2026. Including $556.8 million in operating lease liabilities ($518.7 million long-term and $38.1 million current), its debt-to-equity ratio was about 1.1x against shareholder equity of $497.9 million.

The current ratio, which compares short-term assets with short-term obligations, was about 0.9x. Chewy reported free cash flow of $562.4 million, calculated by subtracting $129.2 million in capital expenditures from $691.6 million in operating cash flow.

Stock-based compensation of $297.9 million, about 43.1% of operating cash flow, is a non-cash expense that is added back in that figure.

Chewy reported its quarter ended Aug. 2, 2026, on Sept. 9. Net sales rose 7.3% to $3.33 billion, or 5.7% excluding SmartPak, an equine health business it bought on Feb. 2, 2026, and Modern Animal.

Net income was $80.5 million. Chewy raised its full-year outlook and now expects fiscal 2026 net sales of $13.46 billion to $13.57 billion, according to its earnings call.

The case for MercadoLibreMercadoLibre says its e-commerce platform is present in 18 countries, including Brazil and Mexico, and that its Mercado Pago fintech platform is present in eight. Mercado Pago offers payment accounts and credit, including credit cards.

MercadoLibre reports revenue as "net revenues and financial income." That line grew 39.1% to $28.9 billion in 2025, from $20.8 billion in 2024. Income from operations rose 21.7% to $3.2 billion, but net income rose only 4.5% to $2.0 billion, from $1.9 billion in 2024 and $987 million in 2023. Two things held profit back.

Operating margin fell to 11.1% in 2025 from 12.7% in 2024 as the provision for doubtful accounts rose 66% to $3.1 billion, and sales and marketing expense rose 47%. Below the operating line, income tax expense rose 62% to $845 million, and net foreign currency losses rose to $337 million from $182 million.

As of Dec. 31, 2025, MercadoLibre's debt-to-equity ratio was about 1.7x on the same basis, counting $9.2 billion of loans payable and other financial liabilities and $2.2 billion of operating lease liabilities against $6.7 billion of equity. Its current ratio was about 1.2x, though its current liabilities include $13.0 billion of funds payable to customers.

MercadoLibre does not report free cash flow the way Chewy does. Its own measure, adjusted free cash flow, starts with cash from operating activities and then removes customer funds and loan growth, among other adjustments.

Under that measure, it was $1.48 billion in 2025, compared with $12.1 billion in cash from operating activities, which includes customer funds held through Mercado Pago. The two companies' free cash flow figures are therefore not directly comparable.

In the quarter ended June 30, 2026, net revenues and financial income rose 50% to $10.17 billion, or 43% excluding currency effects. Operating income fell 17% to $683 million, a 6.7% margin, and net income fell 11% to $466 million. In its second-quarter release, management said it continues to "set the dial in a way that prioritizes long-term value creation over short-term profitability."

Risk profile comparisonChewy says competition in its industry, "especially Internet-based competition, is strong and presents an ongoing threat to the success of our business." With a net margin of 2.4% in its latest quarter, price pressure could weigh on profit.

Chewy also relies on third-party logistics providers, so delivery problems could affect its 21.7 million active customers.

Acquisitions add execution risk. When it announced Modern Animal, Chewy said the deal should be EBITDA-neutral on a pro forma basis in 2026, with clear line of sight to EBITDA contribution beginning in 2027, and accretive to earnings per share within the first year after closing.

Chewy's balance sheet has also changed since year-end. It took out a $600 million seven-year term loan on June 23, 2026, and as of Aug. 2, 2026, it had $588.7 million of long-term debt, net of issuance costs, against $370.5 million of stockholders' equity, while it repurchased $400.0 million of its stock in the first 26 weeks of fiscal 2026.

On its Sept. 9 call, Chewy's CEO said the environment "has broadly stabilized to the trends we observed exiting the first quarter" and that the company is "not assuming a meaningful consumer recovery for the balance of this fiscal year."

MercadoLibre operates in countries where, according to its annual report, inflation and currency devaluations can raise the cost of connectivity and hardware, which can limit its growth. Net foreign currency losses were $337 million in 2025, up from $182 million in 2024.

Credit is a larger risk. MercadoLibre says its lending solution exposes it to the credit risk of its merchants and consumers. Its provision for doubtful accounts rose 66% in 2025, and in the quarter ended June 30, 2026, its credit portfolio grew 75% to more than $16 billion, with 15-to-90-day nonperforming loans at 7%.

The company says new credit card cohorts are "naturally dilutive" and expects credit card margins to strengthen as those cohorts mature. In payments, Mercado Pago competes with banks, fintech companies, payment networks and digital wallets, according to the annual report.

MercadoLibre's borrowing is rising as it expands. Its net debt, which MercadoLibre calculates by counting operating lease liabilities as debt, was $6.4 billion at June 30, 2026, up from $4.7 billion at year-end, and it sold $1 billion of 5.850% notes due 2036 in September 2026.

Valuation comparisonChewy trades at a lower multiple of both sales and expected earnings than MercadoLibre, whose revenue is growing much faster.

MetricChewyMercadoLibreForward P/E11.1x44.8xP/S ratio0.6x2.4xValuation metrics include sourcing from Financial Modeling Prep (FMP) and may differ from other data providers.

The P/S ratio measures the company's market value relative to its sales over the past twelve months, while the Forward P/E relates the stock price to projected earnings estimates for the coming year.

While MercadoLibre looks like the better buy to me, I'd be a patient, long-term buyer because the company is sacrificing margin to grow, and its lending book is expanding quickly.

Revenue rose 50% in the second quarter, and operating income fell 17% as management chose long-term value over short-term profit. Management has also said it will keep investing at the scale and pace the opportunity demands, so earnings could stay uneven, and a bad turn in credit or in Latin American currencies would show up fast.

I'm willing to live with that for a business whose buyer and payments user bases each grew by roughly a quarter or more in a year.

Chewy is the steadier business. Autoship supplies more than four-fifths of its sales, and management raised its outlook in September. The catch is that single-digit growth leaves little cushion when margins are this thin. Management is also not assuming a pet-market recovery this fiscal year, and the company added a term loan this summer.

The shares have lost roughly half of their value over the past year, yet I'd want the veterinary acquisitions to deliver the contribution Chewy projects before I lean on it.

Either one could earn a place in a diversified portfolio of 50 or more companies that you plan to hold for at least five years. The Motley Fool's guide to the best e-commerce stocks and how to invest in them covers the industry more broadly.

Chewy is undervalued, trading as if it's a struggling retailer, despite being a resilient, recurring subscription business with expanding healthcare offerings. CHWY's Autoship program drives 84% of sales, delivering predictable growth and customer stickiness even as the broader pet market slows. Margin expansion is fueled by sponsored ads, automation, and AI, with management targeting a long-term 10% Adjusted EBITDA margin.

It has been about a month since the last earnings report for Chewy (CHWY - Free Report) . Shares have lost about 10.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Chewy due for a breakout? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent catalysts for Chewy before we dive into how investors and analysts have reacted as of late.

CHWY Q2 Earnings Meet Estimates, Sales Beat on Customer GrowthChewy reported second-quarter fiscal 2026 adjusted earnings of 36 cents a share, which rose 9.1% year over year and came in line with the Zacks Consensus Estimate. Net sales increased 7.3% to $3,330.2 million, topping the consensus mark of $3,322 million.

Results reflected customer growth, market share gains and disciplined execution. Chewy added 208,000 net active customers sequentially, excluding additions related to Modern Animal, while its customer funnel remained healthy across acquisition, retention and reactivation.

CHWY's Customer Base Keeps ExpandingOrganic net sales, excluding SmartPak and Modern Animal, rose 5.7% year over year. Active customers increased 3.8% to 21.705 million, while net sales per active customer advanced 1.9% to $602.

On a normalized basis, adjusting for the extra week in the prior-year comparable period, net sales per active customer increased 3.8%. Management cited customer cohort maturation, greater engagement across health and pharmacy, and broader cross-category adoption as supports.

Chewy's Autoship Mix Reinforces Recurring SalesAutoship customer sales climbed 9.3% to $2,817.2 million and represented 84.6% of total net sales. The program continued to grow faster than the overall business, reinforcing the recurring nature of Chewy's revenue base.

Consumer pressure remained visible in discretionary areas. Treat sales slowed more sharply than core food, while premiumization and discretionary attachment stayed pressured. Even so, mid-teens hard goods growth substantially outpaced the broader market, and Pet Health and Specialty Products delivered strong organic growth.

CHWY's Margins Benefit From Cost DisciplineGross margin was 30.4%, flat year over year and up 30 basis points sequentially. Adjusted EBITDA increased 23.7% to $226.7 million, supported by sponsored ads, disciplined promotional activity and lower variable cost to serve.
About $10 million of upside came from timing-related benefits, mainly earlier tariff refunds and shifted rebates. More than $5 million came from discrete items, including gift-card breakage, inventory adjustments and vendor-funded merchandising. Adjusted SG&A declined to 18.4% of sales from 19.1%, reflecting fulfillment utilization, automation and productivity gains.

Chewy Health and AI Add Growth LeversChewy Vet Care again generated triple-digit revenue growth, while the fresh and frozen portfolio posted triple-digit unit growth. The equine, farm and exotics business delivered a seventh consecutive quarter of mid-double-digit sales growth. Modern Animal and SmartPak also performed ahead of prior expectations.

AI initiatives are moving into scaled deployment. Kai, Chewy's customer-facing AI assistant, resolved about 30% of chats through self-service in early use. Management still expects AI-related initiatives to generate low tens of millions of dollars in fiscal 2026 cost savings, scaling to about $50 million annualized in fiscal 2027.

CHWY's Cash Flow Supports Capital ReturnsFree cash flow fell 15.5% year over year to $89.5 million, reflecting $137.4 million of operating cash flow and $47.9 million of capital expenditures. Chewy ended the quarter with $612 million of cash, cash equivalents and marketable securities and more than $1 billion of total available liquidity.

The company deployed $200 million toward share repurchases and bought back 9.9 million shares in the quarter. It also completed the $400 million Modern Animal acquisition and raised $600 million through its inaugural term loan issuance.

Chewy Raises Fiscal 2026 OutlookChewy expects fiscal 2026 net sales between $13.46 billion and $13.57 billion, implying reported growth of 6.8%-7.7% and organic growth of 5.5%-6.3%. Management had earlier guided net sales in the band of $13.40-$13.55 billion. Adjusted EBITDA margin is projected at 6.7%-6.8%, with the low end raised by 10 basis points from the prior range.

For the third quarter, net sales are expected at $3.323-$3.358 billion, with adjusted EBITDA margin of 6.6%-6.7% and adjusted earnings of around 39 cents a share. The outlook assumes no meaningful consumer recovery and continued low pricing contribution, while management expects Chewy to keep gaining share.

How Have Estimates Been Moving Since Then?In the past month, investors have witnessed a upward trend in fresh estimates.

VGM ScoresCurrently, Chewy has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock has a grade of B on the value side, putting it in the second quintile for value investors.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

OutlookEstimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Chewy has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Investors often turn to recommendations made by Wall Street analysts before making a Buy, Sell, or Hold decision about a stock. While media reports about rating changes by these brokerage-firm employed (or sell-side) analysts often affect a stock's price, do they really matter?

