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Chewy: Chewy's Q3 Earnings: A Strong Beat on Multiple Fronts

Chewy's Q3 net sales grew 8.3% year-over-year to $3.12 billion, surpassing the high end of guidance, driven by unit volume growth. The company's gross margin expanded 50 basis points to 29.8%, fueled by sponsored ad growth, a strong Autoship baseline, and favorable category mix. Adjusted EBITDA reached $181 million, up 30% year-over-year, with adjusted EBITDA margin expanding 100 basis points to 5.8%. Earnings per share (EPS) came in at $0.32, significantly beating estimates of $0.1248. The strong financial performance was accompanied by a 5% year-over-year growth in active customers to 21.2 million, with improvements across the active customer funnel. The company generated $176 million of free cash flow and repurchased $55 million of shares.

CHWY

USD 32.46

0.59%

A-Score: 4.7/10

Publication date: December 10, 2025

Full Report

Author: Analystock.ai

📋 Highlights
  • Net Sales Growth: Q3 net sales rose 8.3% to $3.12B, exceeding guidance, driven by unit volume growth.
  • Adjusted EBITDA Expansion: Adjusted EBITDA surged 30% to $181M, with margin expanding 100 bps to 5.8%.
  • Active Customer Growth: Active customers reached 21.2M (+5% YoY), with 18% YoY growth in net adds and lower churn.
  • Gross Margin Improvement: Gross margin expanded 50 bps to 29.8%, fueled by sponsored ads, Autoship, and category mix.
  • Chewy+ Program Success: 80% of members are paid, driving higher order frequency and category engagement, with 40% of CVC customers net new.

Operational Highlights

The company's operational performance was marked by strong execution across various fronts. The Chewy+ paid membership program is outperforming expectations, driving higher order frequency and category engagement. The company opened two additional Chewy Vet Care practices, bringing the total to 14 locations across five states. Chewy's health offerings, including Chewy Vet Care and the recently acquired Smart Equine, are expected to enhance the company's premium health and nutraceutical assortment.

Guidance and Outlook

For full-year 2025, Chewy expects net sales growth of approximately 8%, with adjusted EBITDA margin expansion to 5.6-5.7%. The company is on track to achieve its long-term objective of 10% adjusted EBITDA margin. Looking ahead to 2026, the company expects durability in net adds to continue increasing, with an implied growth rate of high single digits in Q4, reflecting a tougher comparison to a strong Q4 last year. Analysts estimate next year's revenue growth at 6.7%.

Valuation

Chewy's current valuation metrics indicate a premium valuation. The stock trades at a P/E Ratio of 65.14, P/S Ratio of 1.07, and EV/EBITDA of 39.37. The company's Return on Equity (ROE) stands at 55.17%, and Return on Invested Capital (ROIC) is 18.45%. The Free Cash Flow Yield is 3.44%, indicating a reasonable valuation based on cash flow generation. These metrics suggest that the market has priced in a significant growth premium, and the company's ability to deliver on its growth expectations will be crucial in justifying the current valuation.

Program Synergies

The interaction between Chewy+ and Autoship customers is complex, with Chewy+ affording targeted and segmented marketing. The company aims to increase NSPAC and basket consolidation with these programs. The Chewy+ program has seen strong conversion and retention, with 80% of members now paid, and is no longer dilutive. The company is running ahead of plan in 4Q, with strong execution during Black Friday and Cyber Monday.

Chewy's A-Score