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Chewy, Inc. (CHWY)·Q1 2026 Earnings Summary

Executive Summary

  • Chewy delivered a solid quarter: net sales of $3.12B (+8.3% YoY), adjusted EBITDA margin of 6.2% (+50 bps YoY), and adjusted diluted EPS of $0.35; GAAP diluted EPS was $0.15. Auto-ship penetration reached a record 82.2% of sales and active customers grew 3.8% to 20.8M .
  • Results modestly exceeded Wall Street consensus: revenue beat by ~1.1% ($3.12B vs $3.08B*) and adjusted EPS beat by ~3.3% ($0.35 vs $0.339*). Management guided Q2 net sales to $3.06–$3.09B and maintained FY2025 net sales at $12.3–$12.45B with FY adjusted EBITDA margin 5.4%–5.7% .
  • Key positives: Sponsored Ads drove gross margin expansion normalized for prior-year one-offs, Hardgoods grew 12.3% YoY on refreshed assortment, and free cash flow remained positive ($48.7M) despite seasonality .
  • Watch items: GAAP gross margin down 10 bps YoY due to prior-year one-time benefits, GAAP net margin down 30 bps YoY, and CFO transition announced in May (company reaffirmed guidance) .
  • Stock reaction catalysts: management signaled trending toward the “upper half” of FY net sales guidance and sequential gross margin improvement expected in Q2; Chewy Plus and CVC progress are emerging levers .

Note: “Q1 2026” refers to Chewy’s fiscal Q1 2025 ended May 4, 2025 .

What Went Well and What Went Wrong

What Went Well

  • Record Auto-ship penetration (82.2% of net sales), with Auto-ship sales up 14.8% YoY to $2.56B; management highlighted Auto-ship as a key differentiation and loyalty driver .
  • Sponsored Ads were the largest driver of normalized gross margin improvement; 1P ad platform enables video and off-site capabilities with strong partner ROI .
  • Hardgoods net sales grew 12.3% YoY on refreshed assortment, faster SKU onboarding, and improved discovery; CEO cited “customers appreciate the new offerings” and >150 new brands added over two quarters .

What Went Wrong

  • GAAP gross margin declined 10 bps YoY (29.6% vs 29.7%) driven by prior-year Q1 one-time benefits; normalized, gross margin expanded ~60 bps YoY per management .
  • GAAP net margin declined 30 bps YoY (2.0% vs 2.3%) amid lower net interest income and higher SG&A tied to network expansion .
  • Free cash flow of $48.7M decreased vs $52.6M prior year due to higher capex timing; management still expects ~80% of adjusted EBITDA to convert to FCF for FY .

Financial Results

Core P&L and Margins (chronological: prior year → prior quarter → current)

MetricQ1 FY2024 (Apr 28, 2024)Q4 FY2024 (Feb 2, 2025)Q1 FY2025 (May 4, 2025)
Revenue ($USD Billions)$2.878 $3.247 $3.116
GAAP Diluted EPS ($)$0.15 $0.05 $0.15
Gross Margin %29.7% 28.5% 29.6%
Adjusted EBITDA ($USD Millions)$162.9 $124.5 $192.7
Adjusted EBITDA Margin %5.7% 3.8% 6.2%
GAAP Net Income ($USD Millions)$66.9 $22.8 $62.4
GAAP Net Income Margin %2.3% 0.7% 2.0%
Adjusted Diluted EPS ($)$0.31 $0.28 $0.35

Segment Net Sales (YoY growth detail)

Segment ($USD Billions)Q1 FY2024Q1 FY2025YoY %
Consumables$2.047 $2.178 6.4%
Hardgoods$0.305 $0.342 12.3%
Other$0.526 $0.596 13.3%
Total Net Sales$2.878 $3.116 8.3%

KPIs and Cash Flow

KPIQ1 FY2024Q4 FY2024Q1 FY2025
Active Customers (Millions)19.988 20.514 20.756
Net Sales per Active Customer ($)$562 $578 $583
Auto-ship Sales ($USD Billions)$2.233 $2.617 $2.563
Auto-ship % of Net Sales77.6% 80.6% 82.2%
Free Cash Flow ($USD Millions)$52.6 $156.6 $48.7

Consensus vs Actual (S&P Global)

MetricPeriodConsensusActual
Revenue ($USD Billions)Q1 FY2025$3.081*$3.116*
Primary EPS ($)Q1 FY2025$0.339*$0.350*
Revenue ($USD Billions)Q2 FY2025$3.078*$3.104*
Primary EPS ($)Q2 FY2025$0.332*$0.330*

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Billions)Q2 FY2025—$3.06–$3.09 New quarterly guide
Net Sales ($USD Billions)FY2025$12.3–$12.45 $12.3–$12.45 Maintained; trending upper half (qualitative)
Adjusted EBITDA Margin %FY20255.4%–5.7% 5.4%–5.7% Maintained
Adjusted Diluted EPS ($)Q2 FY2025—$0.30–$0.35 New quarterly guide
Gross Margin TrajectoryQ2 FY2025—Sequential improvement expected New qualitative
Share-based Comp ($USD Millions)FY2025~$315 ~$315 Maintained
Diluted Shares (Millions)FY2025~430 ~430 Maintained
Net Interest Income ($USD Millions)FY2025$25–$30 $25–$30 Maintained
Effective Tax Rate %FY202520%–22% 20%–22% Maintained
Tariff ImpactFY2025Minimal Minimal Maintained
Capex (% of Net Sales)FY20251.5%–2.0% Low end of 1.5%–2.0% Clarified lower end