Let's take a look at what these Wall Street heavyweights have to say about Chewy (CHWY - Free Report) before we discuss the reliability of brokerage recommendations and how to use them to your advantage.

Chewy currently has an average brokerage recommendation (ABR) of 1.79, on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by 28 brokerage firms. An ABR of 1.79 approximates between Strong Buy and Buy.

Of the 28 recommendations that derive the current ABR, 16 are Strong Buy and two are Buy. Strong Buy and Buy respectively account for 57.1% and 7.1% of all recommendations.

Brokerage Recommendation Trends for CHWY

Check price target & stock forecast for Chewy here>>>

While the ABR calls for buying Chewy, it may not be wise to make an investment decision solely based on this information. Several studies have shown limited to no success of brokerage recommendations in guiding investors to pick stocks with the best price increase potential.

Are you wondering why? The vested interest of brokerage firms in a stock they cover often results in a strong positive bias of their analysts in rating it. Our research shows that for every "Strong Sell" recommendation, brokerage firms assign five "Strong Buy" recommendations.

This means that the interests of these institutions are not always aligned with those of retail investors, giving little insight into the direction of a stock's future price movement. It would therefore be best to use this information to validate your own analysis or a tool that has proven to be highly effective at predicting stock price movements.

With an impressive externally audited track record, our proprietary stock rating tool, the Zacks Rank, which classifies stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), is a reliable indicator of a stock's near-term price performance. So, validating the Zacks Rank with ABR could go a long way in making a profitable investment decision.

ABR Should Not Be Confused With Zacks RankAlthough both Zacks Rank and ABR are displayed in a range of 1--5, they are different measures altogether.

The ABR is calculated solely based on brokerage recommendations and is typically displayed with decimals (example: 1.28). In contrast, the Zacks Rank is a quantitative model allowing investors to harness the power of earnings estimate revisions. It is displayed in whole numbers -- 1 to 5.

It has been and continues to be the case that analysts employed by brokerage firms are overly optimistic with their recommendations. Because of their employers' vested interests, these analysts issue more favorable ratings than their research would support, misguiding investors far more often than helping them.

In contrast, the Zacks Rank is driven by earnings estimate revisions. And near-term stock price movements are strongly correlated with trends in earnings estimate revisions, according to empirical research.

In addition, the different Zacks Rank grades are applied proportionately to all stocks for which brokerage analysts provide current-year earnings estimates. In other words, this tool always maintains a balance among its five ranks.

Another key difference between the ABR and Zacks Rank is freshness. The ABR is not necessarily up-to-date when you look at it. But, since brokerage analysts keep revising their earnings estimates to account for a company's changing business trends, and their actions get reflected in the Zacks Rank quickly enough, it is always timely in indicating future price movements.

Should You Invest in CHWY?In terms of earnings estimate revisions for Chewy, the Zacks Consensus Estimate for the current year has declined 3.6% over the past month to $1.53.

Analysts' growing pessimism over the company's earnings prospects, as indicated by strong agreement among them in revising EPS estimates lower, could be a legitimate reason for the stock to plunge in the near term.

The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #4 (Sell) for Chewy. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Therefore, it could be wise to take the Buy-equivalent ABR for Chewy with a grain of salt.

Chewy: Maintaining a Gradual and Steady Revenue TrendChewy (CHWY -1.24%) primarily generates revenue by operating a comprehensive online retail platform that supplies an extensive variety of pet food, daily accessories, prescribed medications, and specialized wellness items directly to individual pet owners living all across the United States.

It recently finalized the acquisition of a dedicated veterinary platform to introduce physical clinic locations and virtual care services, while several third-party pet food brands sold on its website were simultaneously recalled for potential bacterial contamination.

MercadoLibre: Demonstrating Rapid Upward Revenue GrowthMercadoLibre mainly earns revenue by operating a massive digital commerce marketplace, managing complex regional logistics networks, and offering various financial technology services, such as digital payment processing and consumer credit, to everyday users across Latin America.

It recently completed the widespread regional rollout of a new artificial intelligence search architecture across multiple marketplace websites. At the same time, several external law firms announced targeted investigations into potential violations of federal securities laws by the organization.

Why Revenue Matters for InvestorsRevenue here refers to the data provider's standardized income-statement revenue line item, and consistently tracking this metric helps individual investors clearly understand the total volume of money flowing into a business before any normal operating expenses are finally deducted.

Quarterly Revenue Comparison for Chewy and MercadoLibreCalendar quarterChewy RevenueMercadoLibre RevenueQ3 2024$2.9 billion (quarter ended Oct. 27, 2024)$5.3 billion (quarter ended Sept. 30, 2024)Q4 2024$3.2 billion (quarter ended Feb. 2, 2025)$6.1 billion (quarter ended Dec. 31, 2024)Q1 2025$3.1 billion (quarter ended May 4, 2025)$5.9 billion (quarter ended March 31, 2025)Q2 2025$3.1 billion (quarter ended Aug. 3, 2025)$6.8 billion (quarter ended June 30, 2025)Q3 2025$3.1 billion (quarter ended Nov. 2, 2025)$7.4 billion (quarter ended Sept. 30, 2025)Q4 2025$3.3 billion (quarter ended Feb. 1, 2026)$8.8 billion (quarter ended Dec. 31, 2025)Q1 2026$3.3 billion (quarter ended May 3, 2026)$8.8 billion (quarter ended March 31, 2026)Q2 2026$3.3 billion (quarter ended Aug. 2, 2026)$10.2 billion (quarter ended June 30, 2026)Foolish TakeAdmittedly, if looking at the raw numbers, MercadoLibre is the obvious choice, as its revenue has risen fast over time. Nonetheless, the risk profile may put Chewy in a more favorable light.

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For one, Chewy is based in the U.S., and many American investors may feel more comfortable investing in a market they might understand better. Additionally, among the consumer discretionary stocks, Chewy's P/E ratio of 28 is well below the 48 P/E ratio of MercadoLibre.

Furthermore, in the second quarter of 2026, MercadoLibre's net income fell 11% year over year despite 50% revenue growth over the same period. In comparison, Chewy's net income rose 29% year over year, while revenue increased only 7%, which may put risk-averse investors at ease.

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However, MercadoLibre's net income fell because it chose to sacrifice short-term profits in favor of bolstering its e-commerce and fintech businesses, a move that could pay off in the long term. Thus, if their risk tolerance permits, they are probably better off choosing MercadoLibre.

Data source: Financial Modeling Prep. Data as of Sept. 21, 2026.

Key Takeaways CHWY raised fiscal 2026 sales guidance to $13.46-$13.57 billion, implying 6.8%-7.7% growth.CHWY expects AI initiatives to save low tens of millions in 2026 and about $50 million annualized in 2027.CHWY's adjusted EBITDA rose 23.7%, though timing and discrete benefits aided second-quarter results. Chewy, Inc. (CHWY - Free Report) raised its fiscal 2026 outlook after second-quarter sales growth, customer gains and operating efficiencies supported a better full-year view. The update is notable because management is not assuming a meaningful recovery in consumer spending.

The outlook also reflects contributions from acquired businesses and early AI savings. Investors still have to weigh softer discretionary demand, temporary margin benefits and mixed earnings-revision signals.

Chewy Raises Its Full-Year Sales OutlookChewy now expects fiscal 2026 net sales of $13.46-$13.57 billion, implying growth of 6.8%-7.7%. The prior range was $13.40-$13.55 billion. Organic sales growth is projected to be in the range of 5.5%-6.3%.

SmartPak and Modern Animal are contributing above prior assumptions. Autoship customer sales rose 9.3% to $2.82 billion and represented 84.6% of second-quarter net sales, while active customers increased 3.8% to 21.7 million.

Chewy Expands Its Profitability OutlookManagement raised the low end of adjusted EBITDA margin guidance by 10 basis points, bringing the fiscal 2026 range to 6.7%-6.8%. At the midpoint of the sales and margin ranges, the outlook implies adjusted EBITDA of about $912 million.

The second-quarter margin picture also showed structural gains. Adjusted SG&A fell to 18.4% of sales from 19.1% a year earlier, helped by fulfillment utilization, automation and lower variable cost to serve.

AI Adds a New Efficiency LeverChewy expects AI-related initiatives to generate cost savings in the low tens of millions of dollars in fiscal 2026 and approximately $50 million on an annualized basis in fiscal 2027.

Kai, Chewy's customer-facing AI assistant, resolved roughly 30% of chats through self-service in early use. The company is also deploying AI tools across customer care, pharmacy and veterinary operations to reduce manual work and improve productivity.

Q2 Results Reveal the Outlook's CaveatsSecond-quarter net sales rose 7.3% to $3.33 billion, while adjusted EBITDA increased 23.7% to $226.7 million. Adjusted earnings of 36 cents per share rose 9.1% year over year and matched the Zacks Consensus Estimate.

The profit upside was not entirely recurring. About $10 million came from timing-related benefits, while more than $5 million reflected discrete items. Management said that these items accounted for essentially all of the adjusted EBITDA outperformance versus expectations. Discretionary spending and premiumization also remained pressured.

Earnings Momentum Meets the Zacks SignalsChewy's earnings trajectory remains positive even as estimate revisions have softened. The Zacks Consensus Estimate for fiscal 2026 earnings is pegged at $1.53 per share, up 20.5% from fiscal 2025, but the estimate has declined 3.6% over the past four weeks. Fiscal 2027 earnings are expected to be $1.86 per share.

Valuation has contracted alongside share-price weakness. CHWY trades at 19.44X forward earnings.

Image Source: Zacks Investment Research

Freshpet, Inc. (FRPT - Free Report) focuses on fresh, refrigerated pet food and trades at 35.14X forward earnings. Petco Health and Wellness Company, Inc. (WOOF - Free Report) operates across pet retail, services and health and trades at 20.46X forward earnings. Different business mixes limit direct comparisons, but the figures provide context for Chewy's current multiple.

Chewy currently carries a Zacks Rank #4 (Sell), alongside a Growth Score of A, a Value Score of B, a VGM Score of A and a Momentum Score of D.

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

The favorable Growth and VGM Scores point to supportive growth and blended style characteristics, but the Zacks Rank and Momentum Score indicate weaker near-term estimate and price trends. That combination keeps the improved operating outlook in balance with softer revisions, consumer pressure and execution risk.

Key Takeaways CHWY shares fell 24.9% in a month as earnings estimates declined 3.6% over the same period.CHWY's Autoship sales rose 9.3% and accounted for 84.6% of second-quarter net sales.CHWY trades at 0.53X forward sales, near its five-year low, as margin and demand pressures persist. Chewy, Inc. (CHWY - Free Report) shares have plunged 24.9% in the past month, sharpening the debate over whether improving operating fundamentals can offset softer consumer demand, margin normalization and weaker estimate momentum.

Image Source: Zacks Investment Research

The pullback has pushed valuation close to a five-year low. Yet recurring Autoship sales, customer growth and expansion in pet health continue to provide operating support, leaving investors to weigh a cheaper entry point against near-term execution risks.

Chewy’s One-Month Slide Resets the DebateThe stock’s 24.9% four-week decline comes with a 3.6% reduction in the current fiscal-year earnings estimate over the same period. That combination adds caution for investors looking for evidence that sentiment and expectations have stabilized.

Chewy’s second-quarter fiscal 2026 results were firmer operationally. Net sales rose 7.3% year over year to $3.33 billion, while adjusted EBITDA increased to $226.7 million. The contrast between business performance and falling estimates makes the reset in market expectations the central issue.

