Shares of Petco Health and Wellness Company, Inc. (WOOF) surged 7.07% in after-hours trading on Tuesday, following the release of its third-quarter 2025 financial results. The pet health and wellness retailer reported earnings that surpassed analysts' expectations, despite a slight miss on revenue.

Petco posted quarterly earnings of $0.03 per share, significantly beating the analyst consensus estimate of $0.00. This represents a remarkable turnaround from the $0.02 loss per share reported in the same period last year. However, the company's quarterly sales of $1.5 billion fell short of the estimated $1.472 billion, marking a 3.1% decrease year-over-year. Comparable sales also declined by 2.2% compared to the previous year.

Despite the revenue challenges, investors appeared to focus on the positive aspects of Petco's report. The company's gross profit margin improved by approximately 0.8 percentage points to 38.9%, and operating income rose by $25.2 million to $29.2 million. Additionally, Petco announced plans to close about 20 stores in fiscal year 2025, which may be seen as a strategic move to optimize operations. The company also revised its fiscal 2025 earnings outlook upward, signaling confidence in its ongoing multi-phased transformation of its business model. These factors, combined with the earnings beat, likely contributed to the significant after-hours stock price increase.