Chewy Stock Falls 40% in 2025 Even as Free Cash Flow Jumps 24%

May 24, 2026 - 19:28

Chewy is working hard to convince investors it can be more than just a low-margin online pet supply retailer, but Wall Street remains skeptical. The stock has dropped roughly 40% so far in 2025, even as the company reported a 24% increase in free cash flow during the same period.

The disconnect highlights a growing tension between Chewy's improving financial fundamentals and the market's broader concerns about its long-term growth story. While the company has managed to tighten operations and generate stronger cash returns, investors appear focused on slowing revenue growth and rising competition from big-box retailers and newer online entrants.

Chewy has tried to pivot toward higher-margin areas like pet health insurance, prescription medications, and its own private-label brands. The company also launched a veterinary telehealth service and expanded its Autoship subscription program, which now accounts for a significant portion of sales. These moves are designed to boost customer loyalty and improve profitability over time.

Still, the market is not buying the narrative. Analysts point out that Chewy operates in a highly competitive space where margins are thin and customer acquisition costs remain high. The stock's steep decline suggests that even strong cash flow growth is not enough to offset fears about future earnings pressure.

For now, Chewy remains a company caught between solid execution and a skeptical market. Whether it can close that gap may depend on how quickly its higher-margin initiatives start to meaningfully shift the bottom line.