CHWY Growth Drivers Remain IntactAutoship customer sales increased 9.3% year over year and represented 84.6% of total net sales in the second quarter. Active customers reached 21.7 million, while net sales per active customer rose to $602, supporting the recurring-revenue and engagement story.

Health, pharmacy and newer offerings add growth avenues beyond core retail. Freshpet, Inc. (FRPT - Free Report) also shows that parts of the pet market remain capable of faster expansion, with second-quarter 2026 net sales rising 15.5% to $305.6 million. That performance provides useful context for category demand and competitive intensity.

Chewy Faces Consumer and Margin PressurePressure remains visible in discretionary purchases and premiumization. Treat sales growth slowed more sharply than core food in the second quarter, while management said broader discretionary attachment remained pressured across consumables and hard goods.

Profitability also benefited from items that may not repeat. Roughly $10 million of second-quarter upside came from timing-related benefits, while more than $5 million reflected discrete items. Management expects gross margin to decline modestly sequentially in the third quarter as those benefits normalize.

CHWY Valuation Near a Five-Year LowCHWY trades at 0.53X forward 12-month sales, only slightly above its five-year low of 0.52X and well below the five-year median of 1.12X. The discount is substantial, but weaker estimates and consumer pressure can keep a low multiple from rerating quickly.

Image Source: Zacks Investment Research

Petco Health and Wellness Company, Inc. (WOOF - Free Report) offers another industry reference point. Petco reported second-quarter 2026 net sales of about $1.5 billion, up 0.05%, while comparable sales increased 0.6%. The mixed peer backdrop reinforces that valuation should be considered alongside each company’s growth, margin and execution profile.

Chewy’s Signals Still Point to CautionChewy’s lower valuation and recurring sales base provide support, but the recent share decline, estimate cuts and margin normalization keep the near-term setup unsettled. The key question is whether operating gains can continue while discretionary demand remains soft and temporary profit benefits fade.

CHWY currently carries a Zacks Rank #4 (Sell). It has a Growth Score of A, a Value Score of B, a Momentum Score of C and a VGM Score of A. The favorable growth and value characteristics contrast with weaker near-term earnings-revision signals, underscoring the difference between an inexpensive stock and one whose expectations have fully reset.

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

MarketBeat Week in Review – 09/07 - 09/11Chewy NYSE: CHWY is prioritizing U.S. health services, customer spending expansion and artificial intelligence capabilities as it seeks to build on its pet retail foundation, Chief Executive Officer Sumit Singh said during a Goldman Sachs conference fireside chat.

Singh said the company’s investment in supply chain and technical infrastructure, coupled with Autoship adoption across food and medication categories, has created a more stable base for reinvestment. He characterized pet health as a roughly $50 billion total addressable market, including an estimated $12 billion to $15 billion in products such as medications, prescription diets, supplements and flea-and-tick treatments.

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Chewy’s Sell-Off Puts Its Recurring Revenue Story Back on Trial for InvestorsChewy entered the health category in 2018 and has become the country’s largest pet pharmacy, Singh said. He added that the company is capturing about $0.70 of every dollar moving online in the pet medications and related product space. Over the past six years, Chewy added approximately $9 billion in incremental revenue, with about $4 billion coming from Chewy Health, according to Singh.

Consumer demand and customer growth Singh said consumer enthusiasm for discretionary pet categories has softened, particularly following what he described as increased marketplace stress beginning in March and April. The company saw pressure on attachment rates, or purchases of additional products beyond core needs, and adjusted its forecast accordingly.

Chewy’s Growth Engine Is Stronger Than the Market ThinksHowever, he said trends have since stabilized. Adoptions and relinquishments are “roughly at parity,” while Chewy’s food and medication businesses remain strong and health services are outperforming the company’s expectations relative to its April outlook.

Singh said shelter and rescue organizations account for roughly two-thirds to 70% of pet adoptions, while breeders represent the remainder. He said dogs are modestly underperforming and cats are outperforming at shelters and rescues, resulting in an overall balanced adoption picture. He also said breeders of certain popular breeds have not seen a slowdown in litter production, though puppy prices have risen.

While normalized annual pet additions to the market would typically total 10 million to 12 million, Singh said the current figure is running below that level. Even so, Chewy’s gross customer additions from consumers shifting from other retailers are exceeding its 2019 gross-add levels, he said.

The company continues to target 150,000 to 250,000 net active-customer additions, even if broader market conditions remain subdued. Singh said Chewy’s longer-term aspiration is high-single-digit to low-double-digit revenue growth, supported by customer additions and higher net sales per active customer, or NSPAC.

Health, clinics and customer spending Singh identified pharmacy, supplements, prescription diets, insurance, telemedicine and veterinary clinics as major components of the company’s health strategy. He said about one-quarter of Chewy’s customers currently buy from its pharmacy, while fewer than half of consumers know Chewy sells pet medications.

Each existing Chewy customer who becomes a pharmacy customer adds approximately $300 to $500 in NSPAC, Singh said. The company plans to focus marketing efforts on improving pharmacy awareness and expanding medication attachment among existing customers.

Chewy operates 60 veterinary clinics, which Singh said are performing better than the case the company outlined previously. A Chewy Vet Care clinic is expected to generate about $3.5 million in revenue, plus roughly $800,000 in additional sales on Chewy’s website, for approximately $4.3 million in combined revenue. Singh said the company is outperforming those metrics and reaching break-even in about 20 months.

He also said four out of 10 clinic customers are new to Chewy. The company acquired Modern Animal to immediately double its clinic base and gain additional capacity to expand. Singh described the acquisition as a fit based on culture, customer orientation and technology, adding that it provides the company with options for both asset-light and company-operated clinic models.

Chewy’s average veterinary recruiting time is about four months, Singh said. Its one-year veterinarian retention cohort is in the high-80% to low-90% range, he said. The company expects telemedicine products to improve affordability and access to veterinary care as regulations allow the category to develop further. Autoship, AI and capital allocation Autoship remains a key contributor to customer spending and retention. Singh said Autoship orders carry a mid-single-digit higher average order value than non-Autoship orders. Chewy has also doubled mobile-app penetration over the past three years, and Singh said app users tend to be more engaged, have higher Autoship participation and generate higher order values.

The company is testing efforts to use pet-profile data to expand Autoship beyond food and medications into additional merchandise categories. Singh said the product works in market tests, but its near-term contribution has been affected by broader pressure on discretionary attachment rates.

Chewy is also developing AI-driven tools internally, including “Cai,” or Chewy AI, to handle post-purchase service needs. Singh said the company is building additional agents to improve search, discovery and shopping, and eventually to use customer signals to manage relationships more individually through the app.

Singh said Chewy does not expect to enter a broad new investment cycle and does not need additional investment to maintain market-share gains if market conditions do not improve. Instead, he said the company intends to make durable, non-promotional investments in growth while using its base business, clinic margins and an expected $50 million in AI savings in 2027 to self-fund most initiatives.

After reinvestment, Chewy’s next capital-allocation priority is evaluating potential acquisitions, primarily in health, followed by returning capital to shareholders, Singh said. International expansion remains a lower priority, with the company focused on U.S. health services, digital products and clinics despite positive lessons from its Canadian launch.

About Chewy (NYSE:CHWY)Chewy, Inc is an e-commerce company focused on pet products and services. Through its website and mobile applications, the company sells pet food, treats, supplies, toys, bedding, medications, and other products for dogs, cats, fish, birds, reptiles, and small pets.

Chewy supports recurring purchases through its Autoship program and provides access to prescription and over-the-counter pet medications through Chewy Pharmacy. The company also offers pet health-related services, including veterinary consultations in certain markets, and sells products under a range of national and private-label brands.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected].

Should You Invest $1,000 in Chewy Right Now?Before you consider Chewy, you'll want to hear this.

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While Chewy currently has a Moderate Buy rating among analysts, top-rated analysts believe these five stocks are better buys.

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CHWY is scaling AI across customer care, pharmacy and operations, targeting meaningful cost savings as productivity improves.

The recommendations of Wall Street analysts are often relied on by investors when deciding whether to buy, sell, or hold a stock. Media reports about these brokerage-firm-employed (or sell-side) analysts changing their ratings often affect a stock's price. Do they really matter, though?

Let's take a look at what these Wall Street heavyweights have to say about Chewy (CHWY - Free Report) before we discuss the reliability of brokerage recommendations and how to use them to your advantage.

Chewy currently has an average brokerage recommendation (ABR) of 1.79, on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by 28 brokerage firms. An ABR of 1.79 approximates between Strong Buy and Buy.

Of the 28 recommendations that derive the current ABR, 16 are Strong Buy and two are Buy. Strong Buy and Buy respectively account for 57.1% and 7.1% of all recommendations.

Brokerage Recommendation Trends for CHWY

Check price target & stock forecast for Chewy here>>>

While the ABR calls for buying Chewy, it may not be wise to make an investment decision solely based on this information. Several studies have shown limited to no success of brokerage recommendations in guiding investors to pick stocks with the best price increase potential.

Are you wondering why? The vested interest of brokerage firms in a stock they cover often results in a strong positive bias of their analysts in rating it. Our research shows that for every "Strong Sell" recommendation, brokerage firms assign five "Strong Buy" recommendations.

This means that the interests of these institutions are not always aligned with those of retail investors, giving little insight into the direction of a stock's future price movement. It would therefore be best to use this information to validate your own analysis or a tool that has proven to be highly effective at predicting stock price movements.

With an impressive externally audited track record, our proprietary stock rating tool, the Zacks Rank, which classifies stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), is a reliable indicator of a stock's near-term price performance. So, validating the Zacks Rank with ABR could go a long way in making a profitable investment decision.

ABR Should Not Be Confused With Zacks RankAlthough both Zacks Rank and ABR are displayed in a range of 1--5, they are different measures altogether.

Broker recommendations are the sole basis for calculating the ABR, which is typically displayed in decimals (such as 1.28). The Zacks Rank, on the other hand, is a quantitative model designed to harness the power of earnings estimate revisions. It is displayed in whole numbers -- 1 to 5.

Analysts employed by brokerage firms have been and continue to be overly optimistic with their recommendations. Since the ratings issued by these analysts are more favorable than their research would support because of the vested interest of their employers, they mislead investors far more often than they guide.

On the other hand, earnings estimate revisions are at the core of the Zacks Rank. And empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

In addition, the different Zacks Rank grades are applied proportionately to all stocks for which brokerage analysts provide current-year earnings estimates. In other words, this tool always maintains a balance among its five ranks.

Another key difference between the ABR and Zacks Rank is freshness. The ABR is not necessarily up-to-date when you look at it. But, since brokerage analysts keep revising their earnings estimates to account for a company's changing business trends, and their actions get reflected in the Zacks Rank quickly enough, it is always timely in indicating future price movements.

Should You Invest in CHWY?In terms of earnings estimate revisions for Chewy, the Zacks Consensus Estimate for the current year has declined 0.3% over the past month to $1.52.

Analysts' growing pessimism over the company's earnings prospects, as indicated by strong agreement among them in revising EPS estimates lower, could be a legitimate reason for the stock to plunge in the near term.

The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #4 (Sell) for Chewy. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Therefore, it could be wise to take the Buy-equivalent ABR for Chewy with a grain of salt.

