E-commerce pet food and supplies retailer Chewy (NYSE: CHWY) reported Q2 CY2025 results topping the market’s revenue expectations, with sales up 8.6% year on year to $3.10 billion. Its non-GAAP profit of $0.33 per share was in line with analysts’ consensus estimates.
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Chewy (CHWY) Q2 CY2025 Highlights:
- Revenue: $3.10 billion vs analyst estimates of $3.08 billion (8.6% year-on-year growth, 0.8% beat)
- Adjusted EPS: $0.33 vs analyst estimates of $0.33 (in line)
- Adjusted EBITDA: $183.3 million vs analyst estimates of $182.1 million (5.9% margin, 0.7% beat)
- Operating Margin: 2.2%, up from 1.1% in the same quarter last year
- Free Cash Flow was -$48.55 million, down from $48.7 million in the previous quarter
- Market Capitalization: $17.38 billion
Company Overview
Founded by Ryan Cohen, who later became known for his involvement in GameStop, Chewy (NYSE: CHWY) is an online retailer specializing in pet food, supplies, and healthcare services.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last three years, Chewy grew its sales at a mediocre 9% compounded annual growth rate. This was below our standard for the consumer internet sector and is a poor baseline for our analysis.
This quarter, Chewy reported year-on-year revenue growth of 8.6%, and its $3.10 billion of revenue exceeded Wall Street’s estimates by 0.8%.
Looking ahead, sell-side analysts expect revenue to grow 4.9% over the next 12 months, a deceleration versus the last three years. This projection is underwhelming and indicates its products and services will face some demand challenges.
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Cash Is King
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Chewy has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.4%, subpar for a consumer internet business.
Taking a step back, an encouraging sign is that Chewy’s margin expanded by 3.6 percentage points over the last few years. We have no doubt shareholders would like to continue seeing its cash conversion rise as it gives the company more optionality.
Chewy burned through $48.55 million of cash in Q2, equivalent to a negative 1.6% margin. The company’s cash flow turned negative after being positive in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.
Key Takeaways from Chewy’s Q2 Results
Revenue, adjusted EBITDA, and EPS were all roughly in line. Investors were likely hoping for more, and shares traded down 7.6% to $38.90 immediately following the results.
Should you buy the stock or not? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