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY2024 and Q4 FY2024)Current Period (Q1 FY2025)Trend
Sponsored Ads / 1P PlatformAds ~1% of FY net sales; 1P migration planned; key margin driver Largest driver of normalized gross margin improvement; 1P stack live with video and off-site; strong ROI Positive scaling; broadening formats/channels
Auto-ship penetrationQ4: 80.6% of sales; sales +21% YoY Record 82.2%; sales +14.8% YoY Strengthening penetration
Chewy Plus membershipNot material contributor in 2024; beta ongoing Exited beta; strong sign-ups; higher frequency, cross-category penetration; $49 annual fee Early but promising engagement lift
CVC (Vet clinics)8 clinics opened in 2024; plan 8–10 in 2025 11 clinics in 4 states; forward bookings strong; ~half of new vet visitors purchase on Chewy within 30 days Expanding footprint and ecosystem benefits
Hardgoods assortment/experienceQ4 hardgoods broad-based growth; improved site/app conversion +12.3% YoY; >150 new brands added; faster SKU onboarding (40–50% faster) Continued momentum on refresh and attach
Automation / Fulfillment~>40% volume in automated FCs; Houston ramping; path to 70–80% Reinforced near- to medium-term path; SG&A leverage targeted Incremental throughput/efficiency
Tariffs/PricingMinimal FY25 impact expected; limited inflation Like-for-like inflation minimal; hardgoods tariff impact not yet flowing through Neutral near term

Management Commentary

  • “First-quarter Auto-ship customer sales of $2.56 billion represented approximately 82% of Q1 net sales, reaching a record high for the company.”
  • “Sponsored Ads continues to be the largest driver of gross margin improvement year-over-year, combined with strong auto-ship baseload and products mix shift into margin-accretive categories.”
  • “We remain on track to open 8-10 new clinics in fiscal year 2025.”
  • “We transitioned the Chewy Plus membership program out of beta…members enjoy free shipping, 5% rewards…$49 for the year.”
  • “We expect to deliver sequential improvement in gross margin in the second quarter.”
  • “We repurchased approximately 665,000 shares for a total of $23.2 million…remaining capacity ~$383.5 million.”

Q&A Highlights

  • Active customer growth sustainability: Management sees low-single-digit growth as a solid baseline driven by stronger gross adds and lower churn, with quality of cohorts improving (NESSPAC and reorder rates up low-single digits YoY) .
  • Ads off-site ramp: 1P platform enables off-site expansion across search/social; margins slightly lower than on-site but ROI exceeding expectations; long-term entitlement still 1–3% of net sales .
  • Chewy Plus unit economics: Higher session activity, order frequency, cross-category penetration; incremental contribution profit while keeping costs in line; continued disciplined ramp .
  • Auto-ship conversion and path: “Brilliance in basics,” assortment/in-stock/personalization drive acquisition and retention; app ecosystem supports loyalty flywheel with Plus and Auto-ship .
  • CVC opportunity: High bookings/utilization; strong new-customer acquisition channel (~50% purchase on chewy.com within 30 days); positions Chewy within a ~$20–25B TAM including health, telehealth, and software .
  • Pricing/tariffs: Minimal like-for-like inflation; hardgoods tariffs not yet visible due to on-shore inventories; consumables largely domestically sourced .

Estimates Context

  • Chewy posted a modest beat vs Street: revenue $3.116B vs $3.081B consensus (+1.1%) and primary EPS $0.35 vs $0.339 consensus (+3.3%), sustaining momentum from Q4 where primary EPS also exceeded consensus (actual $0.18 vs $0.089*) [GetEstimates].
  • FY guide maintained with qualitative tilt to upper half; consensus likely to drift higher on net sales while margin expectations incorporate sequential gross margin improvement in Q2 .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Auto-ship flywheel is strengthening (82.2% of sales, record) and is a core moat supporting visibility, retention, and mix into higher-margin categories .
  • Sponsored Ads scaling on a 1P platform is a key margin lever; off-site expansion broadens TAM with robust partner ROI and should continue to accrete gross margin normalized for one-offs .
  • Hardgoods recovery (+12.3% YoY) reflects assortment refresh and faster onboarding; paired with improved discovery/app attach, this can diversify growth beyond consumables .
  • Near-term setup: Q2 guide implies steady top-line with sequential gross margin improvement; management expects Q1 to be peak quarterly adjusted EBITDA margin with typical seasonal declines thereafter .
  • Watch CFO transition but note guidance reaffirmation and robust liquidity ($616M cash; ~$1.4B liquidity; debt-free) supporting ongoing repurchases and strategic investments .
  • Medium-term thesis: Chewy Plus and CVC deepen ecosystem engagement, potentially lifting NSPAC and share of wallet while Sponsored Ads and automation expand margins toward long-term 10% adjusted EBITDA target .
  • Tactical: Expect estimate revisions modestly higher on revenue/adjusted EPS after beats; focus on Ads/KPIs, gross margin trajectory, and execution on CVC/Plus to gauge durable margin expansion [GetEstimates] .

Appendix: Additional Context and Cross-References

  • Fiscal Q1 2025 press release and 8-K include full financial statements, non-GAAP reconciliations, and KPI definitions .
  • Q4 FY2024 press release provides baseline for prior quarter comparisons and KPIs (active customers, NSPAC, Auto-ship) .
  • CFO departure press release reaffirmed Q1 guidance ahead of earnings .