Chewy posted a clean set of second-quarter results, combining top-line growth, recurring-order momentum and a wider adjusted EBITDA margin. Revenue reached $3.33 billion, adjusted EBITDA margin landed at 6.8%, and total active customers rose 3.8% year over year. Despite those outcomes, the stock declined about 10.16% to $20.91 as of Sep 9, 12:22 PM EDT, reflecting investor demand for clearer evidence that margin improvement is sustainable.
Quarterly highlights
- Revenue was $3.33 billion, up 7.3% year over year and at the top end of the companys guidance range.
- Adjusted EPS was $0.36, in line with consensus expectations.
- Autoship sales increased 9.3% to $2.8 billion, representing 84.6% of total revenue.
- NSPAC rose 1.9% to $602, indicating higher spending per active customer.
- Gross margin was reported at 30.4%, with automation and leaner SG&A contributing to EBITDA expansion.
- SG&A leverage improved by 70 basis points during the quarter.
- The company repurchased $200 million of its shares during the period.
These outcomes reflect more than a simple revenue beat: Chewy concurrently exhibited customer growth, a strong recurring-order engine in Autoship, and disciplined cost control that supported adjusted EBITDA expansion.
Key questions the quarter addressed
- Can the company still add customers? The company added 208,000 customers in the quarter, with total active customers up 3.8% year over year, which demonstrates ongoing net additions but at measured levels.
- Is Autoship still driving the business? Yes. Autoship growth outpaced overall revenue growth, underscoring its role as the core recurring-demand driver and a retention mechanism.
- Are margins structurally improving? There is improving evidence: gross margin of 30.4%, automation gains and SG&A control contributed to a 6.8% adjusted EBITDA margin. Management has shown cost discipline, but investors will want to see confirmation that the margin runway is durable rather than driven by timing items.
- Can growth extend beyond consumables? Hardgoods grew at a mid-teens rate in the quarter, and pet health, specialty products, plus fresh and frozen offerings showed momentum, suggesting diversification beyond core consumables.
- Are recent acquisitions accretive? Integration of Modern Animal is reportedly ahead of expectations, and SmartPak has added customers while reinforcing the health and specialty ecosystem. The remaining question is whether these assets will deliver attractive returns at scale.
Why the stock sold off
Market reaction focused on the visibility and quality of future growth rather than on the reported quarter itself. Managements guidance for the third quarter calls for revenue of $3.323 billion to $3.358 billion and an adjusted EBITDA margin of 6.6% to 6.7%. For the full year, the company set revenue guidance in a $13.46 billion to $13.57 billion range and raised EBITDA margin guidance to 6.7% to 6.8%.
Investors noted that Q2 benefited from timing-related gross-margin items, creating a credibility test for sustaining the reported 6.8% adjusted EBITDA margin. The short-term guidance, combined with lingering questions about gross-margin quality and the sustainability of margin drivers, appears to have dampened confidence despite the quarters metrics. The company also faces a challenging valuation context after a notable decline in its stock price, and at least one analyst reduced a target price from $40 to $32 while adjusting EBITDA estimates.
Near-term catalysts to watch
- Q3 earnings - scheduled for Dec 3, 2026, at market open. Consensus expects EPS of $0.2071 and revenue of $3.33 billion. The central question is whether revenue growth stays near 7% without margin erosion.
- Gross-margin quality. Investors will try to separate recurring structural gains from timing items that boosted Q2 margins. Sustained EBITDA above 6.6% would bolster confidence in the recovery thesis.
- Modern Animal integration. Observers will monitor customer additions, cross-selling progress, clinic economics and any integration costs as measures of whether the acquisition is creating strategic value.
- Customer growth and Autoship. Continued quarterly net additions above 200,000 would indicate demand is broadening, not merely deeper among the existing base.
- Chewy+ and the health ecosystem. Progress on membership adoption, veterinary-care penetration and telehealth engagement could elevate frequency of customer interactions and create higher-value relationships.
Bull and bear frameworks
- Bull case - Recurring Autoship demand, automation, share buybacks and expansion of health services drive sustained margin improvement.
- Bear case - The Q2 margin upside is temporary, customer acquisition costs rise, and acquisitions introduce operational complexity faster than profitable scale is achieved.
The quarter largely answered whether Chewy can execute against its operational plan; the next set of results and progress on integration and margin quality will determine whether that execution is repeatable and durable.