Chewy (CHWY) Q4 & FY2025 Earnings: Record $562M Free Cash Flow Drives 13% Stock Rally
Chewy delivered record FY2025 free cash flow of $562M, 21.3M active customers, and expanding EBITDA margins. The stock surged 13% on strong Q1 FY2026 guidance and record autoship penetration of 84%.
Key points
- Chewy delivered record FY2025 free cash flow of $562M, 21.3M active customers, and expanding EBITDA margins. The stock surged 13% on strong Q1 FY2026 guidance and record autoship penetration of 84%.
Chewy ($CHWY) closed fiscal year 2025 with its strongest financial performance yet, delivering record free cash flow of $562 million, growing its active customer base to 21.3 million, and achieving an adjusted EBITDA margin of 5.7% — all above the high end of prior guidance. The stock surged over 13% on March 25 as the market recognized what the bear case had been discounting: Chewy’s FCF machine is real, expanding, and accelerating.
The quarter that mattered most wasn’t the Q4 headline ($3.26B revenue, flat year-over-year on a reported basis due to a 53rd-week comparison) — it was the Q1 FY2026 guide of $3.33B–$3.36B that confirmed 7–8% normalized growth is sustainable, and the 6.6–6.8% EBITDA margin guidance for FY2026 showing another ~100 basis points of margin expansion ahead.
Results at a Glance
| Metric | Q4 FY2025 | Q4 FY2024 | FY2025 | FY2024 |
|---|---|---|---|---|
| Net Sales | $3.26B | $3.24B | $12.60B | $11.87B |
| Net Sales Growth (normalized) | +8.1% | — | +8.3% | — |
| Gross Margin | 29.4% | 29.2% | 29.8% | 29.2% |
| Adjusted EBITDA | $162.3M | $124.4M | $719.2M | $570.6M |
| Adjusted EBITDA Margin | 5.0% | 3.8% | 5.7% | 4.8% |
| Net Income | $39.2M | $22.8M | $222.8M | $38.7M |
| Adj. Diluted EPS | $0.27 | $0.16 | $0.97 | $0.58 |
| Free Cash Flow | $232.1M | $156.7M | $562.4M | $452.4M |
| Active Customers | — | — | 21.327M | 20.506M |
| Autoship % of Net Sales | 84.0% | 80.6% | 83.3% | 79.5% |
Revenue: Steady Compounder
Chewy has grown from $7.1 billion in FY2020 to $12.6 billion in FY2025 — an 77% cumulative gain over five years. Reported Q4 revenue was essentially flat (+0.5%) due to a difficult prior-year comparison that included a 14th fiscal week. On an apples-to-apples 13-week basis, Q4 revenue grew 8.1%, consistent with the 8.3% normalized full-year growth. The FY2026 guide ($13.6B–$13.75B) implies continued 8–9% normalized revenue growth.
Annual Net Sales (in $B) — FY2020 to FY2026E
FY2025 confirmed actual. FY2026E is midpoint of $13.60B–$13.75B guidance. Fiscal year ends ~February.
The revenue growth story is one of market-share stability in a maturing industry. U.S. pet care spending grows mid-single digits annually; Chewy is growing 8% normalized — meaning it is taking share from Amazon and Walmart, not ceding it. The autoship flywheel is the mechanism: once a customer joins autoship, churn drops dramatically and basket size expands over time.
Free Cash Flow: The Plot Twist
The most underappreciated aspect of Chewy’s transformation is the FCF trajectory. This was a near-zero FCF business through FY2021. The inflection began in FY2022 and has compounded every year since.
Free Cash Flow (in $M) — FY2020 to FY2025
FY2025 is record FCF, up 24% YoY from $452M. Q4 FY2025 FCF alone was $232M (+48% YoY).
FY2025 FCF of $562M exceeded the prior year’s record ($452M) by 24%. Q4 alone generated $232M in FCF — up 48% year-over-year — driven by improved working capital management and higher earnings quality. At the current market cap of ~$11.1 billion, Chewy trades at roughly 20x trailing FCF — a reasonable price for a business generating FCF at this growth rate.
Autoship: The Subscription Economy Hiding in Plain Sight
The defining metric of Chewy’s model is autoship penetration. At 84.0% of Q4 net sales and 83.3% of FY2025 net sales, autoship has crossed a threshold where the business is functionally predictable at scale.
Autoship as % of Net Sales — FY2021 to FY2025
Autoship customer sales hit a record 84.0% in Q4 FY2025 and 83.3% for the full year. Autoship sales grew 14% normalized in FY2025, outpacing total revenue growth.
Autoship isn’t just a convenience feature — it’s a moat. Autoship customers have materially higher retention, larger basket sizes, and lower customer acquisition cost amortization. The flywheel works: customers who enroll buy more frequently, spend more per visit, and churn less, which drives NSPAC (net sales per active customer) higher over time. FY2025 NSPAC reached $591 — up from $567 in FY2024 (+4.2%) and $545 in FY2023.
