Costco Wholesale (NASDAQ: COST) has delivered one of its most closely watched earnings reports in years. On December 11, 2025, the warehouse-club giant reported fiscal Q1 2026 results that beat Wall Street expectations, powered by double‑digit online growth and another big jump in membership income — even as investors weigh tariff litigation and a rich stock valuation. [1]
Key Takeaways from Costco’s Q1 2026 Earnings
- Total revenue rose to $67.3 billion, up about 8% year over year, narrowly ahead of analyst estimates around $67.0–$67.3 billion. [2]
- Diluted EPS came in at $4.50, beating consensus of roughly $4.26–$4.28 by more than 5%. [3]
- Comparable sales climbed 6.4%, with U.S. comps up 5.9%, Canada 6.5%, and Other International 8.8%. [4]
- Digitally enabled comparable sales jumped 20.5%, confirming the “revved‑up” e‑commerce narrative highlighted in pre‑earnings coverage. [5]
- Membership fee income surged 14% to $1.33 billion, extending a powerful trend that has become central to the Costco investment story. [6]
- The company operates 923 warehouses worldwide and runs e‑commerce sites in eight countries, underlining its global scale and digital reach. [7]
- The results arrive just weeks after Costco filed a high‑profile lawsuit challenging Trump administration tariffs, a move that could have meaningful financial implications if refunds are ultimately granted. [8]
Costco’s Q1 2026 Earnings: Beating a High Bar
Costco’s Q1 2026 (twelve weeks ended November 23, 2025) shows a company still growing briskly despite a challenging macro backdrop and an already massive revenue base.
- Net sales climbed to $65.98 billion, up 8.2% from $60.99 billion a year ago. [9]
- Membership fees rose to $1.33 billion from $1.17 billion, a gain of roughly 14% year over year — matching the strong membership growth trends seen in Costco’s fiscal 2025 Q4. [10]
- That brought total revenue to $67.31 billion, slightly above consensus expectations that centered near $67.0–$67.3 billion. [11]
On the bottom line, net income increased to $2.0 billion, compared with $1.8 billion in the prior‑year quarter. Diluted earnings per share of $4.50 rose about 11% year over year and beat Street forecasts by around $0.22 per share, according to data compiled by StreetInsider. [12]
The company noted that this quarter’s results included a $0.16 per‑share tax benefit tied to stock‑based compensation, versus $0.22 from the same item a year earlier — a reminder that some of the EPS strength comes from tax timing, not just operations. [13]
E‑Commerce Engine: 20.5% Digital Growth Confirms the Hype
In the hours leading up to the report, a widely circulated Zacks note — carried by outlets including Nasdaq and The Globe and Mail — framed Q1 around one big question: could Costco’s “e‑commerce engine” keep accelerating? [14]
The answer from the actual numbers is a resounding yes:
- Digitally‑enabled comparable sales grew 20.5% in Q1, far outpacing the company’s overall 6.4% comp growth. [15]
That performance builds on several quarters of strengthening online momentum:
- In Q4 fiscal 2025, Costco’s e‑commerce sales grew 13.6% year over year, and full‑year online revenue jumped 15.6% to $19.6 billion, about 7.3% of total sales. [16]
- Digital Commerce 360 has highlighted Costco Logistics, big‑and‑bulky fulfillment, and retail media campaigns as key drivers behind those gains. [17]
Pre‑earnings commentary from Zacks suggested digital comps were set to rise “over 20%” in Q1, driven by aggressive online promotions and improved delivery capabilities. [18] That forecast has effectively been validated by the 20.5% figure now in the books.
Even though e‑commerce still represents a single‑digit share of Costco’s total revenue, its double‑digit growth and margin profile make it increasingly important for the company’s long‑term earnings power and competitive positioning versus Walmart and Amazon. [19]
Membership Fees: Costco’s Recurring‑Revenue Moat Gets Deeper
Membership economics remain Costco’s secret weapon, and Q1 2026 reinforced that story.
