Chewy Inc (NYSE:CHWY) stock fell 3.17% (As on December 11, 11:31:53 AM UTC-4, Source: Google Finance) though the company reported third-quarter fiscal 2025 results that exceeded analyst expectations. Gross margin improved to 29.8%, an increase of 50 basis points from the same period last year. Adjusted EBITDA rose to $180.9 million, up from $138.2 million a year earlier, with adjusted EBITDA margin expanding by 100 basis points to 5.8%. The company’s net income reached $59.2 million, translating to a net margin of 1.9%, which represents a 180 basis point improvement YoY. Adjusted net income climbed to $135.7 million, a significant increase of $50.7 million compared to the prior year. The company generated approximately $176 million of free cash flow in the quarter, up nearly $70 million sequentially. Further, the company has announced the acquisition of Smart Equine, a leading equine health brand with strong loyalty and repeat purchase behavior. The transaction is expected to be accretive to Adjusted EBITDA margins upon closing. Free Cash Flow for the quarter was $175.8 million, driven by $207.9 million of cash from operating activities and $32.1 million of Capital Expenditures.

CHWY in the third quarter of FY25 has reported the adjusted earnings per share of 32 cents, beating the analysts’ estimates for the adjusted earnings per share of 13 cents. The company had reported the adjusted revenue growth of 8.3 percent to $3.12 billion in the third quarter of FY25, beating the analysts’ estimates for revenue of $3.1 billion. This is primarily driven by unit volume growth, not price. Growth in Autoship customer sales outpaced total company growth, increasing 13.6% to $2.61 billion. The company ended Q3 with 21.2 million active customers, up nearly 5% year-over-year, and delivered improvements across every part of the active customer funnel. Enhanced mobile app functionality is lifting direct traffic, with app customers and app orders up approximately 15% year-over-year. Net sales per active customer reached $595, up nearly 5% year-over-year. Gross margin expanded roughly 50 basis points year-over-year to 29.8%, driven by sponsored ads growth, a strong auto ship baseline, and favorable category mix.

Chewy projects full-year 2025 net sales between $12.58 billion and $12.6 billion, reflecting an 8% YoY growth. The company maintains its adjusted EBITDA margin outlook at 5.6% to 5.7%. For Q4 2025, net sales are expected to range from $3.24 billion to $3.26 billion. Chewy anticipates market conditions in 2026 to mirror those of 2025, with continued focus on strategic initiatives like the Chewy Plus membership program and expansion of Chewy Vet Care.