Chewy's second-quarter revenue rose 7.3% year over year to $3.33 billion, slightly above the $3.32 billion market estimate. Autoship sales increased to 85% of revenue and active customers grew, but budget-conscious shoppers continued to hold back on treats and other discretionary products. The company modestly raised its full-year revenue outlook and narrowed its adjusted EBITDA margin range, while higher fuel costs and consumer spending remain key variables.
Chewy raises revenue outlook, narrows margin range
Chewy now expects fiscal 2026 revenue of $13.46 billion to $13.57 billion, up from its previous range of $13.40 billion to $13.55 billion. The updated forecast implies total growth of 6.8% to 7.7% and organic growth of 5.5% to 6.3%. The company said stronger-than-expected sales from recent acquisitions SmartPak and Modern Animal contributed to the increase.
The adjusted EBITDA margin outlook was narrowed to 6.7% to 6.8%, from 6.6% to 6.8%. Chewy also faces cost pressure from rising fuel prices. At the midpoint of its margin guidance, adjusted EBITDA for fiscal 2026 would be about $914 million.
The market expects fiscal 2027 revenue of $14.44 billion, roughly 7% higher year over year. If the margin improves by about 50 basis points to 7.3%, adjusted EBITDA would be approximately $1.05 billion. With the shares near $19, Chewy's market capitalization is about $7.62 billion. Its latest balance sheet showed $612.2 million in cash and $591.7 million in debt, implying an enterprise value of roughly $7.7 billion. On those earnings estimates, enterprise value would be about 8.4 times adjusted EBITDA for fiscal 2026 and 7.3 times for fiscal 2027. Those multiples depend on the company meeting its future revenue and margin expectations.
Autoship and customer spending continue to grow
Second-quarter autoship sales rose 9.3% year over year to $2.82 billion, accounting for 85% of total sales, compared with 83% a year earlier. Net sales per active customer increased 2% to $602, reflecting a more favorable product mix and higher prices. Chewy added a net 800,000 active customers, a 4% increase year over year.
The figures point to resilience in customer retention and repeat purchases. Autoship is one of Chewy's key tools in competing with large generalist e-commerce platforms. The company is also seeking to expand customer spending through services including veterinary care and advertising. Growth, however, has not been even across categories: demand for discretionary items remains soft, and some customers are switching to lower-priced essentials.
Discretionary products lag as Chewy gains share
Chief Financial Officer Chris Deppe said on the second-quarter earnings call that net sales per active customer benefited from a more mature customer base, greater engagement with health and pharmacy offerings, and increased cross-category purchasing. Those factors were partly offset by weaker demand for discretionary items and premium products. Treat sales slowed more sharply than core food sales in the quarter, reflecting both softer discretionary spending and broader macroeconomic pressures.
Deppe said purchasing patterns across consumables were shaped by both product upgrades and the attachment of discretionary items to orders. While the overall consumables market was roughly flat year over year, Chewy's relevant categories grew at a mid-single-digit rate. CEO Sumit Singh said Chewy was growing at roughly two to three times the pace of the pet industry, indicating share gains despite subdued sector demand.
Adjusted EBITDA climbs 24% as costs weigh on gross margin
Gross margin was unchanged from a year earlier at 30.4%. Chewy said tariff refunds and revenue from unredeemed gift cards provided a one-time benefit of about $10 million, equivalent to roughly 30 basis points of margin. Excluding those items, product gross margin declined, partly because of a higher fuel cost burden.
Adjusted EBITDA rose 24% to $227 million, with a margin of 6.8%, up 90 basis points year over year. Excluding the one-time benefit, underlying margin expansion was about 60 basis points. The improvement indicates that operational gains lifted adjusted profitability even as merchandise costs and logistics expenses pressured gross margin.
Household growth and passing on costs remain key questions
A key uncertainty for Chewy is whether strained household budgets will continue to slow growth in the number of pet-owning households. The pace of new household formation has been a factor in the company's sales performance since the pandemic; continued weakness could constrain a recovery in demand.
Rising raw-material and fuel costs also raise the question of how much Chewy can pass on to customers. Price increases may test customers' willingness to pay. Second-quarter growth in autoship sales, active customers and market share points to resilient demand, while softness in discretionary products and pressure on product margins remain visible in the company's results.