Two analyst downgrades in back-to-back sessions have Chewy stock cratering while the broader market climbs, and the reasoning behind both cuts points to a force that Chewy's own strong execution simply cannot overcome.

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Shares of Chewy (NYSE:CHWY | CHWY Price Prediction) are down 6% to $19.80 in Friday morning trading after a second analyst downgrade in two sessions, with JPMorgan pulling the pet retailer off its buy-equivalent list. The move deepens a rough stretch for Chewy stock, which is now down 40% year to date (YTD). Wednesday’s earnings reaction kicked off the current leg lower, and Friday’s rating cut is extending the damage.

The selling is specific to Chewy stock. Broad-market benchmark the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is up 0.79% on the session, so the pressure on Chewy isn’t coming from a wider risk-off tone. That divergence matters, because both downgrade notes lean on macroeconomic pressure, yet the wider market is trading higher on the same session.

The peer group is moving in different directions on the same tape. Petco Health and Wellness (NASDAQ:WOOF) stock is down 0.6% to $2.42, and Freshpet (NASDAQ:FRPT) stock is up 2% to $66.41. The ProShares Pet Care ETF (CBOE:PAWZ) is a sector proxy that holds all three names, and the split reaction suggests that this is a single-name analyst call rather than a category rerating.

JPMorgan Downgrade Follows Evercore’s Cut Chewy’s slide follows JPMorgan analyst Doug Anmuth downgrading Chewy stock to Neutral from Overweight with a $24 price target, citing persistent macroeconomic pressure on organic growth. Anmuth framed the company as executing well on its own initiatives but with muted organic growth pushing him to the sidelines. The new target sits above where Chewy stock is trading Friday morning, but leaves only modest upside from here on his math.

The downgrade comes a day after Evercore ISI cut Chewy stock’s rating to In Line from Outperform with a $25 price target. Two firms have now moved Chewy off buy-equivalent ratings in consecutive sessions, and the reasoning in both notes lines up: execution is fine, and the category isn’t cooperating. That framing isolates the macro backdrop as the swing factor, with Chewy’s own execution left largely untouched by either firm’s critique.

The analyst still credited Chewy with continuing to gain share, outpacing the broader pet market by two to three times, and with healthy customer additions and retention. He also noted that Chewy’s second-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) margin topped guidance, but that the beat was almost entirely driven by $15 million of timing-related and discrete gross-margin benefits, including a tariff refund, according to JPMorgan. Stripping out the one-time items turns a headline beat into a lower-quality result.

Sector Reaction Stays Contained The peer reaction backs up the read that this is a Chewy-specific event. Petco is drifting fractionally lower, and Freshpet is nudging higher on the same session that Chewy is slumping. If the downgrade were being read as a sector-wide warning on pet spend, Freshpet stock wouldn’t be catching a bid and Petco would likely be under more meaningful pressure.

Chewy reported second-quarter results Wednesday, and Chewy shares fell that session on a free cash flow shortfall that overshadowed a raised full-year outlook. Petco fell alongside Chewy that day, and Freshpet rose, so today’s split is a continuation of Wednesday’s dynamic rather than a fresh divergence. The JPMorgan and Evercore ISI notes are ratifying the market’s initial reaction two sessions later, rather than introducing a new fundamental concern.

What to Watch Next Chewy stock is trading below JPMorgan’s $24 target and below the $25 mark Evercore ISI set on Thursday. The question from here is whether Chewy stock can hold support in the high teens through the close, and whether any additional sell-side notes land before the weekend. A third downgrade would reshape the debate quickly.

Chewy CEO Sumit Singh is scheduled to appear at the upcoming Goldman Sachs consumer conference, and that appearance could shape the next leg of the narrative for Chewy. Investors can watch for whether Singh’s commentary on the pet-category backdrop matches the cautious framing in the two downgrade notes, or pushes back on it with fresh execution color.

The drop against a rising broad market frames today’s move as a single-name story rather than a sector call. The underlying reason (soft category growth) could still spill into peers if it persists, so anyone sizing their pet-retail exposure may want to keep both the company-specific execution and the category backdrop in view before adding to a Chewy share position here. That balance, between execution that’s working and a category that isn’t, is the setup heading into next week.

Contact [email protected] for any questions or corrections.

It's been a tough past year for Chewy (CHWY +1.59%). Its shares have been cut in half over the past year, and the stock plunged 11% after earnings came out on Sept. 9. While the company's results were in line with its earlier guidance, it was considered a low-quality beat due to tariff refunds, gift card breakage, vendor-funded merchandise activity, and a shift in rebates into the second quarter.

Let's take a closer look at the pet products e-commerce company's results and prospects to see if this latest dip is a buying opportunity.

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Solid revenue growth, but cautious guidance While Chewy saw overall solid revenue growth, the company said it continues to see signs of a stressed consumer, as evidenced by fewer treat and other discretionary sales. It expects the pet industry to remain under pressure for the rest of the year, and plans to focus on more controllable factors such as retention and customer acquisition. Along these lines, it plans to launch a redesigned Chewy+ program that includes more health benefits and offers a better customer value proposition.

The company also continues to work to reduce costs and increase operation efficiency through the use of automation and AI. Its AI-powered assistant Kai is already answering approximately 30% of customer inquiries since its launch. Chewy also continues to expand its healthcare services, with Chewy Vet Care, Modern Animal, and SmartPak all performing well.

For the quarter, overall revenue climbed over 7% year over year to $3.33 billion. That was at the high end of the company's earlier forecast for sales of between $3.3 billion and $3.33 billion.

Despite industry headwinds, Chewy still has a very steady business, with the bulk of its sales coming from consumables, such as dog food and pet medication. Meanwhile, nearly 85% of its sales come from Autoship customers who have their orders scheduled to be delivered on a regular basis. Autoship customer sales jumped more than 9% year over year to $2.82 billion. Net sales per active customer (NSPAC) continued to increase, up nearly 2% year over year to $602, while active customers rose 4% year over year to 21.7 million.

Chewy has positioned itself as an operating leverage story, and that narrative was a bit messy this quarter, with the earlier referenced items attributing $15 million in benefits to the quarter. Gross margin remained steady at 30.4% year over year, although Chewy said that, excluding non-recurring items in both periods, it expanded, helped by growth in its sponsored ad business and disciplined promotional activity.

Selling, general, and administration (SG&A) costs climbed 5%, although the company saw 70 basis points of SG&A deleveraging. It credited productivity gains, better fulfillment center utilization, lower variable costs, and keeping headcount in check for the improvement. It called out lower variable costs as the biggest contributor, while highlighting gains from automation and AI tools. All this helped lead to a 90-basis-point increase in EBITDA margins to 6.8%, and Chewy said it saw nice expansion even when excluding the benefits it saw in the quarter.

Adjusted earnings per share (EPS), meanwhile, rose 9% year over year from $0.33 to $0.36, falling in line with guidance of $0.36. Adjusted EBITDA jumped nearly 7% year over year to $226.7 million.

Looking ahead, Chewy forecasts fiscal third-quarter revenue to grow by 6.6% to 7.7% (5.3% to 6.2% organically) to $3.32 billion to $3.36 billion. It expects gross margins to decline sequentially, which is typical seasonality.

For the full year, the company upped its revenue guidance from a range of between $13.4 billion and $13.55 billion to a new range of $13.46 billion to $13.57 billion. It bumped up its adjusted EBITDA margin guidance slightly to 6.7% to 6.8% from an earlier range of 6.6% to 6.8%.

Image source: The Motley Fool.

Time to buy the dip Despite a relatively messy quarter with some moving parts and cautious commentary, the company's overall quarter and guidance were solid. Investors have been acting like this is a business falling off a cliff, when in fact it remains highly recession-resilient with continued operating leverage opportunities.

From a valuation perspective, Chewy stock currently trades at a forward price-to-earnings (P/E) ratio of around 13.5 times this year's consensus and 11 times based on next-year analyst estimates. That's a bargain-basement price for this retailer with its large Autoship business. While pet owners may cut back on dog treats and toys, they aren't going to stop feeding and giving medicine to their pets. As such, I'd be a buyer of the stock here.

Chewy Today

$20.96 +0.21 (+1.00%)

As of 02:35 PM Eastern

This is a fair market value price provided by Massive. Learn more.

$17.40▼

$40.5534.99

$31.05

Chewy, Inc.'s NYSE: CHWY 2026 price weakness, including its early-September sell-off, looks increasingly disconnected from the company’s operating strength and may give long-term investors an opening. While near-term headwinds cloud the market’s judgment, Chewy is not your typical, cyclical retailer. It is a sticky digital ecosystem built around an Autoship feature.

Autoship accounts for about 85% of quarterly revenue, a recurring revenue stream that provides exceptional visibility and a wide moat. Autoship is supported by recurring necessities such as food, health care products and medicines that pet owners are unlikely to cut quickly. Therefore, Chewy displays inflation-resistant qualities, can generate value gains throughout business cycles, and is currently performing well.

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Chewy Raises Guidance on Strong Q2Chewy posted a strong quarter, with revenue up 7.4% to $3.33 billion, outpacing the industry average by about 300 basis points (bps). Revenue also beat consensus by a slim margin, supported by strength in Autoship. Autoship accounted for 84.6% of sales, up 160 bps year over year. Margin is another strength, with gross margin flat despite economic headwinds and adjusted margins improving. Critical details include mid-to-high-single-digit growth in adjusted EBITDA, adjusted net income, and adjusted earnings, with adjusted earnings impacted by a share count reduction.

Other pertinent details include Chewy’s profitable and cash-flow-positive status. This supports sustained financial health, reinvestment, and capital returns through share buybacks. Quarter-ending balance sheet highlights reflect the capital return, with cash and equity down, but no red flags were raised, as leverage remains at ultra-low levels and cash flow is expected to remain strong. The likely outcome is that Chewy rebuilds cash as the year progresses and sustains buybacks. As it stands, the share count is down approximately 4.3% on average for the quarter and 2.8% year to date, providing ample leverage for investors.

Looking ahead, Chewy expects strength to continue and has lifted its full-year outlook. The company expects revenue and earnings in a range slightly above the consensus, sufficient to sustain the capital return outlook. The risk with guidance is sentiment, as analysts responded favorably but with a note of caution. Initial responses highlight industry-leading strength and margin gains but cite industry headwinds as a concern. Sluggish overall pet spending is seen as problematic and may keep Chewy’s stock price under pressure until consumer habits shift.

Chewy’s Headwinds Create Deep Value in 2026Chewy Stock Forecast Today12-Month Stock Price Forecast:
$31.05
47.32% Upside

Moderate Buy
Based on 26 Analyst Ratings

Current Price$21.07High Forecast$45.00Average Forecast$31.05Low Forecast$23.00Chewy Stock Forecast Details

For better or worse, Chewy’s headwinds have created a deep-value opportunity that analysts' trends reflect. While responses and price-target trends show caution, summer reductions bottom out well above CHWY’s early September trading levels, and sentiment is far from bearish.

In this scenario, CHWY trades well below the consensus price target, which implies more than 50% upside if catalysts emerge. Until then, 26 analysts reflect relatively firm conviction in the Moderate Buy rating; no Sell ratings are logged, and the data shows a bullish bias. Institutions, likewise, reflect confidence in CHWY’s long-term value, owning about 93% of the stock and accumulating aggressively with shares near long-term lows.

