Chewy (NYSE:CHWY) reported second-quarter fiscal 2026 net sales of $3.33 billion, up 7.3% from a year earlier and at the high end of its guidance range, as active customer growth, higher spending per customer and Autoship sales supported results amid continued pressure on pet-sector discretionary spending.
Chief Executive Officer Sumit Singh said the broader pet market did not experience a meaningful consumer recovery during the quarter, though conditions also did not worsen from the trends seen at the end of the first quarter. He said Chewy continued to outperform the broader pet category by roughly two to three times and gain market share.
Autoship customer sales climbed 9.3% to $2.8 billion and represented 84.6% of total net sales. Singh said the recurring-sales model remains a key source of revenue durability, while Chewy continued to add customers, improve retention, reactivate lapsed customers and expand engagement across its ecosystem.
Consumer Spending Remains Selective
Chewy said pressure on discretionary purchases and premiumization continued during the quarter, affecting both Consumables and Hardgoods. Singh said consumers remained focused on core food, medications and health-oriented products, while treats and toppers were more exposed to discretionary spending pressures.
Chief Financial Officer Chris Deppe said treats sales growth slowed more sharply than sales of core food. Still, he said industry data indicated that the broader Consumables market was roughly flat year over year, while Chewy delivered mid-single-digit growth in the category. Hardgoods sales increased in the mid-teens, supported by assortment and merchandising improvements, according to the company.
Singh said pet-industry conditions reflected both consumer pressures and softness in dog adoption and household formation. He added that Chewy does not expect pricing to provide a material benefit to sales growth this year, though the company also does not anticipate broad category deflation or irrational promotional activity.
Profitability Exceeds Expectations, With Timing Benefits
Adjusted EBITDA totaled $227 million, representing a 6.8% margin and exceeding Chewy’s prior guidance of 6.3% to 6.4%. Adjusted net income was $149 million, or $0.36 per diluted share.
Deppe said essentially all of the outperformance relative to the company’s margin expectations came from timing-related and discrete benefits. About $10 million of the benefit came primarily from tariff refunds received earlier than anticipated and rebates that shifted from the second half into the second quarter. The quarter also included more than $5 million of benefits from gift-card breakage, inventory adjustments and vendor-funded merchandising activity.
Gross margin was 30.4%, flat year over year and up 30 basis points from the first quarter. Deppe said the company expects gross margin to decline modestly sequentially in the third quarter, in line with seasonal patterns, although it expects gross margin to expand for the full year at a more moderate pace than in fiscal 2025.
Non-GAAP selling, general and administrative expense was 18.4% of sales, compared with 19.1% a year earlier. The company cited improved fulfillment-center utilization, lower variable costs to serve, headcount discipline, automation and AI-enabled productivity as drivers of 70 basis points of year-over-year SG&A leverage.
Health, Acquisitions and AI Remain Strategic Priorities
Chewy said its health businesses continued to expand. The Chewy Vet Care clinic portfolio delivered triple-digit revenue growth, while the company said Modern Animal performed ahead of its expectations following its acquisition. Chewy completed the $400 million Modern Animal acquisition during the quarter.
Singh said Modern Animal and Chewy Vet Care offer complementary capabilities, unit economics and telehealth offerings. SmartPak, Chewy’s equine, farm and exotics business, also performed ahead of expectations. The business recorded its seventh consecutive quarter of mid-double-digit year-over-year sales growth, according to Singh.
The company also highlighted progress in deploying artificial intelligence across customer service, pharmacy and veterinary operations. Chewy launched its AI-powered customer assistant, Kai, to a select group of mobile-app users. Singh said about 30% of chats were resolved through self-service for common requests involving orders, returns, Autoship and account management.
Chewy also began using AI tools for customer-care agents and pharmacy workflows, while its Callie voice capability is supporting appointment confirmations, scheduling and follow-ups at select Chewy Vet Care locations. The company expects AI initiatives to generate low tens of millions of dollars in cost savings during fiscal 2026 and about $50 million on an annualized basis in fiscal 2027.
Singh cautioned that AI savings should not be viewed as a standalone amount that will flow directly to the bottom line, as the company expects the efficiencies to offset ordinary cost pressures and potentially fund growth investments.
Guidance Raised and Narrowed
Chewy raised and narrowed its fiscal 2026 outlook, citing more stable consumer trends, continued market-share gains and better-than-expected contributions from SmartPak and Modern Animal. The company now expects full-year net sales of $13.46 billion to $13.57 billion, representing growth of 6.8% to 7.7%.
Organic net sales are expected to grow 5.5% to 6.3% for the year. The company said the midpoint of the forecast does not assume a meaningful improvement in consumer conditions.
- Full-year adjusted EBITDA margin is expected to be 6.7% to 6.8%, compared with prior guidance of 6.6% to 6.8%.
- At the midpoint, the outlook implies adjusted EBITDA of $912 million and more than 100 basis points of year-over-year margin expansion.
- Third-quarter net sales are projected at $3.323 billion to $3.358 billion, with adjusted EBITDA margin of 6.6% to 6.7% and adjusted diluted earnings per share of about $0.39.
Chewy generated $90 million in free cash flow during the quarter and ended the period with $612 million in cash equivalents and marketable securities, as well as more than $1 billion in total available liquidity. The company issued $600 million in term loans and repurchased $200 million of stock, buying back 9.9 million shares during the quarter.
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.
