It has been about a month since the last earnings report for Chewy (CHWY Quick QuoteCHWY - Free Report) . Shares have lost about 5% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Chewy due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important catalysts.

CHWY Q4 Earnings Miss Estimates, Autoship Customer Sales Rise Y/Y

Chewy reported solid fourth-quarter fiscal 2025 results, wherein the top line beat the Zacks Consensus Estimate and the bottom line missed the same. Also, sales increased and earnings declined year over year.

CHWY’s Quarterly Performance: Key Metrics and Insights

Chewy posted adjusted earnings of 27 cents per share, which missed the Zacks Consensus Estimate of 28 cents. The figure decreased 3.6% from the prior-year period. 

The company reported net sales of $3,264.7 million, surpassing the Zacks Consensus Estimate of $3,256 million. The figure increased 0.5% from $3,247.4 million posted in the year-ago period, driven by strong execution, continued market share gains in a stable category environment and consistent performance across both customer growth and spend per customer.

The Autoship subscription program remained a cornerstone of Chewy’s model. Autoship customer sales grew 4.8% to $2.74 billion, outpacing overall net sales growth. The metric represented 84% of total net sales, a record for the company and an increase from 80.6% in the prior-year period. 

The company ended the quarter with 21.3 million active customers, which reflected a 4% increase year over year, supported by continued improvement across customer acquisition, retention and engagement metrics.

Chewy’s net sales per active customer reached $591, reflecting a 2.2% year-over-year increase, driven by improved customer engagement and higher spending per user. 

CHWY’s Margin & Cost Performance

Chewy’s gross profit increased 3.6% year over year to $959.7 million from $926 million. The gross margin expanded 90 basis points (bps) to 29.4% compared with 28.5% in the year-ago quarter, driven by growth in sponsored ads, a favorable mix toward higher-margin categories and a rational promotional environment.

SG&A expenses declined 2.3% year over year to $684.6 million from $700.7 million in the fiscal quarter. As a percentage of net sales, this metric declined 60 basis points year over year to 21%. Advertising and marketing expenses for the fiscal fourth quarter decreased 1% year over year to $232.6 million from $235 million.

The adjusted EBITDA increased 30.4% year over year to $162.3 million from $124.5 million. The adjusted EBITDA margin increased 120 bps year over year to 5%, highlighting strong operating leverage and improved profitability.

CHWY’s Financial Health Snapshot

The company ended the year with approximately $879 million in cash, cash equivalents and marketable securities, maintaining a strong liquidity position of around $1.7 billion while remaining debt-free. Total shareholders’ equity stood at $497.9 million, reflecting a significant improvement from the prior year.

In the fourth quarter, the company generated free cash flow of $232 million. For fiscal 2025, free cash flow reached a record $562.4 million, supported by $691.6 million in net cash provided by operating activities and $129.2 million in capital expenditures.

In fiscal 2025, the company repurchased approximately 6.8 million shares, deploying around $257 million toward share buybacks, reflecting a continued commitment to returning excess cash to shareholders.

What to Expect From CHWY in the Future?

For the first quarter of fiscal 2026, the company expects net sales in the range of $3.33-$3.36 billion, representing approximately 7-8% year-over-year growth. This period is expected to mark the lowest growth point of the year, primarily due to timing and lapping dynamics. Contribution from the SmartEquine acquisition is expected to be broadly consistent on a quarterly basis throughout the year. The company also expects adjusted earnings per share for the first quarter to be in the range of 40- 45 cents.

CHWY’s Fiscal 2026 Guidance

Turning to fiscal 2026 guidance, the company expects net sales between $13.6 billion and $13.75 billion, reflecting approximately 8-9% year-over-year growth. The SmartEquine acquisition is expected to contribute approximately $80 million in net sales during the year. Growth is expected to be driven by a combination of active customer expansion and NSPAC growth, with the outlook assuming no price inflation and low single-digit active customer growth. From a quarterly cadence perspective, net sales growth is expected to build after the first quarter, improving in the second quarter and continuing to strengthen through the third quarter.

From a profitability standpoint, adjusted EBITDA is expected to be between $900 million and more than $930 million, with growth projected to outpace net sales growth by approximately three times. The company anticipates adjusted EBITDA margin in the range of 6.6-6.8% for the full year, representing approximately 100 basis points of expansion at the midpoint. 

The composition of margin expansion is expected to shift in fiscal 2026, with a greater contribution from operating leverage, supported by structural improvements in SG&A and modest leverage in advertising and marketing. Gross margin is expected to expand year over year, albeit at a more moderate pace than in 2025, with quarterly progression more aligned with historical patterns.

SG&A is expected to show leverage and remain broadly consistent as a percentage of net sales throughout the year. Advertising and marketing expenses are expected to follow a similar quarterly progression as observed in fiscal 2025. A sequential moderation in margins is anticipated in the fourth quarter, consistent with typical seasonality and promotional timing.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a upward trend in fresh estimates.

The consensus estimate has shifted 7.73% due to these changes.

VGM Scores

Currently, Chewy has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Chewy has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Chewy belongs to the Zacks Internet - Commerce industry. Another stock from the same industry, Alibaba (BABA Quick QuoteBABA - Free Report) , has gained 5% over the past month. More than a month has passed since the company reported results for the quarter ended December 2025.

Alibaba reported revenues of $40.73 billion in the last reported quarter, representing a year-over-year change of +6.1%. EPS of $1.01 for the same period compares with $2.93 a year ago.

Alibaba is expected to post earnings of $1.22 per share for the current quarter, representing a year-over-year change of -29.5%. Over the last 30 days, the Zacks Consensus Estimate has changed -4.9%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for Alibaba. Also, the stock has a VGM Score of D.