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Chewy, Inc. (CHWY)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 FY2025 net sales were $3.10B (+8.6% YoY), with gross margin of 30.4%—a high for the year—and adjusted diluted EPS of $0.33; Autoship sales rose ~15% YoY to 83% of total, underscoring share gains in a low-to-mid single-digit growth category .
  • Chewy raised and narrowed FY2025 net sales guidance to $12.5–$12.6B (from $12.3–$12.45B in Q1), maintained adjusted EBITDA margin outlook of 5.4–5.7%, and guided Q3 adjusted diluted EPS to $0.28–$0.33—investing to accelerate growth in H2 while keeping margin expansion midpoint at +75 bps YoY .
  • Key operational drivers: Sponsored Ads and mix into premium categories drove margin expansion; hardgoods returned to double-digit growth on volume; active customers reached 20.9M (+4.5% YoY) with NSPAC at $591 (+4.6% YoY), and Chewy Plus membership accelerated to ~3% of July sales with strong incrementality .
  • Capital allocation: ~$125M of repurchases (~3M shares) in Q2; remaining authorization ~$360M; cash and cash equivalents ~$592M; debt-free liquidity ~$1.4B .
  • Near-term stock reaction catalysts: raised FY sales guidance and record gross margin , Chewy Plus uptake (~3% July sales) , and Q3 EPS guide ; watch for H2 spending to lean into growth (ads, membership, price investment) tempering near-term flow-through .

What Went Well and What Went Wrong

What Went Well

  • Share gains and subscription strength: Autoship sales grew ~15% YoY to $2.58B, reaching 83% of net sales (record); active customers rose to 20.9M (+4.5% YoY), with NSPAC at $591 (+4.6% YoY) .
  • Margin expansion: Gross margin hit 30.4% (+90 bps YoY; +80 bps QoQ), driven by Sponsored Ads and premium mix; adjusted EBITDA margin rose to 5.9% (+80 bps YoY) .
  • New initiatives traction: Chewy Plus reached ~3% of July sales, showing higher frequency, basket attach, Autoship adoption, and positive contribution per customer; “Get Real” fresh/frozen dog food launched with strong customer reception and national capacity through 2028 .
    • Quote: “In the month of July, roughly 3% of Chewy’s total monthly sales were to Chewy Plus members…higher frequency…higher number of products…incremental Autoship adoption” .

What Went Wrong

  • SG&A deleverage: SG&A (ex SBC) was $592.8M (19.1% of sales), deleveraging ~30 bps YoY, due to Houston FC ramp, Dallas shift wind-down, higher hardgoods inbound processing ($3–$5M), and modest wage/benefit increases ($2–$3M) .
  • GAAP EPS optics vs prior year: Diluted EPS fell to $0.14 YoY due to a large prior-year valuation allowance release; adjusted EPS rose to $0.33 (+$0.09 YoY), highlighting non-GAAP normalization .
  • H2 flow-through: Company will reinvest incremental H2 revenue (implied $175M midpoint raise) to drive Chewy Plus, Autoship, and potential selective price investments, limiting near-term incremental EBITDA conversion versus pure flow-through .

Financial Results

Core P&L and KPIs (Actuals)

MetricQ2 2025Q1 2026Q2 2026
Net Sales ($USD Billions)$2.859 $3.116 $3.104
Gross Margin (%)29.5% 29.6% 30.4%
Diluted EPS (GAAP) ($)$0.68 $0.15 $0.14
Adjusted Diluted EPS ($)$0.24 $0.35 $0.33
Adjusted EBITDA ($USD Millions)$144.9 $192.7 $183.3
Adjusted EBITDA Margin (%)5.1% 6.2% 5.9%
Active Customers (Millions)20.0 20.8 20.9
NSPAC ($)$565 $583 $591
Autoship Sales ($USD Billions)$2.242 $2.563 $2.577
Autoship as % of Net Sales78.4% 82.2% 83.0%

