Chewy Earnings Lift Outlook Despite EPS Miss
Chewy earnings showed margin expansion, record free cash flow and raised FY2026 guidance, shifting trader focus to buyback-led flows and profit growth.
KEY TAKEAWAYS
- Record free cash flow of $562 million and adjusted EBITDA rose 26%.
- FY2026 guidance $13.6-$13.8 billion; midpoint implies about 100 basis points margin expansion.
- Adjusted EPS $0.27 missed consensus by 3.6%.
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Chewy, Inc. (NYSE: CHWY) reported March 25, 2026 earnings showing expanding margins and record free cash flow, prompting the company to raise its FY2026 outlook. Management attributed the upgrade to steady customer engagement and plans to increase share repurchases.
Quarter and Full-Year Results
Chewy released fiscal fourth-quarter and full-year 2025 results on March 25, 2026. Full-year net sales reached $12.6 billion, up 6.2% year over year and 8.3% on a normalized 52-week basis. Gross margin expanded to 29.8%, while adjusted EBITDA rose 26% to $719 million, representing a 5.7% margin. Free cash flow hit a record $562 million. The company ended the year with 21 million active customers, with Autoship subscriptions accounting for about 83% of sales. Cash on hand exceeded $860 million.
For the 13-week fourth quarter, net sales totaled $3.3 billion, up 0.5% year over year and 8.1% on a normalized basis, slightly surpassing consensus estimates. Adjusted diluted EPS was $0.27, down from $0.28 a year earlier and about 3.6% below consensus.
FY2026 Guidance and Assumptions
Chewy set FY2026 net sales guidance between $13.6 billion and $13.8 billion, with an adjusted EBITDA margin of 6.6% to 6.8%. This implies roughly 100 basis points of margin expansion at the midpoint compared with FY2025. The outlook assumes low single-digit customer growth, no price inflation, and increased share repurchases relative to the prior year.
Management emphasized a resilient pet market and ongoing profitability improvements. Record cash flow and rising adjusted EBITDA supported the decision to raise guidance and accelerate capital returns, which the company expects will balance reinvestment and shareholder value in FY2026.
The company said in its press release, "We exited 2025 from a position of real strength."
