Chewy Inc. (NYSE: CHWY) shares took a hit Wednesday after the online pet retailer's second-quarter results showed a familiar story: consumers are still feeling the pinch, and they're cutting back on the extras. The company reported adjusted earnings of 36 cents per share, matching both Wall Street's consensus and management's own guidance. Sales, however, came in at $3.33 billion, up 7.3% year over year but just shy of the $3.361 billion analysts were looking for. It did land at the top end of the company's $3.30 billion to $3.33 billion guidance range.

CEO Sumit Singh struck a confident tone, saying, "The durability of our recurring revenue base, continued customer growth, and disciplined execution give us confidence to raise our full-year revenue and profitability outlook."

The backbone of Chewy's business, its Autoship program, continues to be a bright spot. Autoship customer sales climbed 9.3% to $2.82 billion, making up 84.6% of net sales. The program lets customers schedule recurring deliveries of pet food and supplies, which helps smooth out revenue and keep customers locked in. Active customers also grew, up 3.8% year over year to 21.705 million.

Looking ahead, Chewy guided for third-quarter sales between $3.323 billion and $3.358 billion, bracketing the $3.332 billion consensus. It also projected an adjusted EBITDA margin of 6.6% to 6.7% for the quarter.

For the full fiscal 2026, the company raised its sales outlook to $13.46 billion to $13.57 billion, up from its previous $13.4 billion to $13.55 billion range. Wall Street had been expecting $13.553 billion. Chewy also nudged its adjusted EBITDA margin forecast higher, now seeing 6.7% to 6.8% versus the earlier 6.6% to 6.8%.

But not everything is rosy. Singh noted that during the quarter, Chewy did not see a "meaningful recovery" among pressured pet consumers, though conditions also didn't get worse. The clearest sign of consumer caution: treat sales growth slowed more sharply than core food growth. When budgets tighten, the extras go first, and pet treats are apparently no exception.

On the cost front, Chewy continues to expect its AI initiatives to generate savings in the low tens of millions of dollars in fiscal 2026, with those savings potentially reaching about $50 million on an annualized basis in fiscal 2027. Management plans to reinvest some of those efficiency gains into marketing, AI, and other growth initiatives.

Despite the macroeconomic headwinds, Chewy believes its recurring revenue model and strategic investments will help it outperform the broader pet market. Investors, however, weren't entirely convinced on Wednesday. Chewy shares fell 10.27% to $20.88 at the time of publication, according to market data.