Chewy Q2 Earnings Beat Estimates, FY25 Sales Outlook Raised

Chewy (CHWY) reported robust fiscal Q2 2025 results, with adjusted earnings of $0.33 per share and net sales of $3.104 billion, both exceeding consensus estimates. This 8.6% year-over-year revenue growth was primarily driven by record Autoship program demand, which also contributed to a 90 basis point expansion in gross margin to 30.4% and an 80 basis point increase in adjusted EBITDA margin to 5.9%. Bolstered by strong performance and market share gains, Chewy raised its fiscal 2025 net sales outlook to $12.5 billion-$12.6 billion, signaling continued confidence in its growth trajectory.

Analysis

Chewy, Inc. (CHWY) delivered a robust fiscal second-quarter 2025 performance, significantly exceeding consensus estimates on both revenue and profitability. The company reported net sales of $3.104 billion, an 8.6% year-over-year increase, driven by sustained market share gains and record demand for its Autoship subscription program. This key recurring revenue stream grew nearly 15% to $2.58 billion, now accounting for 83% of total sales. Profitability metrics were equally strong, with adjusted EPS of $0.33 more than doubling the consensus estimate of $0.14 and growing 37.5% year-over-year. Margin expansion was a critical highlight, as the gross margin increased by 90 basis points to 30.4%, fueled by a richer product mix and the growth of its sponsored ads business. Correspondingly, the adjusted EBITDA margin expanded by 80 basis points to 5.9%. Management's confidence is underscored by an upward revision of its full-year sales guidance to a range of $12.5 billion to $12.6 billion. The company's financial position remains solid, being debt-free with approximately $1.4 billion in liquidity and executing on a share repurchase program. A notable point of divergence is the stock's recent underperformance, having lost 14.8% in the past three months despite these strong fundamental results and a positive industry trend.

Key Decisions for Investors

• Given the significant earnings beat, raised full-year guidance, and expanding margins, investors should view these results as a strong validation of Chewy's business model and execution.
• The disconnect between the stock's recent 14.8% decline and its accelerating operational performance may present a compelling opportunity, warranting a re-evaluation of positions for those with a long-term, fundamentals-driven thesis.
• Monitor active customer growth and net sales per active customer in subsequent quarters to ensure the current momentum is sustained, as these are primary drivers of the company's growth algorithm.
• The active share repurchase program, with $359.8 million in remaining capacity, provides a potential catalyst and a degree of price support that should be factored into risk-reward calculations.