Chewy fell 11% to $20.68 on Wednesday after fiscal Q2 2027 free cash flow slid 15.5% to $89.5 million. Revenue beat estimates and the company raised its full-year outlook, but traders focused on the cash line that lagged the rest of the report.
Chris Deppe on timing
$89.5 million was the weak spot in the quarter, and Chris Deppe told analysts the shortfall was “entirely timing-related.” He also reiterated a full-year free cash flow conversion target of “roughly 80%,” a signal that Chewy still expects the cash picture to improve over the year rather than reset lower.
$3.33 billion in revenue grew 7.3% year over year and beat estimates by 0.4%, while adjusted diluted EPS of $0.36 matched the $0.3614 consensus. Chewy also raised its fiscal 2026 net sales outlook to $13.46 billion to $13.57 billion and lifted the low end of adjusted EBITDA margin guidance by 10 basis points, so the quarter did not lack for operating progress.
Petco and Freshpet moved differently
$47.9 million in capital expenditures rose 71.1% from a year earlier, which helps explain why free cash flow did not keep pace with sales and earnings. Chewy’s Autoship sales reached 84.6% of revenue, and the company ended the quarter with 21.7 million active customers, but the market still marked the stock lower because the cash conversion trail was less convincing than the headline growth.
$2.45 was where Petco Health and Wellness traded down 6% on Wednesday, while Freshpet rose 0.41% to $67.55. Freshpet had 15.5% revenue growth and had raised its 2026 net sales growth outlook to 10% to 12% in August, which left investors with a clear split: reward the businesses still translating growth into cash, and punish the ones spending faster than that conversion shows up.
Chewy now has to prove that the timing issue Chris Deppe described turns into actual cash flow, not just a fuller projection. If the company gets there while keeping revenue growth and margin guidance moving higher, Wednesday’s selloff may look like a reset point; if not, the 11% drop will read as the market’s warning that sales beats alone are not enough.
