Let's talk about pets, subscriptions, and profits. Chewy Inc. (CHWY) just reported its fourth-quarter numbers, and the story is one of a business that's figured out how to make money in a steady, if not spectacularly growing, market.
The company posted adjusted earnings of 27 cents per share, beating the consensus estimate of 20 cents. Sales came in at $3.265 billion, a slight 0.5% increase year-over-year, but a more respectable 8.1% jump when you adjust for the calendar. Both figures landed within or above management's guidance, which is the kind of predictability investors like to see.
"That performance underscores the durability of the Chewy model and gives us confidence in our ability to deliver continued profitable growth, expanding margins, and strong cash generation in 2026 and beyond," said CEO Sumit Singh. In other words: the engine is running smoothly.
The Autoship Engine Is Purring
The real star of the show is Chewy's Autoship program. Think of it as a subscription for pet food and supplies. Customers sign up, get a discount, and then forget about it while Chewy ships the goods on a regular schedule. It's a beautiful model for recurring revenue.
In the quarter, sales from these Autoship customers hit $2.74 billion, up 4.8% year-over-year. Critically, this recurring revenue stream now represents a whopping 84% of Chewy's total net sales. When most of your business is on autopilot, it provides a lot of stability.
That stability showed up in the margins. Gross margin expanded by 90 basis points to 29.4%. The company's adjusted EBITDA—a measure of core profitability—jumped 30.4% to $162.3 million, with the margin improving by 120 basis points to 5%. Even the customers are spending more: net sales per active customer increased by 2.2% to $591. The total number of active customers grew 4% to 21.33 million. It's a picture of a healthy, slightly more profitable customer base.
The 2026 Roadmap: Profits Over Pedal-to-the-Metal Growth
Now, about the future. Chewy's guidance for 2026 tells an interesting story. For the first quarter, it expects adjusted earnings of 40-45 cents per share, which is well above the consensus estimate of 27 cents. That's the profit expansion talking.
However, the sales outlook tells a slightly different tale. For Q1, Chewy forecasts sales of $3.33 billion-$3.36 billion, which is a bit shy of the $3.393 billion analysts were expecting. For the full fiscal year 2026, the company sees sales in the range of $13.60 billion to $13.75 billion, compared to a consensus of about $13.72 billion. So, it's essentially meeting expectations, not blowing them away.
The real focus is on the bottom line. Chewy expects its adjusted EBITDA margin for 2026 to land between 6.6% and 6.8%. That's a meaningful step up from the 5% it just reported for Q4. The message is clear: growth might be steady, but profitability is accelerating.