Valuation metrics suggest the long-term potential is far greater than analysts' forecasts imply. Assuming the 15x current-year earnings is a fair valuation, CHWY appears closer to reasonably valued than deeply discounted on current-year estimates, making the longer-term upside case dependent on future earnings growth. If current forecasts prove too cautious, the upside potential could be greater.

Chewy Is at a Bottom, But How Long It Stays There Is the QuestionPrice action is weak but not altogether bearish. Chewy is moving lower after the release, but is also trading within a range near its bottom and showing signs of reversal. CHWY may continue lower in the near term but will likely bottom out near the summer lows, if not at higher levels. The risk is that CHWY persists within its range indefinitely, not breaking out until sometime in 2027 or later. In this scenario, investors can start small if they don’t already have exposure and slowly build a position over time.

Several catalysts may trigger a price recovery sooner rather than later. Among them is the pivot to higher-margin pet health, insurance, and telehealth, which collectively increase customer value over time. They not only provide additional income streams but also create numerous recurring opportunities to rechannel consumer dollars to CHWY products, creating a flywheel already showing momentum. Other catalysts include leaning into next-gen technology, including the efficiency and automation that AI provides.

Among the risks Chewy faces, one amplified by consumer headwinds, is competition and, more specifically, competitive pricing. Competitive pricing helps keep consumers coming back but cuts into margins. One way that Chewy mitigates this is with private labels. They provide lower-cost-to-consumer, higher-margin sales and are central to the cash flow outlook.

Should You Invest $1,000 in Chewy Right Now?Before you consider Chewy, you'll want to hear this.

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Key Takeaways Chewy raised fiscal 2026 sales guidance to $13.46B-$13.57B and EBITDA margin to 6.7%-6.8%.Autoship sales rose 9.3% to 84.6% of net sales, while active customers grew 3.8% to 21.7 million.Chewy expects AI to save low tens of millions in fiscal 2026 and about $50M annualized in fiscal 2027. Chewy, Inc. (CHWY - Free Report) used its fiscal second-quarter 2026 earnings call to emphasize a steadier pet-spending backdrop, continued share gains and a higher full-year outlook, with CEO Sumit Singh and CFO Chris Deppe assuming no meaningful consumer recovery.

The company reported adjusted earnings per share (EPS) of $0.36, which matched the Zacks Consensus Estimate. Revenues of $3.33 billion topped the consensus mark of $3.32 billion. Deppe also stressed that timing and discrete benefits boosted fiscal second-quarter profitability.

CHWY Sees Stable Demand Without RecoveryCEO Sumit Singh said that the pet market did not meaningfully recover in the fiscal second quarter, but it also did not deteriorate further from trends seen exiting the first quarter.

Singh said that Chewy continued to outperform the broader pet category by roughly two to three times, supported by share gains across established businesses and newer platforms.

Responding to William Blair, Singh said that pricing is not providing a net benefit in fiscal 2026. Deppe added that guidance assumes current consumer trends remain broadly consistent rather than improve.

Chewy Lifts Full-Year OutlookDeppe said that fiscal 2026 net sales are now expected to be between $13.46 billion and $13.57 billion, including organic growth of 5.5% to 6.3%. The midpoint assumes no meaningful consumer improvement.

Deppe narrowed adjusted EBITDA margin guidance to 6.7%-6.8% from 6.6%-6.8%. He stressed that essentially all fiscal second-quarter profitability upside reflected about $10 million of timing benefits and more than $5 million of discrete benefits.

For the fiscal third quarter, Deppe guided to sales of $3.323 billion to $3.358 billion, adjusted EBITDA margin of 6.6% to 6.7% and adjusted EPS of around $0.39.

CHWY Leans on Customers and AutoshipSingh said that Chewy ended the fiscal second quarter with 21.7 million active customers, up 3.8% year over year, while net sales per active customer reached $602.

Deppe said that Autoship sales rose 9.3% and represented 84.6% of total net sales. He also reported 208,000 sequential net active-customer additions, including 43,000 unique SmartPak customers.

A Guggenheim analyst pressed management on softer treat sales. Singh said that core food and medications remain consumer priorities, while treats and toppers are more exposed to discretionary budget pressure.

Chewy Scales Health and New Growth PlatformsSingh said that Chewy Vet Care again delivered triple-digit revenue growth. He added that Modern Animal performed ahead of expectations, reinforcing his confidence in the combined veterinary platform.

Singh said that SmartPak exceeded initial expectations. He also said a refreshed Chewy Plus program will add more health benefits while preserving the program's margin contribution profile.

Asked by Morgan Stanley about reinvestment, Singh pointed to self-funded growth levers in marketing, customer engagement and new products. He said that fiscal 2027 reinvestment levels have not yet been determined.

CHWY Converts AI Into Productivity GainsSingh said that Chewy's AI strategy is moving toward measurable financial impact. Its Kai assistant is resolving about 30% of selected customer chats through self-service.

Singh expects AI initiatives to generate low tens of millions of dollars in cost savings in fiscal 2026, scaling to about $50 million on an annualized basis in fiscal 2027.

Responding to JPMorgan, Singh expressed high confidence in those efficiencies but cautioned against treating them as pure incremental profit. Deppe said that more than 50% of volume flows through automated states, supporting further cost-to-serve reductions.

Chewy Keeps Focus on Profitable Share GainsSingh closed with a focus on customer growth, wallet-share expansion, health, sponsored ads, AI and automation, while stressing that the outlook does not depend on a broader pet-market rebound.

Deppe's guidance paired a narrower sales range with higher profitability expectations while still accounting for softer discretionary spending and normal second-half seasonality.

Singh and Deppe centered the earnings call on execution, market-share gains and funding growth within Chewy's earnings framework rather than relying on stronger external demand.

CHWY's Zacks Signals Stay MixedCHWY carries a Zacks Rank #4 (Sell), with a Value Score of B, a Growth Score of A, a Momentum Score of A and a VGM Score of A. Those Style Scores reflect favorable characteristics across value, growth and momentum.

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

Zacks methodology treats Style Scores as complements to the Zacks Rank and gives the Rank primacy in stock selection. The current rank therefore tempers the favorable Style Scores and reflects an unfavorable earnings-estimate-revision backdrop. The Rank can change as estimates are revised after the just-reported results.

Key Takeaways Chewy's Q2 sales rose 7.3% to $3.33B as active customers climbed 3.8% to 21.7 million.Autoship sales grew 9.3% and reached 84.6% of total net sales, reinforcing recurring revenue.Chewy raised fiscal 2026 sales guidance to $13.46-$13.57B and lifted the low end of EBITDA margin. Chewy, Inc. (CHWY - Free Report) reported second-quarter fiscal 2026 adjusted earnings of 36 cents a share, which rose 9.1% year over year and came in line with the Zacks Consensus Estimate. Net sales increased 7.3% to $3,330.2 million, topping the consensus mark of $3,322 million.

Results reflected customer growth, market share gains and disciplined execution. Chewy added 208,000 net active customers sequentially, excluding additions related to Modern Animal, while its customer funnel remained healthy across acquisition, retention and reactivation.

CHWY's Customer Base Keeps ExpandingOrganic net sales, excluding SmartPak and Modern Animal, rose 5.7% year over year. Active customers increased 3.8% to 21.705 million, while net sales per active customer advanced 1.9% to $602.

On a normalized basis, adjusting for the extra week in the prior-year comparable period, net sales per active customer increased 3.8%. Management cited customer cohort maturation, greater engagement across health and pharmacy, and broader cross-category adoption as supports.

Chewy's Autoship Mix Reinforces Recurring SalesAutoship customer sales climbed 9.3% to $2,817.2 million and represented 84.6% of total net sales. The program continued to grow faster than the overall business, reinforcing the recurring nature of Chewy's revenue base.

Consumer pressure remained visible in discretionary areas. Treat sales slowed more sharply than core food, while premiumization and discretionary attachment stayed pressured. Even so, mid-teens hard goods growth substantially outpaced the broader market, and Pet Health and Specialty Products delivered strong organic growth.

CHWY's Margins Benefit From Cost DisciplineGross margin was 30.4%, flat year over year and up 30 basis points sequentially. Adjusted EBITDA increased 23.7% to $226.7 million, supported by sponsored ads, disciplined promotional activity and lower variable cost to serve.

About $10 million of upside came from timing-related benefits, mainly earlier tariff refunds and shifted rebates. More than $5 million came from discrete items, including gift-card breakage, inventory adjustments and vendor-funded merchandising. Adjusted SG&A declined to 18.4% of sales from 19.1%, reflecting fulfillment utilization, automation and productivity gains.

Chewy Health and AI Add Growth LeversChewy Vet Care again generated triple-digit revenue growth, while the fresh and frozen portfolio posted triple-digit unit growth. The equine, farm and exotics business delivered a seventh consecutive quarter of mid-double-digit sales growth. Modern Animal and SmartPak also performed ahead of prior expectations.

AI initiatives are moving into scaled deployment. Kai, Chewy's customer-facing AI assistant, resolved about 30% of chats through self-service in early use. Management still expects AI-related initiatives to generate low tens of millions of dollars in fiscal 2026 cost savings, scaling to about $50 million annualized in fiscal 2027.

CHWY's Cash Flow Supports Capital ReturnsFree cash flow fell 15.5% year over year to $89.5 million, reflecting $137.4 million of operating cash flow and $47.9 million of capital expenditures. Chewy ended the quarter with $612 million of cash, cash equivalents and marketable securities and more than $1 billion of total available liquidity.

The company deployed $200 million toward share repurchases and bought back 9.9 million shares in the quarter. It also completed the $400 million Modern Animal acquisition and raised $600 million through its inaugural term loan issuance.

Chewy Raises Fiscal 2026 OutlookChewy expects fiscal 2026 net sales between $13.46 billion and $13.57 billion, implying reported growth of 6.8%-7.7% and organic growth of 5.5%-6.3%. Management had earlier guided net sales in the band of $13.40-$13.55 billion. Adjusted EBITDA margin is projected at 6.7%-6.8%, with the low end raised by 10 basis points from the prior range.

For the third quarter, net sales are expected at $3.323-$3.358 billion, with adjusted EBITDA margin of 6.6%-6.7% and adjusted earnings of around 39 cents a share. The outlook assumes no meaningful consumer recovery and continued low pricing contribution, while management expects Chewy to keep gaining share.

Shares of this Zacks Rank #4 (Sell) company have fallen 19.3% over the past six months against the industry’s rise of 13.8%.

Stocks to ConsiderThe Vita Coco Company, Inc. (COCO - Free Report) , a leading beverage company that develops, markets and distributes coconut water and other plant-based beverages, currently sports a Zacks Rank #1 (Strong Buy). COCO delivered a trailing four-quarter earnings surprise of 21.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

 The Zacks Consensus Estimate for The Vita Coco Company’s current fiscal-year sales and earnings per share (EPS) calls for growth of 31.6% and 64.7%, respectively, from the year-ago figures.

 Target Corporation (TGT - Free Report) , a general merchandise retailer, currently carries a Zacks Rank of 2 (Buy). TGT delivered a trailing four-quarter earnings surprise of 10.5%, on average.

The Zacks Consensus Estimate for Target’s current fiscal-year sales and EPS implies growth of 4.7% and 37.8%, respectively, from the year-ago figures.

