Chewy Puts a $50 Million Price Tag on AI Productivity

Many companies can’t put a number on what artificial intelligence does for their productivity. Chewy has one.

Chewy CEO Sumit Singh said on the company’s second-quarter earnings call that Chewy expects AI to reduce its costs by about $50 million in fiscal 2027, up from the low tens of millions of dollars this fiscal year. Asked how confident he was in those figures, Singh said he has high confidence.

The savings come from customer service, pharmacy, veterinary care and tools for employees. Singh said the tools are past the experiment stage. They lower Chewy’s cost to serve in a way that lasts.

Chewy launched Cai, an AI assistant, to a select group of mobile app users during the quarter. Singh said Cai had been live less than a month and had reached less than 15% of Chewy’s traffic. It handles the most common requests, which cover orders, returns, autoship and account management. About 30% of those chats ended without a human agent. A customer who wants a person gets a care team member within seconds.

More of the work is internal. Chewy’s service agents use many software systems, and new AI tools pull the answers together for them. Singh said that brings new agents close to the performance of experienced ones. In pharmacy, AI extracts and validates data and makes reviews more consistent. That lowers the cost to pick, pack and ship a pharmacy order. At select Chewy Vet Care clinics, a voice agent named Callie confirms appointments, schedules visits and handles routine follow-ups.

Automation carries part of the load. More than half of Chewy’s volume flows through automated facilities, Chief Financial Officer Chris Deppe said. Lower variable cost to serve was the largest contributor to the quarter’s SG&A leverage.

Data Work Came Before the Tools

Singh said Chewy spent several quarters building infrastructure and getting its data right before it shipped the assistants. Cai runs as several agents under an orchestrator, with automated returns and refunds built in. Chewy built all of it itself. That gives Chewy a lasting advantage because other companies would need years to reach the same point or would have to work through third-party providers.

Executives at large companies point to the same groundwork. The PYMNTS Intelligence report “The Enterprise AI Readiness Gap: What Company Data Reveals About the Real Barrier to Scale” found in April that 71% of executives at companies with at least $1 billion in annual revenue name organizational readiness as the primary limit on AI performance.

Savings Fund Growth and Offset Wage Costs

Singh told analysts not to stack the $50 million on top of Chewy’s fiscal 2026 margin path. Part of it will offset normal cost pressure such as wage inflation. Part may be reinvested in growth.

Chewy views AI as a driver of margin gains, “not as a standalone pool of savings” bound for the bottom line, he said.

Chewy hasn’t set its reinvestment level for fiscal 2027. Singh said that decision belongs to the 2027 planning process. He named marketing, a redesigned Chewy+ membership and new products due in the back half of the year as places the money could go.

Other large companies fund AI the same way. A Bain & Co. survey of 951 companies found 44% plan to pay for their next round of AI spending with savings from the last round, Bloomberg reported June 1.

Enterprises are reporting returns. The PYMNTS Intelligence report “The Enterprise AI Payback Curve: Adoption Accelerates as Returns Take Shape” found in August that nearly all enterprises surveyed in financial services, healthcare and media reported positive AI returns over the past 12 months. At least 80% expect to raise AI spending next year.

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