Actual vs S&P Global Consensus

MetricPeriodConsensusActualBeat/Miss
Revenue ($USD)Q2 2026$3,077,822,260*$3,104,200,000 Beat
EPS (Primary) ($)Q2 2026$0.33164*$0.33 (Adj. diluted) In line
Revenue ($USD)Q1 2026$3,080,679,420*$3,116,000,000 Beat
EPS (Primary) ($)Q1 2026$0.33876*$0.35 (Adj. diluted) Beat
Revenue ($USD)Q2 2025$2,856,040,110*$2,858,600,000 In line
EPS (Primary) ($)Q2 2025$0.21123*$0.24 (Adj. diluted) Beat

Values retrieved from S&P Global*

Additional KPIs and Business Mix

KPIQ2 2025Q1 2026Q2 2026
Hardgoods YoY Growth (%)—+12.3% >15%
Sponsored Ads (Narrative)Scaled to ~1% of FY24 sales Sequential growth; 1P platform ramp incl. offsite Key GM driver; sequential growth
Free Cash Flow ($USD Millions)$91.5 $48.7 $105.9
Share Repurchases ($USD Millions)—$23.2 ~$125; ~3M shares

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Billions)FY 2025$12.3–$12.45 $12.5–$12.6 Raised and narrowed
Adjusted EBITDA Margin (%)FY 20255.4–5.7 5.4–5.7 Maintained
Net Sales ($USD Billions)Q3 2025—$3.07–$3.10 New
Adjusted Diluted EPS ($)Q3 2025—$0.28–$0.33 New
Share-based comp + taxes ($USD Millions)FY 2025~$315 ~$315 Maintained
Weighted avg diluted shares (Millions)FY 2025~430 ~430 Maintained
Net interest income ($USD Millions)FY 2025~$25–$30 ~$25–$30 Maintained
Effective tax rate (%)FY 202520–22 20–22 Maintained
CapEx (% of Net Sales)FY 2025Low end of 1.5–2% Low end of 1.5–2% Maintained
Free cash flow conversion (%)FY 2025~80% of adj. EBITDA ~80% of adj. EBITDA Maintained

Earnings Call Themes & Trends

TopicQ4 2025 (Prior-2)Q1 2026 (Prior-1)Q2 2026 (Current)Trend
Sponsored Ads~1% of FY24 sales; 1P platform completing; path to 3% LT 1P launched; on-site and off-site ramp; sequential growth Largest GM driver; continued sequential growth Positive ramp, mix accretive
Chewy Plus—Transitioned out of beta; expanding access ~3% July sales; higher frequency, attach; positive contribution; mid-single-digit % of net sales expected exit year Rapid member growth, incremental
Autoship80.6% of Q4 net sales; +21% YoY 82.2% of Q1 net sales; +14.8% YoY 83.0% of Q2 net sales; +14.9% YoY Sustained outperformance
HardgoodsBroad-based recovery starting +12.3% YoY >15% YoY, volume-driven; in-stock and brand onboarding Durable volume-led recovery
CVC (Vet Care)8 clinics opened; strong ecosystem pull 11 clinics; on track 8–10 in FY25; high conversion to chewy.com On track to 8–10 openings; highest/fastest NESPAC cohorts Expanding footprint, strong ROI
Supply chain/Automation>50% overall automated volume; ramping Houston FC Modest SG&A leverage expected FY25 H2 SG&A leverage; Houston ramp; Dallas shift wind-down Near-term costs, medium-term leverage
Tariffs/MacroMinimal tariff impact embedded Minimal pricing inflation; watch hardgoods tariffs Prepared to mitigate tariffs via mix/onshoring; potential selective price investment Managed risk posture
Fresh/Frozen (Get Real)——TAM $8–$12B over time; 70% existing/30% new customers; high NESPAC economics; capacity through 2028 Early traction, high-margin vertical