Laird Superfood, Inc. (LSF - Free Report) is a consumer product company that develops, manufactures and markets plant-based, natural and functional food and beverage products. LSF currently carries a Zacks Rank #2.

 The Zacks Consensus Estimate for Laird Superfood’s current fiscal-year sales and EPS suggests growth of 188.2% and 104%, respectively, from the year-ago figures. LSF delivered an earnings surprise of 100% in the last reported quarter.

Chewy Inc. (NYSE:CHWY) on Wednesday reported downbeat sales for the second quarter but raised its full-year outlook.

Chewy reported adjusted earnings of 36 cents per share, matching the consensus estimate and management’s guidance of 36 cents. Sales rose 7.3% year over year to $3.33 billion, slightly below the $3.361 billion consensus estimate.

Chewy expects third-quarter sales of $3.323 billion to $3.358 billion, compared with the $3.332 billion consensus estimate. It forecast an adjusted EBITDA margin of 6.6% to 6.7%.

The company raised its fiscal 2026 sales outlook to $13.46 billion-$13.57 billion from $13.4 billion-$13.55 billion. Wall Street expects $13.553 billion. Chewy also lifted its adjusted EBITDA margin forecast to 6.7%-6.8% from 6.6%-6.8%.

Sumit Singh, Chief Executive Officer of Chewy said, “The durability of our recurring revenue base, continued customer growth, and disciplined execution give us confidence to raise our full-year revenue and profitability outlook, while continuing to invest in compelling opportunities that deepen customer engagement and create long-term shareholder value.”

Trending

Chewy shares fell 1.5% to $20.44 in pre-market trading.

These analysts made changes to their price targets on Chewy following earnings announcement.

Evercore ISI Group analyst Mark Mahaney downgraded the stock from Outperform to In-Line and announced a $25 price target. Baird analyst Justin Kleber maintained the stock with an Outperform rating and cut the price target from $30 to $28. Rosenblatt analyst Scott Devitt maintained the stock with a Neutral and lowered the price target from $25 to $24. Considering buying CHWY stock? Here’s what analysts think:

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Chewy beat revenue estimates and raised its full-year outlook, yet the stock cratered anyway while a rival fresh-food maker moved in the opposite direction. The reason behind that split reveals something important about where the pet industry is actually headed.

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Chewy (NYSE:CHWY | CHWY Price Prediction) stock is down 11% midday on Wednesday to $20.68 after the online pet retailer reported fiscal Q2 2027 results that carried a free cash flow shortfall large enough to swamp a raised full-year outlook. The setup is unusual because both the revenue and the adjusted earnings landed close to where analysts had expected.

The selling is spreading across pet-retail stocks. Petco Health and Wellness (NASDAQ:WOOF) stock is down 6% to $2.45, extending a rough stretch for the brick-and-mortar chain. Meanwhile, Freshpet (NASDAQ:FRPT) stock is moving slightly higher against sector weakness, up 0.41% to $67.55, as the premium fresh-food maker looks insulated from Chewy’s specific issues.

The broader market backdrop offers no cover either. The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is down 0.4% in the same session, a modest pullback that highlights how idiosyncratic the pet retail move looks today.

Free Cash Flow Miss Overshadows Raised Guidance Chewy’s adjusted diluted EPS of $0.36 came in line with the $0.3614 consensus, and revenue of $3.33 billion beat by 0.4% and grew 7.3% year over year. Management then raised the full-year outlook, guiding fiscal 2026 net sales to $13.46 billion to $13.57 billion and lifting the low end of adjusted EBITDA margin guidance by 10 basis points.

The problem sits on the cash line. Chewy’s free cash flow of $89.5 million declined 15.5% year over year, with capital expenditures surging 71.1% to $47.9 million as the company absorbs integration costs tied to SmartPak and the $400 million Modern Animal veterinary acquisition. CFO Chris Deppe told analysts the shortfall was “entirely timing-related,” and reiterated a full-year free cash flow conversion target of “roughly 80%.”

Analysts at Jefferies flagged one-time items and timing factors behind the profit result, noting that guidance implying stable core growth alongside heavy reinvestment makes the quarter weaker than the headline figures suggest. They characterized Chewy’s veterinary and equestrian buildout as sensible while calling the payoff timeline uncertain.

Sector Splits Between Retail and Fresh Food The pet retail read-through hit Petco despite the company’s own recent Q2 that beat GAAP EPS estimates by 80.3% and posted a second straight quarter of positive comparable sales at 0.6%. Petco stock had already been down 12.5% year to date entering today, and the Chewy reaction is extending that pressure.

Freshpet is trading in the other direction. The company raised its 2026 net sales growth outlook to 10% to 12% back in August, delivered 15.5% revenue growth, and lifted its 2027 adjusted gross margin target above 49%. CEO Billy Cyr told analysts that “fresh is the future of pet food,” and shareholders appear willing to separate that story from Chewy’s cash reinvestment cycle.

The ProShares Pet Care ETF (CBOE:PAWZ) captures both sides of the divergence, since Chewy and Freshpet each sit near 9.9% and 9.8% of the fund’s net assets while Petco represents a smaller 2.65% position. The fund had already been down 7.1% year to date entering into today’s session.

What to Watch Next The recurring-revenue argument is where the bull case sits. Autoship customer sales made up 84.6% of Chewy’s total net sales in the quarter, up from 83% a year ago, and active customers grew 3.8% to 21.705 million. That subscription base keeps buying regardless of the quarter, which is why some analysts view the reinvestment cycle as a cost that arrives now against benefits that arrive later.

Investors may want to check for whether Chewy management’s upcoming Goldman Sachs consumer conference commentary clarifies the cadence of free cash flow recovery. Position sizing on Chewy stock should reflect that the payoff on veterinary and equestrian expansion remains a multi-quarter question rather than a next-quarter catalyst; today’s session suggests that the market is willing to punish that timing gap even when the top line and the outlook seem favorable.

Contact [email protected] for any questions or corrections.

Chewy’s Growth Engine Is Stronger Than the Market ThinksChewy NYSE: CHWY reported second-quarter fiscal 2026 net sales of $3.33 billion, up 7.3% from a year earlier and at the high end of its guidance range, as active customer growth, higher spending per customer and Autoship sales supported results amid continued pressure on pet-sector discretionary spending.

Chief Executive Officer Sumit Singh said the broader pet market did not experience a meaningful consumer recovery during the quarter, though conditions also did not worsen from the trends seen at the end of the first quarter. He said Chewy continued to outperform the broader pet category by roughly two to three times and gain market share.

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From CrowdStrike to Chewy, These Tanking Stocks Are Announcing BuybacksExcluding contributions from acquired businesses SmartPak and Modern Animal, organic net sales rose 5.7% year over year. The company ended the quarter with 21.7 million active customers, an increase of 3.8%, while net sales per active customer reached $602.

Autoship customer sales climbed 9.3% to $2.8 billion and represented 84.6% of total net sales. Singh said the recurring-sales model remains a key source of revenue durability, while Chewy continued to add customers, improve retention, reactivate lapsed customers and expand engagement across its ecosystem.

Consumer Spending Remains Selective Chewy Gobbles up Market Share in 2026: Poised to Advance in Q2Chewy said pressure on discretionary purchases and premiumization continued during the quarter, affecting both Consumables and Hardgoods. Singh said consumers remained focused on core food, medications and health-oriented products, while treats and toppers were more exposed to discretionary spending pressures.

Chief Financial Officer Chris Deppe said treats sales growth slowed more sharply than sales of core food. Still, he said industry data indicated that the broader Consumables market was roughly flat year over year, while Chewy delivered mid-single-digit growth in the category. Hardgoods sales increased in the mid-teens, supported by assortment and merchandising improvements, according to the company.

Singh said pet-industry conditions reflected both consumer pressures and softness in dog adoption and household formation. He added that Chewy does not expect pricing to provide a material benefit to sales growth this year, though the company also does not anticipate broad category deflation or irrational promotional activity.

Profitability Exceeds Expectations, With Timing Benefits Adjusted EBITDA totaled $227 million, representing a 6.8% margin and exceeding Chewy’s prior guidance of 6.3% to 6.4%. Adjusted net income was $149 million, or $0.36 per diluted share.

Deppe said essentially all of the outperformance relative to the company’s margin expectations came from timing-related and discrete benefits. About $10 million of the benefit came primarily from tariff refunds received earlier than anticipated and rebates that shifted from the second half into the second quarter. The quarter also included more than $5 million of benefits from gift-card breakage, inventory adjustments and vendor-funded merchandising activity.

Gross margin was 30.4%, flat year over year and up 30 basis points from the first quarter. Deppe said the company expects gross margin to decline modestly sequentially in the third quarter, in line with seasonal patterns, although it expects gross margin to expand for the full year at a more moderate pace than in fiscal 2025.

Non-GAAP selling, general and administrative expense was 18.4% of sales, compared with 19.1% a year earlier. The company cited improved fulfillment-center utilization, lower variable costs to serve, headcount discipline, automation and AI-enabled productivity as drivers of 70 basis points of year-over-year SG&A leverage.

Health, Acquisitions and AI Remain Strategic Priorities Chewy said its health businesses continued to expand. The Chewy Vet Care clinic portfolio delivered triple-digit revenue growth, while the company said Modern Animal performed ahead of its expectations following its acquisition. Chewy completed the $400 million Modern Animal acquisition during the quarter.

Singh said Modern Animal and Chewy Vet Care offer complementary capabilities, unit economics and telehealth offerings. SmartPak, Chewy’s equine, farm and exotics business, also performed ahead of expectations. The business recorded its seventh consecutive quarter of mid-double-digit year-over-year sales growth, according to Singh.

The company also highlighted progress in deploying artificial intelligence across customer service, pharmacy and veterinary operations. Chewy launched its AI-powered customer assistant, Kai, to a select group of mobile-app users. Singh said about 30% of chats were resolved through self-service for common requests involving orders, returns, Autoship and account management.

Chewy also began using AI tools for customer-care agents and pharmacy workflows, while its Callie voice capability is supporting appointment confirmations, scheduling and follow-ups at select Chewy Vet Care locations. The company expects AI initiatives to generate low tens of millions of dollars in cost savings during fiscal 2026 and about $50 million on an annualized basis in fiscal 2027.

Singh cautioned that AI savings should not be viewed as a standalone amount that will flow directly to the bottom line, as the company expects the efficiencies to offset ordinary cost pressures and potentially fund growth investments.

Guidance Raised and Narrowed Chewy raised and narrowed its fiscal 2026 outlook, citing more stable consumer trends, continued market-share gains and better-than-expected contributions from SmartPak and Modern Animal. The company now expects full-year net sales of $13.46 billion to $13.57 billion, representing growth of 6.8% to 7.7%.

Organic net sales are expected to grow 5.5% to 6.3% for the year. The company said the midpoint of the forecast does not assume a meaningful improvement in consumer conditions.

Full-year adjusted EBITDA margin is expected to be 6.7% to 6.8%, compared with prior guidance of 6.6% to 6.8%. At the midpoint, the outlook implies adjusted EBITDA of $912 million and more than 100 basis points of year-over-year margin expansion. Third-quarter net sales are projected at $3.323 billion to $3.358 billion, with adjusted EBITDA margin of 6.6% to 6.7% and adjusted diluted earnings per share of about $0.39. Chewy generated $90 million in free cash flow during the quarter and ended the period with $612 million in cash equivalents and marketable securities, as well as more than $1 billion in total available liquidity. The company issued $600 million in term loans and repurchased $200 million of stock, buying back 9.9 million shares during the quarter.

