Chewy stock rating reiterated at Outperform by William Blair

Chewy Inc. (NYSE:CHWY) reported Q2 2025 results with revenue slightly surpassing and EPS meeting analyst expectations, driven by the addition of 150,000 active customers. The company raised its full-year sales guidance while maintaining its adjusted EBITDA margin outlook, a point of ongoing scrutiny for direct-to-consumer models. William Blair reiterated its Outperform rating, citing Chewy's strong execution and consistent customer growth, suggesting the stock remains undervalued despite prevailing market conditions.

Analysis

Chewy Inc. (CHWY) delivered a solid second-quarter 2025 performance, characterized by revenues of $3.1 billion and an EPS of $0.33, which slightly surpassed and met analyst expectations, respectively. A key operational highlight was the sequential addition of 150,000 active customers, a metric that significantly exceeded sell-side consensus for flat growth, although it fell short of some higher buy-side estimates. This execution prompted William Blair to reiterate its Outperform rating, citing the results as a "handy beat." Furthermore, the company issued a bullish outlook, raising its full-year sales guidance and setting third-quarter forecasts modestly ahead of expectations. A point of investor scrutiny remains on profitability, as Chewy maintained its adjusted EBITDA margin guidance, a common concern for direct-to-consumer business models. The report also underscored strong fundamentals, including a 29.2% gross margin and a 12.4% return on assets, with analysts noting that the company is now moving beyond a period of heavy investment, positioning it for more significant revenue and earnings contributions in the future.

Key Decisions for Investors

• Given the strong active customer growth, raised full-year sales guidance, and positive analyst commentary, investors may consider the stock's 'undervalued' assessment as a potential entry point for a long position.
• Investors should closely monitor the adjusted EBITDA margin in upcoming quarters, as the ability to drive margin expansion is a critical catalyst and a primary concern noted for the DTC business model.
• Look for tangible evidence in future earnings reports that recent investments in automation and product development are translating into accelerated revenue growth and improved profitability, which is a core component of the forward-looking thesis.