Chewy Stock Jumps 13% on Strong Sales and AI Outlook

Shares of online pet retailer Chewy surged over 13% on Wednesday following the release of its fiscal Q4 2025 results and an optimistic forecast. The company reported adjusted net sales of $3.26 billion, an 8.1% increase compared to the same period last year.

Beyond top-line growth, Chewy demonstrated strength in its customer base. It added 813,000 active customers over the year, bringing its total to 21.3 million. More importantly, existing customers are spending more, with net sales per active customer rising to $591, continuing a multi-year upward trend.

The company's profitability metrics also showed significant improvement. Its gross margin expanded to 29.4%, up from 28.5% a year ago, and its EBITDA margin jumped to 5% from 3.8%. This operational scaling translated into a powerful 48% surge in free cash flow, which reached $232 million.

Looking forward, management provided a bullish outlook for fiscal 2026. They forecast net sales to grow roughly 9% to about $13.7 billion and project their adjusted EBITDA margin to rise to approximately 6.7%. A key driver of this margin expansion is expected to be artificial intelligence (AI).

For investors, Chewy's report signals a company that is successfully navigating a competitive market by growing its loyal customer base and extracting more value from each one. The consistent increase in sales per customer shows strong brand loyalty and pricing power, which are critical for long-term success in e-commerce.

The expanding profit margins are perhaps the most compelling part of the story. They demonstrate that Chewy's business model is becoming more efficient as it scales, moving beyond just top-line growth to deliver healthier bottom-line profits. The surge in free cash flow provides the company with more financial flexibility for investments, buybacks, or weathering economic downturns.

Management's forward guidance, particularly the emphasis on AI, provides a tangible path for continued profit growth. Projecting tens of millions in AI-related cost efficiencies this year and up to $50 million annually suggests these aren't vague promises but quantified operational targets. This use of AI to boost productivity could be a major differentiator.

Finally, the stock's sharp positive reaction validates that the market sees this as a high-quality earnings beat. It rebuilds investor confidence after periods of volatility, suggesting Chewy's strategy of focusing on profitability and technological efficiency is resonating on Wall Street.