About Chewy (NYSE:CHWY)Chewy, Inc NYSE: CHWY is a leading e-commerce retailer specializing in pet food, supplies and services. The company offers a comprehensive assortment of products for dogs, cats, fish, birds and other small animals, including prescription medications, veterinary health products, grooming essentials and toys. Through its online platform and mobile app, Chewy provides an intuitive shopping experience with features such as Autoship, ensuring regular deliveries of pet essentials at schedule intervals.

Founded in 2011 by Ryan Cohen and Michael Day, Chewy initially operated under the name Mr.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected].

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Chewy (CHWY -9.18%) stock is falling today on the heels of the company's latest quarterly report. The pet products e-commerce specialist's share price was down 7.7% as of 11 a.m. ET. The S&P 500 was down 0.3% at the same point in the daily session, and the Nasdaq Composite was down 0.5%.

The broader market is seeing moderate bearish momentum today as investors react to macroeconomic concerns, and Chewy's latest quarterly report has also failed to spur net buying action. As of this writing, the stock is now down roughly 35% year to date.

Image source: Getty Images.

Chewy's quarterly results weren't bad Before the market opened this morning, Chewy published results for the second quarter of its current fiscal year -- a period that ended on Aug. 2. The company's non-GAAP (adjusted) earnings per share of $0.36 in the period were in line with the average Wall Street analyst estimate, and sales of $3.33 billion topped the average forecast by roughly $10 million. Revenue increased roughly 7.4% year over year despite a challenging retail backdrop, and the company's gross margin of 30.4% matched last quarter's level.

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What's next for Chewy? While Chewy stock is getting hit with sell-offs today, the company actually raised its full-year sales guidance. Management now expects full-year sales to come in between $13.46 billion and $13.57 billion -- up from its previous target for sales between $13.4 billion and $13.55 billion.

Even though the midpoint of the company's new guidance range exceeded the average analyst target of $13.48 billion in sales for the fiscal year, Chewy is seeing a valuation pullback today. The pet-products retailer has continued to execute efficiently even as consumer pressures are leading to more cautious spending in the category. Still, investors are concerned about what the macro backdrop means for the business's near-term performance.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chewy. The Motley Fool has a disclosure policy.

PLANTATION, Fla.--(BUSINESS WIRE)--Chewy, Inc. (NYSE: CHWY) (“Chewy”), a trusted destination for pet parents and partners everywhere, has released its financial results for the second quarter of fiscal year 2026 ended August 2, 2026.

Fiscal Q2 2026 Highlights:

Net sales of $3.33 billion increased 7.3 percent year over year or 5.7 percent excluding SmartPak and Modern Animal contributions Gross margin of 30.4 percent stayed consistent year over year Net income of $80.5 million, including share-based compensation expense and related taxes of $85.9 million Net margin of 2.4 percent increased 40 basis points year over year Basic earnings per share of $0.20, an increase of $0.05 year over year Diluted earnings per share of $0.20, an increase of $0.06 year over year Adjusted EBITDA(1) of $226.7 million, an increase of $43.4 million year over year Adjusted EBITDA margin(1) of 6.8 percent increased 90 basis points year over year Adjusted net income(1) of $148.8 million, an increase of $7.7 million year over year Adjusted basic earnings per share(1) of $0.37, an increase of $0.03 year over year Adjusted diluted earnings per share(1) of $0.36, an increase of $0.03 year over year “Chewy delivered a strong second quarter, with growth of 7.3% to $3.33 billion of net sales at the high end of our guidance, and a 6.8% Adj. EBITDA margin, exceeding our expectations,” said Sumit Singh, Chief Executive Officer of Chewy. “The durability of our recurring revenue base, continued customer growth, and disciplined execution give us confidence to raise our full-year revenue and profitability outlook, while continuing to invest in compelling opportunities that deepen customer engagement and create long-term shareholder value.”

Management will host a conference call and webcast to discuss Chewy's financial results today at 8:00 am ET.

Chewy Fiscal Second Quarter 2026 Financial Results Conference Call
When: Wednesday, September 9, 2026
Time: 8:00 am ET
Live webcast and replay: https://investor.chewy.com
Conference call registration: https://events.q4inc.com/attendee/640129598

(1) Adjusted EBITDA, adjusted EBITDA margin, adjusted net income, and adjusted basic and diluted earnings per share are non-GAAP financial measures. See “Non-GAAP Financial Measures” for additional information on non-GAAP financial measures and a reconciliation to the most comparable GAAP measures.

About Chewy

Our mission is to be the most trusted and convenient destination for pet parents and partners everywhere. We believe that we are the preeminent online source for pet products, supplies, and prescriptions as a result of our broad selection of high-quality products and services, which we offer at competitive prices and deliver with an exceptional level of care and a personal touch to build brand loyalty and drive repeat purchasing. We seek to continually develop innovative ways for our customers to engage with us, as our websites and mobile applications allow our pet parents to manage their pets’ health, wellness, and merchandise needs, while enabling them to conveniently shop for our products. We partner with approximately 4,000 of the best and most trusted brands in the pet industry, and we create and offer our own private brands. Through our websites and mobile applications, we offer our customers approximately 190,000 products and services offerings, to bring what we believe is a high-bar, customer-centric experience to our customers.

Forward-Looking Statements

This communication contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this communication, including statements regarding our share repurchase program, our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions, although not all forward-looking statements contain these identifying words.

Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could cause actual results to differ materially from those in such forward-looking statements, including but not limited to, our ability to: sustain our recent growth rates and successfully manage challenges to our future growth, including introducing new products or services, improving existing products and services, and expanding into new jurisdictions and offerings; successfully respond to business disruptions; successfully manage risks related to the macroeconomic environment, including any adverse impacts on our business operations, financial performance, supply chain, workforce, facilities, customer services and operations; acquire and retain new customers in a cost-effective manner and increase our net sales, improve margins and maintain profitability; manage our growth effectively; maintain positive perceptions of the Company and preserve, grow, and leverage the value of our reputation and our brand; limit operating losses as we continue to expand our business; forecast net sales and appropriately plan our expenses in the future; estimate our market share; strengthen our current supplier relationships, retain key suppliers, and source additional suppliers; negotiate acceptable pricing and other terms with third-party service providers, suppliers and outsourcing partners and maintain our relationships with such parties; mitigate changes in, or disruptions to, our shipping arrangements and operations; optimize, operate and manage the expansion of the capacity of our fulfillment centers; provide our customers with a cost-effective platform that is able to respond and adapt to rapid changes in technology; limit our losses related to online payment methods; maintain and scale our technology, the reliability of our websites, mobile applications, and network infrastructure, including through the use of artificial intelligence; maintain adequate cybersecurity with respect to our systems and retain third-party service providers that do the same with respect to their systems; maintain consumer confidence in the safety, quality and health of our products; limit risks associated with our suppliers and our outsourcing partners; comply with existing or future laws and regulations in a cost-efficient manner; utilize net operating loss and tax credit carryforwards, and other tax attributes; adequately protect our intellectual property rights; successfully defend ourselves against any allegations or claims that we may be subject to; attract, develop, motivate and retain highly-qualified and skilled employees; respond to economic conditions, industry trends, and market conditions, and their impact on the pet products market; reduce merchandise returns or refunds; respond to severe weather and limit disruption to normal business operations; manage new acquisitions, investments or alliances, and integrate them into our existing business; successfully compete in new offerings; manage challenges presented by international markets; successfully compete in the pet products and services health and retail industry, especially in the e-commerce sector; comply with the terms of our credit facility; raise capital as needed; and maintain effective internal control over financial reporting.

You should not rely on forward-looking statements as predictions of future events, and you should understand that these statements are not guarantees of performance or results, and our actual results could differ materially from those expressed in the forward-looking statements due to a variety of factors. We have based the forward-looking statements contained in this communication primarily on our current assumptions, expectations, and projections about future events and trends that we believe may affect our business, financial condition, and results of operations. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” included under Part 1, Item 1A in our Annual Report on Form 10-K for the fiscal year ended February 1, 2026, in our other filings with the Securities and Exchange Commission, our subsequent quarterly reports, and elsewhere in this communication. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this communication. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this communication. While we believe that such information provides a reasonable basis for these statements, this information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements. The forward-looking statements made in this communication relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this communication to reflect events or circumstances after the date of this communication or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

CHEWY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)

  As of

August 2,
2026

February 1,
2026

Assets

(Unaudited)

Current assets:

Cash and cash equivalents

$

611.0

$

860.1

Marketable securities

1.2

18.7

Accounts receivable

232.1

222.2

Inventories

924.7

864.8

Prepaid expenses and other current assets

76.3

70.0

Total current assets

1,845.3

2,035.8

Property and equipment, net

624.8

552.3

Intangible assets, net

149.7

0.3

Operating lease right-of-use assets

482.1

467.9

Goodwill

334.1

39.4

Deferred tax assets

264.7

232.2

Other non-current assets

39.9

38.5

Total assets

$

3,740.6

$

3,366.4

Liabilities and stockholders’ equity

Current liabilities:

Trade accounts payable

$

1,166.0

$

1,221.4

Accrued expenses and other current liabilities

1,033.4

1,080.2

Current portion of long-term debt

3.0

—

Total current liabilities

2,202.4

2,301.6

Operating lease liabilities

527.2

518.7

Long-term debt, net

588.7

—

Other long-term liabilities

51.8

48.2

Total liabilities

3,370.1

2,868.5

Stockholders’ equity:

Preferred stock, $0.01 par value per share, 5,000,000 shares authorized, no shares issued and outstanding as of August 2, 2026 and February 1, 2026

—

—

Class A common stock, $0.01 par value per share, 1,500,000,000 shares authorized, 224,993,295 and 238,647,144 shares issued and outstanding as of August 2, 2026 and February 1, 2026, respectively

2.2

2.4

Class B common stock, $0.01 par value per share, 395,000,000 shares authorized, 176,478,229 and 176,478,229 shares issued and outstanding as of August 2, 2026 and February 1, 2026, respectively

1.8

1.8

Additional paid-in capital

1,550.7

1,852.9

Accumulated deficit

(1,184.8

)

(1,360.1

)

Accumulated other comprehensive income

0.6

0.9

Total stockholders’ equity

370.5

497.9

Total liabilities and stockholders’ equity

$

3,740.6

$

3,366.4

CHEWY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(in millions, except per share data)

(Unaudited)

  13 Weeks Ended

26 Weeks Ended

August 2,
2026

August 3,
2025

August 2,
2026

August 3,
2025

Net sales

$

3,330.2

$

3,104.2

$

6,687.4

$

6,220.2

Cost of goods sold

2,319.0

2,162.0

4,664.8

4,354.2

Gross profit

1,011.2

942.2

2,022.6

1,866.0

Operating expenses:

Selling, general and administrative

704.4

671.9

1,381.2

1,325.0

Advertising and marketing

214.8

200.6

420.9

394.4

Total operating expenses

919.2

872.5

1,802.1

1,719.4

Income from operations

92.0

69.7

220.5

146.6

Interest and other income, net

19.9

4.3

22.7

5.3

Income before income tax provision

111.9

74.0

243.2

151.9

Income tax provision

31.4

12.0

67.9

27.5

Net income

$

80.5

$

62.0

$

175.3

$

124.4

Comprehensive income:

