Costco Wholesale 2026 Q1 Earnings Strong Performance as Net Income Surges 11.3%

Costco Wholesale (COST) reported fiscal 2026 Q1 earnings on Dec 11, 2025, delivering results that exceeded expectations on earnings while missing revenue targets. The company’s net income surged 11.3% to $2 billion, with EPS rising 11.4% to $4.51. However, total revenue of $67.31 billion fell short of Wall Street’s $67.14 billion estimate. Management emphasized strategic priorities like digital innovation and global expansion, though it refrained from providing specific forward guidance, citing macroeconomic risks.

Revenue

Costco’s total revenue climbed 8.3% year-over-year to $67.31 billion, driven by robust net sales and membership fee growth. Net sales accounted for the majority at $65.98 billion, reflecting 8.2% year-over-year expansion. Membership fees contributed $1.33 billion, up from $1.17 billion in the prior year. The company attributed its strong performance to 6.4% total company comparable sales growth, with digitally-enabled sales surging 20.5%.

Earnings/Net Income

Costco’s profitability strengthened significantly, with net income rising to $2 billion in Q1 2026, marking a new record high for the fiscal quarter and a 11.3% increase from $1.8 billion in Q1 2025. Earnings per share (EPS) grew 11.4% to $4.51, outperforming the prior year’s $4.05. The results included a $72 million tax benefit from stock-based compensation, compared to $100 million in the prior year. This earnings growth underscores Costco’s ability to maintain margins despite macroeconomic headwinds.

Price Action

The stock price of Costco edged up 0.98% during the latest trading day but declined 1.27% over the most recent full trading week and 3.39% month-to-date.

Post-Earnings Price Action Review

The strategy of buying Costco (COST) when revenues miss and holding for 30 days resulted in a 224.11% return, significantly outperforming the benchmark return of 117.80%. The strategy’s excess return was 106.31%, with a CAGR of 23.54% over the backtested period. Notably, the strategy had a maximum drawdown of 0.00%, indicating effective risk management, with a Sharpe ratio of 1.12 and a volatility of 20.94%.

CEO Commentary

Costco’s CEO highlighted the strength of its digitally-enabled sales, which grew 20.5%, and operational efficiency, including a $72 million tax benefit from stock-based compensation. Strategic priorities include expanding e-commerce capabilities across eight international markets and maintaining a global warehouse footprint of 923 locations. While optimistic about sustained growth through market expansion and digital innovation, the CEO acknowledged risks like inflation, geopolitical factors, and supply chain dynamics.

Guidance

Costco’s forward-looking statements caution that future results may vary materially due to economic conditions, inflation, competition, and geopolitical risks. The company explicitly disclaims providing specific numerical guidance for future periods but notes that current results include a $72 million tax benefit from stock-based compensation, compared to $100 million in the prior year.

Additional News

Recent non-earnings news includes Costco’s expansion of e-commerce capabilities in eight international markets, as outlined by CEO leadership. The company also faced discussions about its high valuation, with a P/E ratio near 50x, prompting debates on whether the premium is justified. Additionally, insider selling activity saw executives offloading shares totaling over $14 million in the past six months. These developments highlight both growth ambitions and market skepticism amid Costco’s strategic focus on digital innovation and global expansion.