Chewy Raises 2026 Sales Outlook After Second-Quarter Growth

Key Facts

Chewy raised its fiscal 2026 sales forecast to a range of $13.46 billion to $13.57 billion after second-quarter revenue grew 7.3% to $3.33 billion. The company also lifted the low end of its adjusted earnings before interest, taxes, depreciation and amortization margin forecast to 6.7%, retaining the 6.8% upper end. The quarter ended August 2, 2026, and the results were released September 9, 2026. The revision combines a higher sales forecast with a firmer minimum profit margin, giving investors separate measures of demand and earnings. Assessing its strength requires distinguishing improvements that can continue from benefits confined to the reported quarter.

Chewy's previous fiscal 2026 sales forecast ranged from $13.40 billion to $13.55 billion, according to its first-quarter earnings presentation. Both ends of the new range rose, so the change was more than a narrowing of guidance. The company now projects annual sales growth of 6.8% to 7.7%, or 5.5% to 6.3% excluding acquisitions. Its prior adjusted EBITDA margin range was 6.6% to 6.8%, leaving the improvement concentrated at the lower end. That raises the minimum margin management expects for the year while leaving the upper end of its forecast intact.

Sales to customers participating in Chewy's Autoship program reached about $2.82 billion in the second quarter, up 9.3% from a year earlier and equal to 84.6% of total sales. Their share was 83.0% a year ago, showing that these customers accounted for more of the business. The measure does not guarantee every future purchase; it records sales to participating customers during the reported period. Repeat purchasing can nevertheless make revenue easier to forecast than isolated orders, which explains investor interest in the trend. Continued growth in this category above the companywide rate would strengthen the case for Chewy reaching its annual sales range.

Chewy ended the second quarter with 21.7 million active customers, an increase of 3.8% from a year earlier. Sales per active customer reached $602, compared with $591 in the corresponding period. Revenue growth therefore reflects both a larger customer base and higher measured sales per customer, rather than customer additions alone. The count includes about 43,000 SmartPak customers but excludes customer additions from the Modern Animal acquisition. Those definitions clarify the reach of the customer measure when comparing periods and help investors read customer growth alongside sales growth excluding acquisitions.

Chewy's second-quarter sales grew 5.7% excluding contributions from SmartPak and Modern Animal, compared with reported growth of 7.3%. The first measure removes the acquired businesses and offers a closer comparison of growth in the existing operation. The difference between the rates also shows that acquisitions contributed to reported revenue growth without specifying each business's separate contribution. Management said the acquired operations were contributing more than assumed in its earlier outlook. Tracking both rates matters: sustained underlying growth supports the demand case, while acquisition performance provides another route to meeting the annual forecast.

Adjusted EBITDA rose to $226.7 million from $183.3 million a year earlier, and its margin widened to 6.8% from 5.9%. Gross margin, however, was unchanged year over year at 30.4%, so better margins on goods sold alone cannot explain the adjusted profit gain. Accounting net income was $80.5 million, while diluted earnings per share were $0.20. Adjusted EBITDA excludes items that remain in accounting net income, meaning the measures answer different questions about profitability. For CHWY holders, durable earnings growth depends on whether Chewy can contain costs while demand continues to expand.

Second-quarter results included about $10 million of benefits related to the timing of tariff refunds and rebates, plus more than $5 million of other discrete items, management said on its earnings call. Management said those benefits accounted for essentially all of the adjusted EBITDA gain over its internal expectations. At the same time, adjusted selling, general and administrative costs fell to 18.4% of sales from 19.1% a year earlier. The company attributed that improvement to better fulfillment-center use, a lower cost to serve orders, disciplined staffing and productivity gains. Separating temporary items from recurring operating savings shows how much of the profit improvement could endure after timing effects disappear.

Chewy management said AI tools were beginning to yield productivity benefits in customer care, pharmacy and veterinary operations, but it did not isolate their contribution to second-quarter margin. The company expects savings from these initiatives in the low tens of millions of dollars during 2026 and about $50 million at an annualized rate in 2027. Those amounts are management forecasts, rather than savings already realized in full. Management said some gains could offset ordinary cost pressures or fund growth investment, so they need not flow entirely into net income. A sustained reduction in the cost of serving orders would provide a clearer financial test of these initiatives than the number of tools launched.

Second-quarter free cash flow was $89.5 million, compared with $105.9 million a year earlier, despite higher adjusted earnings. Cash generated from operations reached $137.4 million, versus $133.9 million in the corresponding period. The differing directions of free cash flow and operating cash show the effect of capital spending on the cash left to the business. That spending was $47.9 million, compared with $28.0 million a year earlier. The distinction matters to investors comparing earnings growth with cash generation because investment can lower free cash flow even while operations grow.

CHWY closed at $18.55 on September 23, 2026, according to EL7 data, after trading between $18.50 and $19.71 that session. It had closed at $19.66 on September 22, 2026, placing the guidance increase in the context of share-price pressure after the results announcement. A bullish investor may see Autoship growth and a lower adjusted expense ratio as signs that earnings can expand despite cautious consumers. A more cautious investor may focus on the timing-related items that helped the quarter. Which reading holds up depends on whether later earnings preserve the operating improvement after those items fade.

Chewy expects fiscal third-quarter 2026 sales of $3.323 billion to $3.358 billion and an adjusted EBITDA margin of 6.6% to 6.7%. The coming results will test whether recurring purchases and a lower cost to serve can offset the disappearance of timing benefits recorded in the second quarter. Management's outlook assumes no meaningful recovery in consumer spending over the rest of the fiscal year, with discretionary purchases still under pressure. Sustained sales growth excluding acquisitions and better operating efficiency would support a reading of the guidance increase as durable improvement. Slower demand or a margin below the stated range would weaken that reading, even if reported sales remained higher.