Chewy Posts Strong 2025, Guides Higher on AI

(CHWY) reported robust financial performance for Q4 and full-year 2025, with net sales exceeding $12.6 billion, an 8.3% year-over-year increase, driven by strong Autoship customer sales and strategic AI investments, while also providing optimistic 2026 guidance. For the full year 2025, Chewy achieved net sales over $12.6 billion and a gross margin of 29.8%, representing a 60 basis point expansion year-over-year.

The company generated record free cash flow of $562.4 million and ended the year debt-free with approximately $879 million in cash and equivalents. Autoship customer sales reached $10.5 billion, accounting for 83.3% of total net sales, underscoring a strong recurring revenue model.

Chewy is leveraging AI across operations, expecting low tens of millions in benefits for 2026 and over $50 million in annualized savings by 2027, as stated by CEO Sumit Singh. For 2026, Chewy forecasts net sales between $13.6 billion and $13.75 billion, an 8% to 9% growth, and an Adjusted EBITDA margin of 6.6% to 6.8%.

Challenges include anticipated low single-digit industry growth, no significant rebound in pet household formation, and moderate gross margin expansion in 2026. The SmartEquine acquisition is expected to contribute $80 million in net sales for 2026, with future potential for a few hundred million dollars, according to Sumit Singh.