Chewy (CHWY) continues to deliver consistent margin expansion and is tracking towards its long-term adjusted earnings before interest, taxes, depreciation, and amortization margin target of 10%, Wedbush said in a Wednesday note.

The company's 2026 margin expansion will be driven by operating leverage, which is expected to come from logistical efficiencies within its Houston fulfillment center, management of its selling, general, and administrative expenses, and the adoption of artificial intelligence, Wedbush said.

Wedbush said it expects Chewy's Q1 revenue to grow by 7.5%, versus 7.4% prior estimate, to $3.3 billion. Adjusted EBITDA is estimated to be $239 million along with a margin of 7.1%, according to the note. Chewy expects Q1 revenue in the range of $3.33 billion to $3.36 billion.

The brokerage further said that the company's 2026 revenue range of $13.6 billion and $13.75 billion was ahead of consensus by about $100 million at the midpoint. Chewy's adjusted EBITDA margin estimate of 6.6% to 6.8% for the year was above the initial Wall Street estimate of 6.5%, according to Wedbush.

Wedbush lowered its price target on Chewy to $36 from $42, citing heightened uncertainty in the current macro environment and artificial intelligence-related risks on the terminal value of the business. Wedbush maintained its outperform rating.

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