Chewy (NYSE:CHWY) executives pointed to continued share gains, expanding profitability, and record free cash flow as highlights of fiscal 2025, while outlining expectations for another year of margin improvement in fiscal 2026 amid what management described as a steady but not accelerating pet industry backdrop.
Management views on the pet industry and growth drivers
CEO Sumit Singh said the company expects 2026 pet industry dynamics to “largely mirror 2025,” describing demand as resilient but “without cyclical acceleration.” He said pet household formation appears stable, with “no evidence of deterioration,” but added that Chewy is “not underwriting a meaningful rebound” in that variable. Singh cited current estimates suggesting low single-digit industry growth, with dog at the lower end and cat at the higher end, and said management expects growth to be “predominantly volume driven with little or no contribution from pricing.”
Fourth quarter and full-year 2025 results
New CFO Chris Deppe, who joined Chewy in 2022 and was recently appointed to the role, reported fourth quarter net sales of more than $3.26 billion and full-year fiscal 2025 net sales of more than $12.6 billion. Deppe said those results represented year-over-year growth of 8.1% in the fourth quarter and 8.3% for the full year on a comparable basis, noting fiscal 2024 included a 53rd week and that comparisons were discussed on a comparable 52-week basis where applicable.
Chewy ended the year with 21.3 million active customers, up about 4% year over year, with net additions up by more than 810,000 in fiscal 2025. Autoship continued to represent the majority of revenue, with Autoship customer sales of more than $2.7 billion in the fourth quarter and $10.5 billion for the year. Deppe said Autoship represented 84% of total net sales in the fourth quarter and 83.3% for the full year, while Autoship sales growth outpaced overall revenue growth, rising nearly 13% in the fourth quarter and 14% for the full year on a comparable basis.
Net sales per active customer (NSPAC) reached $591 in the fourth quarter, up about 4% year over year on a comparable basis. Deppe said gross margin was 29.4% in the fourth quarter and 29.8% for the full year, representing roughly 90 basis points of expansion in the quarter and 60 basis points for the full year. He attributed gross margin performance to Sponsored Ads growth, premium mix into higher-margin categories (including Health and Wellness), and a “rational promotional environment.”
On profitability, Deppe reported adjusted net income of $150 million in the fourth quarter and $541 million for the year, translating to adjusted diluted earnings per share of $0.27 in the quarter and $1.27 for the full year. Adjusted EBITDA was $162 million in the fourth quarter (a 5% margin), up 120 basis points year over year, while full-year adjusted EBITDA was $719 million (a 5.7% margin), up about 26% year over year. Deppe also highlighted record free cash flow of $232 million in the fourth quarter and $562.4 million for the year.
Cash, capital allocation, and share repurchases
Deppe said fiscal 2025 free cash flow reflected $691.6 million of net cash provided by operating activities and $129.2 million of capital expenditures. Chewy ended the year with about $879 million in cash, equivalents, and marketable securities, remained debt-free, and had total liquidity of about $1.7 billion.
The company repurchased and retired approximately 6.8 million shares in 2025 for about $257 million. Deppe said capital allocation priorities remain unchanged—fund strategic initiatives with attractive returns, maintain a strong balance sheet, and return excess cash to shareholders—and added that share repurchases are expected to increase in 2026 versus 2025, citing cash generation and management’s view of valuation.
Strategic initiatives: Vet Care, AI, and private brands
Singh said Chewy Vet Care opened 10 new practices in 2025, reaching 18 locations across five states. He said performance continues to exceed expectations, supported by strong utilization and high customer and veterinarian satisfaction scores, and described Vet Care as both a customer acquisition engine and an engagement flywheel. He also called it “the fastest NSPAC compounder in the business.”
On artificial intelligence, Singh said Chewy has been building the foundation to deploy AI at scale and is embedding it across the purchase experience, service and operations, and supply chain and fulfillment. He said the company expects AI-driven efficiencies to contribute a “low tens of millions of dollars” benefit in 2026, with a “meaningful step up” in 2027 and a path to approximately $50 million or more in annualized savings as capabilities scale. In Q&A, he cited applications in customer service aimed at reducing handle times and contact rates and referenced a self-service refunds and returns launch, as well as AI use cases across fulfillment, pharmacy, and marketing operations.
Chewy also announced the launch of “Chewy Made,” a unified owned-brand platform that will expand across dog and cat consumables beginning in April and throughout 2026. Singh said management believes private brands should ultimately be in the low- to mid-teens as a percentage of net sales, and at that scale could carry roughly 500 basis points higher gross margin than the base business. He said current penetration is low- to mid-single digits overall, with stronger penetration in hardgoods and a larger opportunity in consumables.
Fiscal 2026 outlook and margin expectations
For fiscal 2026, Deppe guided to net sales of $13.6 billion to $13.75 billion, or about 8% to 9% year-over-year growth, with the recently closed SmartEquine acquisition expected to contribute about $80 million in net sales. The outlook assumes no price inflation and low single-digit active customer growth. Deppe said first quarter net sales are expected to be $3.33 billion to $3.36 billion, or about 7% to 8% growth, and described Q1 as the “low point” for growth due to timing and lapping dynamics, with growth expected to build in Q2 and strengthen through Q3.
Chewy expects full-year 2026 adjusted EBITDA margin of 6.6% to 6.8%, implying roughly 100 basis points of expansion at the midpoint, with adjusted EBITDA of about $900 million to over $930 million. Deppe said the composition of margin expansion is expected to shift toward operating leverage (SG&A and modest leverage in advertising and marketing), with gross margin still expected to expand but at a more moderate pace than in 2025. He also said management anticipates typical seasonality, including sequential moderation in Q4 margins tied to promotional timing.
Deppe guided to first-quarter adjusted diluted EPS of $0.40 to $0.45 and said the company expects share-based compensation expense (including related taxes) to be broadly flat year over year, weighted average diluted shares of about 425 million, net interest income of about $10 million to $15 million, and an effective tax rate of 20% to 22% in 2026.
On SmartEquine, Singh said Chewy expects the business to run at gross margins above 35% in the near future, but that 2026 will focus on stabilizing and “fixing” the acquired business, with no expectation of a material P&L contribution this year. He said Chewy believes it can grow the category to “a few hundred million dollar” opportunity over time at 35% to 45% gross margin.
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.
