Costco's Q1 Soars: Revenue Jumps 8.3%, Net Income Up 11.3%

TL;DR

**Costco is crushing it, buy the dip if you get one, because those membership fees are pure profit gold.**

AI Summary

Costco Wholesale Corporation reported a robust first quarter for fiscal year 2026, with total revenue increasing by 8.29% to $67,307 million, up from $62,151 million in the prior year's comparable period. Net sales grew 8.19% to $65,978 million, while membership fees saw a significant 13.98% rise to $1,329 million. Net income for the quarter ended November 23, 2025, climbed 11.29% to $2,001 million, compared to $1,798 million in the first quarter of fiscal 2025. Diluted earnings per share also increased by 11.39% to $4.50 from $4.04. Operating income improved by 12.16% to $2,463 million. The company's cash and cash equivalents rose to $16,217 million from $14,161 million at August 31, 2025, indicating strong liquidity. Merchandise inventories increased to $21,141 million from $18,116 million, reflecting potential inventory build-up or sales expectations. A quarterly cash dividend of $1.30 per share was declared, up from $1.16 per share in the prior year, signaling confidence in future performance.

Why It Matters

This strong performance from Costco signals continued consumer demand for value and bulk purchasing, even amidst broader economic uncertainties. For investors, the 11.29% net income growth and increased dividend of $1.30 per share demonstrate solid financial health and a commitment to shareholder returns, potentially making COST an attractive defensive play. Employees benefit from a stable and growing company, while customers continue to enjoy competitive pricing and a broad product selection. In a competitive retail landscape, Costco's membership model and efficient operations allow it to maintain an edge against traditional retailers and e-commerce giants, reinforcing its market position.

Risk Assessment

Risk Level: low — Costco exhibits a low risk level due to its consistent revenue and net income growth, with total revenue up 8.29% and net income up 11.29% year-over-year. The company's strong cash position, with cash and cash equivalents at $16,217 million, further mitigates financial risk. While merchandise inventories increased by $3,025 million, this is likely managed given their high sales volumes and rapid inventory turnover model.

Analyst Insight

Investors should consider holding or adding to their Costco (COST) positions, as the company demonstrates strong financial performance and a resilient business model. The increased dividend and robust cash flow indicate a healthy outlook, making it a stable investment in the current market.

Financial Highlights

debt To Equity

0.54

revenue

$67,307 million

operating Margin

3.66%

total Assets

$82,790 million

total Debt

$8,102 million

net Income

$2,001 million

eps

$4.50

gross Margin

11.24%

cash Position

$16,217 million

revenue Growth

+8.29%

Revenue Breakdown

Key Numbers

• $67.3B — Total Revenue (Increased 8.29% from $62.151 billion in Q1 2025)
• $2.0B — Net Income (Increased 11.29% from $1.798 billion in Q1 2025)
• $4.50 — Diluted EPS (Increased 11.39% from $4.04 in Q1 2025)
• $1.3B — Membership Fees (Increased 13.98% from $1.166 billion in Q1 2025)
• $1.30 — Quarterly Cash Dividend (Increased from $1.16 per share in Q1 2025)
• $16.2B — Cash and Cash Equivalents (Increased from $14.161 billion at August 31, 2025)
• $21.1B — Merchandise Inventories (Increased from $18.116 billion at August 31, 2025)
• 921 — Warehouses Worldwide (Total number of warehouses operated at November 23, 2025)
• $1.355B — Unrecognized Stock-Based Compensation Cost (Remaining cost related to RSUs unvested at November 23, 2025)
• 1.7 years — Weighted-Average Recognition Period (For unrecognized stock-based compensation cost)

Key Players & Entities

• Costco Wholesale Corporation (company) — registrant
• $67,307 million (dollar_amount) — Total revenue for 12 weeks ended November 23, 2025
• $62,151 million (dollar_amount) — Total revenue for 12 weeks ended November 24, 2024
• $2,001 million (dollar_amount) — Net income for 12 weeks ended November 23, 2025
• $1,798 million (dollar_amount) — Net income for 12 weeks ended November 24, 2024
• $1.30 (dollar_amount) — Quarterly cash dividend per share declared October 15, 2025
• $1.16 (dollar_amount) — Quarterly cash dividend per share in Q1 2025
• $16,217 million (dollar_amount) — Cash and cash equivalents at November 23, 2025
• $14,161 million (dollar_amount) — Cash and cash equivalents at August 31, 2025
• SEC (regulator) — Securities and Exchange Commission