Net income

$

80.5

$

62.0

$

175.3

$

124.4

Foreign currency translation adjustments

(0.3

)

0.2

(0.3

)

0.6

Comprehensive income

$

80.2

$

62.2

$

175.0

$

125.0

Earnings per share attributable to common Class A and Class B stockholders:

Basic

$

0.20

$

0.15

$

0.43

$

0.30

Diluted

$

0.20

$

0.14

$

0.42

$

0.29

Weighted-average common shares used in computing earnings per share:

Basic

406.4

414.2

410.1

413.9

Diluted

410.1

428.4

414.6

426.8

CHEWY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)

  26 Weeks Ended

August 2,
2026

August 3,
2025

Cash flows from operating activities

Net income

$

175.3

$

124.4

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

76.7

62.1

Share-based compensation expense

150.4

150.4

Non-cash lease expense

19.6

17.4

Unrealized foreign currency (gains) losses, net

—

(0.2

)

Other adjustments

6.8

5.8

Net change in operating assets and liabilities:

Accounts receivable

(8.2

)

(52.1

)

Inventories

(44.9

)

(37.5

)

Prepaid expenses and other current assets

(2.7

)

(32.2

)

Other non-current assets

(0.4

)

—

Trade accounts payable

(65.3

)

50.0

Accrued expenses and other current liabilities

(49.3

)

(49.8

)

Operating lease liabilities

(18.5

)

(16.9

)

Other long-term liabilities

6.4

(1.1

)

Net cash provided by operating activities

245.9

220.3

Cash flows from investing activities

Capital expenditures

(85.6

)

(65.7

)

Purchases of marketable securities

(21.4

)

—

Proceeds from maturities of marketable securities

39.2

—

Cash paid for acquisition of businesses, net of cash acquired

(552.8

)

—

Other investing activities

—

(5.2

)

Net cash (used in) investing activities

(620.6

)

(70.9

)

Cash flows from financing activities

Repurchases of common stock

(400.0

)

(152.6

)

Proceeds from, net of income taxes paid for, parent reorganization transaction

4.3

2.3

Repayment of borrowings and related financing costs

—

(0.8

)

Proceeds from debt

811.7

—

Principal repayments of debt

(220.0

)

—

Payments for tax withholdings related to vesting of share-based compensation awards

(68.7

)

—

Other

(1.4

)

(2.9

)

Net cash provided by (used in) financing activities

125.9

(154.0

)

Effect of exchange rate changes on cash and cash equivalents

(0.3

)

0.6

Net (decrease) in cash and cash equivalents

(249.1

)

(4.0

)

Cash and cash equivalents, as of beginning of period

860.1

595.8

Cash and cash equivalents, as of end of period

$

611.0

$

591.8

Non-GAAP Financial Measures

To supplement our GAAP results, we present certain non-GAAP financial measures that management uses to evaluate operating performance, assess liquidity, and inform capital allocation decisions. These measures include Adjusted EBITDA and Adjusted EBITDA margin, Adjusted net income and Adjusted earnings per share, and Free cash flow.

Adjusted EBITDA excludes depreciation and amortization, share-based compensation and related taxes, income tax provision (benefit), interest income (expense), transaction-related costs, net legal settlement proceeds, changes in the fair value of equity warrants, severance and exit costs, and other items not considered indicative of our core operations. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of net sales.

Adjusted net income and Adjusted earnings per share exclude certain non-cash and non-recurring items, including share-based compensation and related taxes, releases of valuation allowances associated with deferred tax assets, transaction-related costs, net legal settlement proceeds, changes in the fair value of equity warrants, and severance and exit costs. Beginning in the first quarter of 2026, Adjusted net income excludes transaction-related costs prospectively.

Free cash flow represents net cash provided by operating activities less capital expenditures.

We believe these measures provide additional insight into the underlying trends in our business and facilitate comparisons across reporting periods. Reconciliations to the most directly comparable GAAP measures are provided below.

These non-GAAP measures have limitations and should not be considered in isolation or as a substitute for GAAP results. For example, Adjusted EBITDA does not reflect capital expenditures, working capital requirements, interest income (expense), income taxes, or share-based compensation, which remains a recurring component of our compensation structure. In addition, other companies may calculate non-GAAP measures differently, which may limit their comparability. Accordingly, these measures should be considered together with our GAAP financial statements and related disclosures.

Key Financial and Operating Data

We measure our business using both financial and operating data and use the following metrics and measures to assess the near-term and long-term performance of our overall business, including identifying trends, formulating financial projections, making strategic decisions, assessing operational efficiencies, and monitoring our business.

13 Weeks Ended

26 Weeks Ended

(in millions, except net sales per active customer, per share data, and percentages)

August 2,
2026

August 3,
2025

%
Change

August 2,
2026

August 3,
2025

%
Change

Financial and Operating Data

Net sales

$

3,330.2

$

3,104.2

7.3

%

$

6,687.4

$

6,220.2

7.5

%

Net income (1)

$

80.5

$

62.0

29.8

%

$

175.3

$

124.4

40.9

%

Net margin

2.4

%

2.0

%

2.6

%

2.0

%

Adjusted EBITDA (2)

$

226.7

$

183.3

23.7

%

$

479.8

$

376.0

27.6

%

Adjusted EBITDA margin (2)

6.8

%

5.9

%

7.2

%

6.0

%

Adjusted net income (2)

$

148.8

$

141.1

5.5

%

$

328.7

$

290.0

13.3

%

Earnings per share, basic (1)

$

0.20

$

0.15

33.3

%

$

0.43

$

0.30

43.3

%

Earnings per share, diluted (1)

$

0.20

$

0.14

42.9

%

$

0.42

$

0.29

44.8

%

Adjusted earnings per share, basic (2)

$

0.37

$

0.34

8.8

%

$

0.80

$

0.70

14.3

%

Adjusted earnings per share, diluted (2)

$

0.36

$

0.33

9.1

%

$

0.79

$

0.68

16.2

%

Net cash provided by operating activities

$

137.4

$

133.9

2.6

%

$

245.9

$

220.3

11.6

%

Free cash flow (2)

$

89.5

$

105.9

(15.5

)%

$

160.3

$

154.6

3.7

%

Active customers (3) (4)

21.705

20.906

3.8

%

21.705

20.906

3.8

%

Net sales per active customer

$

602

$

591

1.9

%

$

602

$

591

1.9

%

Autoship customer sales

$

2,817.2

$

2,576.9

9.3

%

$

5,649.8

$

5,139.6

9.9

%

Autoship customer sales as a percentage of net sales

84.6

%

83.0

%

84.5

%

82.6

%

(1) Includes share-based compensation expense and related taxes of $85.9 million and $159.3 million for the thirteen and twenty-six weeks ended August 2, 2026, compared to $79.1 million and $157.1 million for the thirteen and twenty-six weeks ended August 3, 2025.

(2) Adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted basic and diluted earnings per share, and free cash flow are non-GAAP financial measures. See “Non-GAAP Financial Measures” above.

(3) Includes approximately 43 thousand active customers attributable to SmartPak for the thirteen and twenty-six weeks ended August 2, 2026.

(4) Excludes customer additions related to the Modern Animal acquisition.

We define net margin as net income divided by net sales and adjusted EBITDA margin as adjusted EBITDA divided by net sales.

Adjusted EBITDA and Adjusted EBITDA Margin

The following table presents a reconciliation of net income to adjusted EBITDA, as well as the calculation of net margin and adjusted EBITDA margin, for each of the periods indicated:

(in millions, except percentages)

13 Weeks Ended

26 Weeks Ended

Reconciliation of Net Income to Adjusted EBITDA

August 2,
2026

August 3,
2025

August 2,
2026

August 3,
2025

Net income

$

80.5

$

62.0

$

175.3

$

124.4

Add (deduct):

Depreciation and amortization

39.7

32.1

76.7

62.1

Share-based compensation expense and related taxes

85.9

79.1

159.3

157.1

Interest expense (income), net

4.7

(3.9

)

1.9

(7.1

)

Change in fair value of equity warrants

—

—

—

2.6

Income tax provision

31.4

12.0

67.9

27.5

Exit costs

—

—

1.9

—

Severance costs

—

—

—

5.9

Net legal settlement proceeds

(24.0

)

—

(24.0

)

—

Transaction related costs

6.4

0.6

16.2

0.7

Other

2.1

1.4

4.6

2.8

Adjusted EBITDA

$

226.7

$

183.3

$

479.8

$

376.0

Net sales

$

3,330.2

$

3,104.2

$

6,687.4

$

6,220.2

Net margin

2.4

%

2.0

%

2.6

%

2.0

%

Adjusted EBITDA margin

6.8

%

5.9

%

7.2

%

6.0

%

Adjusted Net Income and Adjusted Basic and Diluted Earnings per Share

The following table presents a reconciliation of net income to adjusted net income, as well as the calculation of adjusted basic and diluted earnings per share, for each of the periods indicated:

(in millions, except per share data)

13 Weeks Ended

26 Weeks Ended

Reconciliation of Net Income to Adjusted Net Income

August 2,
2026

August 3,
2025

August 2,
2026

August 3,
2025

Net income

$

80.5

$

62.0

$

175.3

$

124.4

Add:

Share-based compensation expense and related taxes

85.9

79.1

159.3

157.1

Change in fair value of equity warrants

—

—

—

2.6

Exit costs

—

—

1.9

—

Severance costs

—

—

—

5.9

Net legal settlement proceeds

(24.0

)

—

(24.0

)

—

Transaction related costs

6.4

—

16.2

—

Adjusted net income

$

148.8

$

141.1

$

328.7

$

290.0

Weighted-average common shares used in computing earnings per share and adjusted earnings per share:

Basic

406.4

414.2

410.1

413.9

Effect of dilutive share-based awards

3.7

14.2

4.5

12.9

Diluted

410.1

428.4

414.6

426.8

Earnings per share attributable to common Class A and Class B stockholders

Basic

$

0.20

$

0.15

$

0.43

$

0.30

Diluted

$

0.20

$

0.14

$

0.42

$

0.29

Adjusted basic

$

0.37

$

0.34

$

0.80

$

0.70

Adjusted diluted

$

0.36

$

0.33

$

0.79

$

0.68

Free Cash Flow

The following table presents a reconciliation of net cash provided by operating activities to free cash flow for each of the periods indicated:

(in millions)

13 Weeks Ended

26 Weeks Ended

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

August 2,
2026

August 3,
2025

August 2,
2026

August 3,
2025

Net cash provided by operating activities

$

137.4

$

133.9

$

245.9

$

220.3

Deduct:

Capital expenditures

(47.9

)

(28.0

)

(85.6

)

(65.7

)

Free Cash Flow

$

89.5

$

105.9

$

160.3

$

154.6

Free cash flow may vary period to period based on the timing and level of capital expenditures, including investments in fulfillment capacity, pharmacy facilities, veterinary clinics, technology infrastructure, and other operational initiatives. Free cash flow may also be affected by changes in working capital, including fluctuations in inventory levels, vendor payment terms, and other components of the cash conversion cycle.

Chewy stock advances after the company raises net sales guidance for the fiscal year.