Chewy, Inc. (NYSE:CHWY) delivered stronger-than-expected results for the third quarter of fiscal 2025, but the stock reversed early gains. Shares initially jumped 3.9% in premarket trading before sliding more than 2% ahead of the opening bell.
The pet-retail specialist reported adjusted earnings of $0.32 per share — more than double the consensus forecast of $0.13. Revenue came in at $3.12 billion, slightly above analysts’ expectations of $3.1 billion and up 8.3% year over year.
“Chewy continues to outperform the pet category and expand market share, with profits once again growing faster than sales,” said Sumit Singh, Chief Executive Officer of Chewy. “Our Q3 results build on the momentum from the first half of fiscal 2025 and highlight both the structural resilience of our model and the execution quality of every team member at Chewy.”
Gross margin rose to 29.8%, up 50 basis points from the prior year. Adjusted EBITDA climbed to $180.9 million compared with $138.2 million a year earlier, boosting the adjusted EBITDA margin by 100 basis points to 5.8%.
Net income reached $59.2 million, representing a net margin of 1.9%, an improvement of 180 basis points year over year. Adjusted net income increased sharply to $135.7 million, up $50.7 million from the same period last year.
Analysts at William Blair highlighted the growth in customer activity and the company’s stronger-than-expected profitability metrics following the release. They noted the quarter showed “a relatively clean beat, with notable acceleration in active customers and healthier-than-expected margin components across the P&L.”
They continued: “Refocusing back to active customers, there is a notable inflection here, back to a run-rate annual add of 1 million. We continue to see upside to this figure looking into 2026, but for now take comfort in the better-than-expected results and improvement on the second quarter, whereas the trend line and consensus had expected further deceleration.”
William Blair analysts also pointed to ongoing earnings momentum, adding: “Adjusted EBITDA margin growth has shown steady improvement through the year, and we believe the company enters next year with only tailwinds as its loyalty program ramps up. The concern here will lie most likely in a softer guide to close the year, but we believe current period momentum should give comfort that the company can continue to meet or exceed numbers.”
At a free-cash-flow run rate of $1 billion, the firm argued that Chewy shares are “more appropriately valued closer to $20 billion in total enterprise value, or roughly $50 per share.”