FAQ

Risk Factors

• Inventory Management [medium — operational]: Merchandise inventories increased to $21,141 million from $18,116 million. This build-up could indicate anticipation of strong sales or potential risks associated with holding costs, obsolescence, or changes in consumer demand.
• Competition [medium — market]: Costco operates in a highly competitive retail environment. While not explicitly detailed in this section, the company's success relies on maintaining its value proposition against other warehouse clubs, mass merchandisers, and online retailers.
• Compliance and Regulations [low — regulatory]: As a global retailer, Costco is subject to various regulations related to product safety, labor practices, and international trade. Non-compliance could lead to fines, reputational damage, and operational disruptions.
• Interest Rate Fluctuations [low — financial]: While interest expense was relatively low at $35 million, changes in interest rates can impact the cost of debt and the return on cash and short-term investments. The company holds $16,217 million in cash and cash equivalents.

Industry Context

Costco operates in the highly competitive warehouse club segment of the retail industry. Key competitors include Sam's Club and BJ's Wholesale Club, as well as mass merchandisers and online retailers. The industry is characterized by a focus on value, bulk purchasing, and membership models. Trends include the ongoing shift to e-commerce, demand for private label brands, and increasing consumer focus on value and convenience.

Regulatory Implications

Costco faces ongoing regulatory scrutiny common to large retailers, including compliance with labor laws, product safety standards, and international trade regulations. Any significant compliance failures could result in fines, operational disruptions, and damage to brand reputation. The company's global operations expose it to a complex web of international regulations.

What Investors Should Do

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Key Dates

• 2025-11-23: End of First Quarter Fiscal Year 2026 — Reporting period for the financial results discussed in the 10-Q, showing revenue and net income growth.
• 2025-08-31: End of Fiscal Year 2025 — Provides a comparison point for current assets, liabilities, and equity, notably showing an increase in merchandise inventories and cash.
• 2025-11-24: Prior Year Comparable Period (Q1 FY2025) — Used for year-over-year growth calculations, highlighting an 8.29% increase in total revenue and 11.29% increase in net income.

Glossary

Membership fees

Revenue generated from membership subscriptions, a key recurring revenue stream for Costco. (Shows a significant 13.98% growth, indicating strong member loyalty and value perception.)

Merchandise inventories

The cost of goods held by the company for sale. (An increase to $21,141 million from $18,116 million suggests increased stock levels, potentially to meet demand or due to supply chain considerations.)

Diluted EPS

Earnings per share calculated after accounting for all dilutive potential common shares, such as stock options and convertible securities. (Increased by 11.39% to $4.50, reflecting improved profitability on a per-share basis.)

Operating income

Profitability from a company's core business operations before interest and taxes. (Grew by 12.16% to $2,463 million, indicating efficient management of operating expenses relative to sales.)

Accumulated other comprehensive loss

A component of equity representing unrealized gains or losses on certain investments and foreign currency translations that have not yet been realized. (Increased from $(1,770) million to $(1,976) million, primarily due to foreign-currency translation adjustments.)

Year-Over-Year Comparison

Compared to the prior year's comparable period (12 weeks ended November 24, 2024), Costco Wholesale Corporation demonstrated robust growth in its first quarter of fiscal year 2026. Total revenue increased by 8.29% to $67,307 million, with net sales up 8.19% and membership fees showing a strong 13.98% increase. Net income rose by 11.29% to $2,001 million, and diluted EPS grew by 11.39% to $4.50. Operating income also saw a healthy increase of 12.16%. Merchandise inventories experienced a notable increase of $3.025 billion, while cash and cash equivalents grew by $2.056 billion, indicating improved liquidity and a strategic inventory build-up.

Key Financial Figures

• $0.005 — CONTINGENCIES EQUITY Preferred stock $0.005 par value; 100,000,000 shares authorize

Filing Documents

• cost-20251123.htm (10-Q) — 668KB
• costex10210q112325.htm (EX-10.2) — 74KB
• costex10310q112325.htm (EX-10.3) — 38KB
• costex10410q112325.htm (EX-10.4) — 63KB
• costex31110q112325.htm (EX-31.1) — 19KB
• costex32110q112325.htm (EX-32.1) — 11KB
• 0000909832-25-000169.txt ( ) — 4607KB
• cost-20251123.xsd (EX-101.SCH) — 27KB
• cost-20251123_cal.xml (EX-101.CAL) — 48KB
• cost-20251123_def.xml (EX-101.DEF) — 122KB
• cost-20251123_lab.xml (EX-101.LAB) — 450KB
• cost-20251123_pre.xml (EX-101.PRE) — 306KB
• cost-20251123_htm.xml (XML) — 489KB

