Chewy (CHWY) Beats on Profit Even as Pet Spending Stays Soft

On September 9, 2026, Chewy, Inc. (NYSE:CHWY) reported fiscal second-quarter net sales of $3.33 billion, up 7.3% year over year, and adjusted earnings per share of $0.36, nearly double the roughly $0.18 analysts had expected, prompting the company to raise its full-year revenue and profitability outlook. CEO Sumit Singh said the broader pet market did not meaningfully recover during the quarter but also did not deteriorate further, with Chewy continuing to outperform the category by two to three times through share gains across its established and newer businesses.

Bull Case

Chewy, Inc. (NYSE:CHWY)’s recurring revenue base is solid. It gives the company greater visibility into future sales. Autoship sales jumped by 9.3% year over year to $2.82 billion and represented 84.6% of total net sales. The growing contribution from subscription-based purchases gives Chewy a more predictable revenue stream and reduces its exposure to fluctuations in discretionary pet spending.

Chewy is also building growth engines beyond its core retail business. Chewy Health, which includes veterinary care and pharmacy services, delivered triple-digit revenue growth. Specialty categories such as equine and exotics recorded a seventh consecutive quarter of mid-double-digit growth. These businesses give Chewy additional opportunities to increase customer spending and diversify its sources of revenue as the overall pet market matures.

Chewy is combining customer growth with stronger profitability and shareholder returns. The firm added 208,000 net active customers during the quarter. It takes its customer base to 21.7 million while returning $200 million to shareholders through share repurchases. Management also noted structural SG&A leverage, automation, and AI-driven cost reductions as contributors to margin expansion. It shows that Chewy can improve earnings while investing in customer acquisition and growth.

Bear Case

Part of Chewy, Inc. (NYSE:CHWY)’s profitability improvement came from benefits that may not recur. CFO Chris Deppe said the quarter’s profitability upside included about $10 million from timing benefits and more than $5 million from discrete benefits. Those items boosted the latest results but do not provide a recurring earnings contribution. It means investors may need to lower their expectations for the pace of margin expansion in future quarters.

Chewy’s core organic growth has slowed from the previous quarter. Revenue excluding recent acquisitions increased 5.7%, compared with 7.7% organic growth in the first quarter. The deceleration shows that Chewy still needs to gain market share and expand newer categories to maintain growth momentum, particularly as management does not expect a real recovery in consumer spending to support its 2026 outlook.

The company cannot rely on pricing or a consumer recovery to drive its 2026 results. Management said pricing will provide no net benefit in fiscal 2026 and based its guidance on continued share gains and cost discipline rather than an improvement in consumer demand. That leaves Chewy with less room for execution mistakes because weaker customer growth or higher operating costs could quickly pressure the company’s earnings trajectory.

Hedge Fund Sentiment

Chewy, Inc. (NYSE:CHWY)’s hedge fund count fell to 44 in the second quarter from 53 in the first, with position value declining more sharply to $684.8 million from $1.57 billion, according to Insider Monkey’s database. Petco, a more direct pet-specialty retail competitor, held steady at 22 hedge fund holders across both quarters, with position value rising modestly to $76.7 million from $72.0 million.

Conclusion

Chewy, Inc. (NYSE:CHWY) has a solid recurring revenue base. It is also expanding into newer areas like Chewy Health and specialty pet supplies. Customer growth, automation, and structural SG&A leverage give the company room to boost profits and pay back shareholders. But one-time gains drove some of the recent profit surprise, and sales growth slowed down from last quarter. Chewy achieved this slower growth without help from price increases or broader gains in consumer spending. Investors now need Chewy to hold onto its new customers and market share over time. Chewy must also convert its subscription model and cost savings into steady profit and cash flow growth.

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