Management Commentary

  • “Q2 net sales grew by nearly 9% YoY to $3.1 billion…Autoship customer sales of $2.58 billion represented 83% of our Q2 net sales…Hardgoods grew over 15%” .
  • “In July, roughly 3% of Chewy’s total monthly sales were to Chewy Plus members…buying at a higher frequency…higher number of products…incremental Autoship adoption…positive contribution profit per customer” .
  • “We are raising and narrowing our full year 2025 net sales outlook to between $12.5 and $12.6 billion…maintaining full year 2025 adjusted EBITDA margin outlook of 5.4% to 5.7%” .
  • “We expect Q3 adjusted diluted EPS in the range of $0.28 to $0.33…Q2 being the high point for [gross margin] this year” .
  • “We spent about $3–$5 million in higher inbound processing costs…[and] about $2–$3 million [in] higher wages/benefits…expect SG&A costs to moderate in the back half” .

Q&A Highlights

  • H2 investment cadence: Management intends to reinvest incremental revenue (midpoint raise ~$175M) into Chewy Plus, Autoship growth, and potential selective pricing to take share; flow-through held in check near term .
  • SG&A puts/takes: Temporary deleverage from Houston FC ramp, Dallas shift wind-down, hardgoods inventory processing ($3–$5M), and wages/benefits ($2–$3M); expect H2 leverage and FY2025 SG&A leverage .
  • Gross margin drivers: Sponsored Ads, mix to premium consumables/health, rising Autoship scale; promotional environment rational; Q2 gross margin is peak for FY2025 with healthy annual expansion expected .
  • Fresh/frozen TAM and economics: TAM seen growing to $8–$12B; early customer mix ~70% existing/30% new; high NESPAC and gross profit per unit; capacity in place through 2028 .
  • Advertising environment: Competitive intensity remains high; net traffic +14% and mobile app sessions +25% YoY; Sponsored Ads grew sequentially with 1–3% LT entitlement reiterated .

Estimates Context

  • Q2 FY2025 actual revenue modestly above consensus and adjusted EPS above consensus; Q1 FY2025 beat on both revenue and adjusted EPS; Q2 FY2026 revenue above consensus and adjusted EPS essentially in line, supporting raised FY guidance .
  • Near-term estimate revisions likely: upward for FY net sales and modest adjustments to H2 EPS given management’s explicit reinvestment to drive share gains (H2 offense) and gross margin peaking in Q2 .

Values retrieved from S&P Global*

Key Takeaways for Investors

  • Subscription engine remains robust: Autoship penetration increased to 83% with sustained double-digit growth—supporting revenue visibility and mix-driven margin expansion .
  • Membership flywheel is working: Chewy Plus drove ~3% of July sales with tangible basket and frequency lift; expect mid-single-digit % of net sales by year-end and margin accretive contribution dollars .
  • Operating leverage set to improve in H2: SG&A deleverage appears transitory; Houston FC and other ramps should support modest FY leverage; monitor fulfillment and wage/benefit normalization .
  • Gross margin discipline: Sponsored Ads and premium mix drove a record 30.4% margin; management flagged Q2 as peak for FY2025—plan on quarterly volatility but annual expansion remains intact .
  • Capital deployment: Continued buybacks (~$125M in Q2) with ~$360M authorization remaining and strong liquidity; signals confidence while funding growth initiatives .
  • Trading setup: Raised FY sales guidance, record gross margin, and Q3 EPS guide offer upside catalysts; near-term EBIT flow-through may be capped as the company leans into growth—expect investors to weigh top-line acceleration vs. margin trajectory .
  • Medium-term thesis: Emerging high-margin verticals (Sponsored Ads, health/CVC, fresh/frozen) and ecosystem programs (Autoship, Chewy Plus) support path toward LT adjusted EBITDA margin target; execution and tariff mitigation strategies reduce macro downside .