FINANCIAL INFORMATION

PART I FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements 3 Condensed Consolidated Statements of Income 3 Condensed Consolidated Statements of Comprehensive Income 4 Condensed Consolidated Balance Sheets 5 Condensed Consolidated Statements of Equity 6 Condensed Consolidated Statements of Cash Flows 7 Notes to Condensed Consolidated Financial Statements 8

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 17

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 24

Controls and Procedures

Item 4. Controls and Procedures 24

OTHER INFORMATION

PART II OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 25

Risk Factors

Item 1A. Risk Factors 25

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 25

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 25

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 25

Other Information

Item 5. Other Information 25

Exhibits

Item 6. Exhibits 26

Signatures

Signatures 27 2 Table of Contents

—FINANCIAL INFORMATION

PART I—FINANCIAL INFORMATION

—Financial Statements

Item 1—Financial Statements COSTCO WHOLESALE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (amounts in millions, except per share data) (unaudited) 12 Weeks Ended November 23, 2025 November 24, 2024 REVENUE Net sales $ 65,978 $ 60,985 Membership fees 1,329 1,166 Total revenue 67,307 62,151 OPERATING EXPENSES Merchandise costs 58,510 54,109 Selling, general and administrative 6,334 5,846 Operating income 2,463 2,196 OTHER INCOME (EXPENSE) Interest expense ( 35 ) ( 37 ) Interest income and other, net 155 147 INCOME BEFORE INCOME TAXES 2,583 2,306 Provision for income taxes 582 508 NET INCOME $ 2,001 $ 1,798 NET INCOME PER COMMON SHARE: Basic $ 4.51 $ 4.05 Diluted $ 4.50 $ 4.04 Shares used in calculation (000s): Basic 443,961 443,988 Diluted 444,515 444,891 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents COSTCO WHOLESALE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (amounts in millions) (unaudited) 12 Weeks Ended November 23, 2025 November 24, 2024 NET INCOME $ 2,001 $ 1,798 Foreign-currency translation adjustment and other, net ( 206 ) ( 324 ) COMPREHENSIVE INCOME $ 1,795 $ 1,474 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents COSTCO WHOLESALE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (amounts in millions, except par value and share data) (unaudited) November 23, 2025 August 31, 2025 ASSETS CURRENT ASSETS Cash and cash equivalents $ 16,217 $ 14,161 Short-term investments 966 1,123 Receivables, net 3,231 3,203 Merchandise inventories 21,141 18,116 Other current assets 1,856 1,777 Total current assets 43,411 38,380 OTHER ASSETS Property and equipment, net 32,616 31,909 Operating lease right-of-use assets 2,730 2,725 Other long-term assets 4,033 4,085 TOTAL ASSETS $ 82,790 $ 77,099 LIABILITIES AND EQUITY CURRENT LIABILITI

Legal Proceedings

Legal Proceedings The Company is involved in many claims, proceedings and litigations arising from its business and property ownership. In accordance with accounting guidance, the Company establishes an accrual for legal proceedings if and when those matters present loss contingencies that are both probable and 12 Table of Contents reasonably estimable. There may be actual losses in excess of amounts accrued. The Company monitors those matters for developments that would affect the likelihood of a loss (taking into account where applicable indemnification arrangements concerning suppliers and insurers) and the accrued amount, if any, thereof, and adjusts the amount as appropriate. The Company has recorded an immaterial accrual with respect to some matters described below, in addition to other immaterial accruals for matters not described below. If the loss contingency at issue is not both probable and reasonably estimable, the Company does not establish an accrual, but monitors for developments that make the contingency both probable and reasonably estimable. In each case, there is a reasonable possibility that a loss may be incurred, including a loss in excess of the applicable accrual. For matters where no accrual has been recorded, the possible loss or range of loss (including any loss in excess of the accrual) cannot, in the Company's view, be reasonably estimated because, among other things: the remedies or penalties sought are indeterminate or unspecified; the legal and/or factual theories are not well developed; and/or the matters involve complex or novel legal theories or a large number of parties. In November 2023, a former employee filed a class action against the Company alleging claims under California law for failure to pay minimum wage, failure to pay overtime, failure to provide meal and rest breaks, failure to provide accurate wage statements, failure to reimburse expenses, failure to pay wages when due, and failure to pay sick pay. Martin Rey