Chewy Grows Margins and Market Share in Q3: Autoship Sales Now 84% of Revenue
Profits Outpace Sales Growth While Margins Expand
Chewy’s third quarter fiscal 2025 results tell a clear story: profit is growing even faster than revenue. Net sales climbed 8.3% year-over-year to $3.12 billion, while net income surged to $59.2 million—a massive improvement over last year’s $3.9 million for the same period. Gross margin reached 29.8%, up 0.5 percentage points, while net margin expanded from 0.1% to 1.9%, signaling healthier operating fundamentals and greater efficiency.
One standout: Adjusted EBITDA (a non-GAAP measure reflecting core earnings) grew 31% year-over-year to $180.9 million, lifting the adjusted EBITDA margin to 5.8%. This marked a 1% improvement over last year’s margin.
Autoship Fuels Revenue—Now at 84% of Net Sales
Chewy’s success hinges on its Autoship program, which now accounts for 83.9% of net sales—up sharply from 80% last year. Autoship customer sales rose to $2.61 billion this quarter (a 13.6% increase), reflecting more pet owners locking in recurring purchases. With over 21.16 million active customers (a 4.9% gain), the average spend per customer also increased by 4.9% to $595.
| Key Metrics | Q3 FY2025 | Q3 FY2024 | Change (%) |
|---|---|---|---|
| Net Sales ($B) | 3.12 | 2.88 | 8.3 |
| Gross Margin (%) | 29.8 | 29.3 | +0.5 pt |
| Net Income ($M) | 59.2 | 3.9 | n/m |
| Adjusted EBITDA ($M) | 180.9 | 138.2 | 30.9 |
| Adjusted EBITDA Margin (%) | 5.8 | 4.8 | +1.0 pt |
| Autoship Sales ($B) | 2.61 | 2.30 | 13.6 |
| Autoship % of Net Sales | 83.9 | 80.0 | +3.9 pt |
| Active Customers (M) | 21.16 | 20.16 | 4.9 |
| Net Sales/Active Customer ($) | 595 | 567 | 4.9 |
Cash Flow and Balance Sheet: Building a Strong Foundation
Chewy continues to bolster its liquidity and operational flexibility. Net cash provided by operating activities for the quarter reached $207.9 million, up 13.3% year-over-year, while free cash flow improved nearly 16% to $175.8 million. Cash and cash equivalents now total $675.4 million—up from $595.8 million at the start of the fiscal year. Inventory and accounts receivable levels increased, likely reflecting Chewy’s confidence in customer demand and efforts to meet it.
Margin Growth and Autoship Trends Remain the Key Storylines
Chewy’s Q3 numbers highlight margin expansion and repeat customer engagement as central drivers of the business. Adjusted earnings per share grew 65% to $0.33 (basic) and 60% to $0.32 (diluted) compared to a year ago, outpacing even the solid top-line growth. Free cash flow, crucial for future investment, continued its steady climb, further supporting long-term initiatives.
What’s Next for Chewy?
Management points to a resilient operating model and superior execution for these gains. Chewy exceeded the high end of its net sales guidance and is riding momentum from the first half of the fiscal year into the holiday season. While management flags typical macroeconomic and operational risks in their outlook, Chewy’s rising margins and growing share of repeat business make the company well-positioned as consumer patterns in pet care continue shifting online.
With nearly 84% of revenue now on autopilot via its subscription model and steady profit expansion, Chewy offers a template for sustainable, customer-centric growth. Investors will want to watch next quarter’s Autoship growth and margin trends to see if this run continues—or accelerates further.
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