Customer Metrics: Growth Resumed
| Metric | FY2025 | FY2024 | FY2023 | FY2022 |
|---|---|---|---|---|
| Active Customers | 21.33M | 20.51M | 20.38M | 20.65M |
| YoY Growth | +4.0% | +0.6% | −1.3% | +7.4% |
| NSPAC | $591 | $567 | $545 | $492 |
| NSPAC Growth | +4.2% | +4.0% | +10.8% | +10.8% |
| Autoship % | 83.3% | 79.5% | 76.6% | 73.4% |
The active customer recovery — from a trough after post-pandemic attrition — is now accelerating. At 21.33 million active customers growing 4% annually, with NSPAC expanding 4%, Chewy’s revenue growth is structurally intact. No heroic assumptions needed: 4% customer growth × 4% NSPAC growth ≈ 8% revenue growth, matching the guidance exactly.
Strategic Vectors: AI, Private Label, and SmartEquine
AI-Driven Efficiency: CEO Sumit Singh highlighted AI as a meaningful driver going forward, expecting AI-driven efficiency gains to deliver “low tens of millions of dollars in benefit in 2026,” scaling to approximately $50 million or more in annualized savings by 2027. This is incremental FCF that doesn’t require revenue growth — pure operating leverage.
Chewy Made (Private Label): The company is expanding its “Chewy Made” private-label brand strategy, targeting mid-teens penetration of net sales. Private label carries higher gross margins than branded products, so mix shift toward Chewy Made is a structural gross margin tailwind that compounds over multiple years.
SmartEquine (SmartPak acquisition): The equine supplement and tack business now operates under the SmartEquine brand. Management expects SmartEquine to generate 35%+ gross margins, representing a multi-hundred-million-dollar incremental opportunity at above-average profitability.
Chewy Vet Care: The physical veterinary clinic rollout integrates vet services with prescription food and medication fulfillment — a segment Amazon and Walmart have not cracked. Vet care customers have the highest NSPAC and lowest churn in the ecosystem.
FY2026 Guidance
| Metric | FY2026 Guidance | FY2025 Actual | Change |
|---|---|---|---|
| Net Sales | $13.60B–$13.75B | $12.60B | +8%–+9% |
| Adj. EBITDA Margin | 6.6%–6.8% | 5.7% | +90–110 bps |
| Q1 Net Sales | $3.33B–$3.36B | $3.26B (13-wk) | +7%–+8% |
| Q1 Adj. EPS | $0.40–$0.45 | $0.27 | +48%–+67% |
The EBITDA margin expansion guidance of ~100 bps is the most compelling element. If Chewy reaches 6.7% EBITDA margins on $13.7B of revenue, that’s approximately $919M in EBITDA — up 28% from FY2025. On a 60–70% FCF conversion, that implies FY2026 FCF of $550–$640M, roughly in line with FY2025 or slightly above.
The Q1 EPS guide of $0.40–$0.45 represents 48–67% growth — exceptional even relative to the strong FY2025 baseline.
Valuation
| Metric | Value |
|---|---|
| Share Price (March 25, 2026) | $26.62 |
| 52-Week Range | $22.74 – $48.62 |
| Market Cap | ~$11.1B |
| Enterprise Value | ~$10.7B |
| Revenue (FY2025) | $12.60B |
| P/S (FY2025) | 0.88x |
| P/S (FY2026E) | 0.81x |
| Adj. EBITDA (FY2025) | $719M |
| EV/EBITDA (FY2025) | 14.9x |
| EV/EBITDA (FY2026E) | ~11.6x |
| FCF (FY2025) | $562M |
| P/FCF (FY2025) | 19.7x |
| EV/FCF (FY2025) | 19.0x |
| Forward P/E | ~29x |
| Avg. Analyst Price Target | $43.82 |
| Implied Upside to Target | ~65% |
At under 1x forward revenue and ~19x trailing FCF, Chewy is priced for a business with limited growth and uncertain profitability. The results make clear that neither is the case. The street’s median price target of $43.82 implies ~65% upside from today’s price.
The bull case: At 0.88x trailing revenue, Chewy is priced like a melting retailer, not a subscription-driven pet e-commerce platform with 8% normalized growth, record FCF, and 100 bps of annual margin expansion ahead. If Chewy reaches $700M in FCF by FY2027 (achievable at 6.8% EBITDA margins on $14.5B revenue), the stock at 25x FCF would be worth ~$42 — matching the analyst consensus target. AI-driven cost savings, private label mix expansion, and Chewy Vet Care scaling are all incremental upside optionality not priced in.
The bear case: Chewy is valued cheaply for a reason: U.S. pet spending is normalizing after a pandemic-era boom, Amazon is an existential competitor that can absorb losses in pet products indefinitely, and the SmartEquine acquisition adds integration complexity. NSPAC growth of 4% is strong but decelerating from the 10%+ pace of FY2022–FY2023. If active customer growth stalls and NSPAC growth tapers to 2–3%, the revenue model underwhelms relative to the current market cap. The stock’s 52-week high of $48.62 suggests the multiple isn’t uniformly bearish — but the 45% pullback from that high in the context of positive fundamentals raises questions about what the market is pricing.
What to watch next quarter (Q1 FY2026): Did active customer growth hold above 4%? Did autoship penetration tick above 84%? Any commentary on tariff impacts on pet food import costs (particularly from China-sourced ingredients in Chewy Made products) will be the risk factor to monitor.
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