Best Buy BBY 2026Q1 Earnings Preview Downside Risk Amid Tariff Pressures

Forward-Looking Analysis
Best Buy is set to report its Q1 2026 earnings on May 29, 2025. Analysts expect a 1% year-over-year decline in revenue to $8.8 billion, with a comparable sales decline of 0.5%, due to tariff-related cost pressures. These tariffs could erode profitability, as the company might need to absorb higher costs or raise prices. Operating margin is projected to contract by 40 basis points to 3.4%, while gross margin may improve by 10 basis points to 23.4%, thanks to a revamped membership program and higher-margin services. Despite headwinds, Best Buy's operational discipline and category leadership are expected to provide resilience. Analyst Joseph Feldman expects earnings per share (EPS) of $6.30 for 2025, revised down from $6.44. While challenges persist, opportunities arise from new product cycles and expanding offerings like loyalty and health services. Best Buy's shares recently traded at $70.05, reflecting a cautious market stance.

Historical Performance Review
In Q4 2025, Best Buy reported revenue of $13.95 billion, net income of $117 million, and an EPS of $0.55. The company achieved a gross profit of $2.92 billion. Despite surpassing analyst expectations, demand pressures and economic headwinds led to a 4.4% annual revenue decline, highlighting the complex market environment Best Buy navigated.

Additional News
Best Buy has faced tariff concerns as 60% of its goods are sourced from China. These tariffs could impact profitability, forcing the company to absorb costs or raise prices. Analyst Joseph Feldman highlighted the company's vulnerability to trade-related cost inflation. Despite these challenges, Best Buy is positioned to leverage new product cycles and expand its higher-margin offerings, including AI innovations, loyalty programs, and health services. The company maintains operational discipline, which aids in weathering current challenges, and continues to explore sales upside opportunities from aging purchases and past negative comps.

Summary & Outlook
Best Buy faces challenges with tariff pressures affecting profitability, but maintains resilience through operational discipline and category leadership. Despite a slight revenue decline projected for Q1 2026, the company benefits from higher-margin services and membership programs. The recent reduction in EPS forecasts reflects a cautious market sentiment, yet growth opportunities exist with new product cycles and service expansions. Overall, while the company navigates a challenging environment, its strategic initiatives may offer medium-term growth prospects. The outlook remains cautiously neutral, balancing risks and growth catalysts.