The $1.33 billion in membership fees generated this quarter represent:
- Roughly 14% year‑over‑year growth, mirroring Q4’s 14% jump, when fees hit $1.72 billion. [20]
- A larger slice of the company’s total revenue base, despite already high levels of membership penetration. [21]
Recent analysis from Digital Commerce 360 noted that Costco closed fiscal 2025 with:
- 81 million paid household members (up 6.3% year over year)
- 145.2 million cardholders (up 6.1% year over year)
- Executives highlighted that nearly half of new sign‑ups are under 40, reflecting success in attracting younger shoppers through online channels. [22]
At the same time, Costco has faced scrutiny because renewal rates have edged down slightly — worldwide from about 90.2% to 89.8%, and in the U.S. and Canada from roughly 92.7% to 92.3%, a trend linked to a growing mix of newer, digital‑first members who typically renew at lower rates initially. [23]
Barron’s and other outlets flagged this subtle dip as a potential warning sign ahead of Q1, especially given Costco’s premium valuation. [24] But with membership fee income still growing at a mid‑teens clip, the core subscription model looks intact — and arguably stronger — after this quarter.
How Q1 Results Stacked Up Against Expectations
Heading into today’s report, the numbers on the Street were tightly clustered:
- Zacks’ pre‑earnings spotlight called for EPS of about $4.26 and revenue of $67.3 billion, citing preliminary net sales of $65.98 billion. [25]
- StockStory, in a note syndicated via Yahoo Finance, pegged consensus at $4.27 EPS on $67.03 billion in revenue, roughly 7.9% year‑over‑year growth. [26]
- A separate Zacks preview carried by Finviz pointed to $4.25 EPS and $67.28 billion in revenue, implying about 11% EPS growth and 8.3% sales growth. [27]
The actual outcome:
- EPS of $4.50 beat that range by $0.22–$0.25, even after adjusting for a modest tax benefit. [28]
- Revenue of $67.31 billion landed either in line with or modestly above consensus, depending on the source. [29]
- Comparable sales of 6.4% and digitally enabled comps of 20.5% matched or exceeded what many analysts had penciled in. [30]
UBS, which reiterated a “Buy” rating and a 12‑month price target of $1,205 in a note highlighted by Proactive Investors, had forecast 8.2% net sales growth, 6.4% core comp growth, and EPS of $4.39 — slightly above consensus but still below the ultimate $4.50 print. [31]
In short: Costco cleared a high bar, particularly on earnings, with sales that were solid rather than spectacular but clearly consistent with its recent trend line.
Tariff Lawsuit and “Liberation Day” Overhang: Bigger Than a Footnote
Costco’s Q1 2026 earnings are not happening in a vacuum. In late November, the company filed a closely watched lawsuit against the Trump administration seeking a declaration that certain tariffs imposed under the 1977 International Emergency Economic Powers Act are unlawful and a full refund of duties already paid. [32]
CFO Dive reports that:
- The case has sparked “tariff refund FOMO” among other import‑heavy companies, which are now scrambling to assess whether they should file similar suits or pursue alternative refund avenues. [33]
- Costco filed partly out of concern that, if the Supreme Court rules on the consolidated tariff case in the spring, some of its import entries could hit protest deadlines before a clear remedy is available — jeopardizing potential refunds on “a lot of money.” [34]
Related coverage on Yahoo Finance and FX Empire has cast tonight’s earnings call as a dual event: a traditional update on sales and profits, and a first detailed look at how Costco’s leadership views tariff risk and possible upside from refunds. [35]
Tariffs are explicitly listed among the risk factors in Costco’s Q1 press release, underscoring their relevance to forward guidance. [36] For a retailer that imports a broad range of goods, the stakes are high:
- If tariffs are upheld, Costco’s cost of goods remains structurally higher, pressuring margins or necessitating more selective price increases.
- If they are struck down and refunds materialize, Costco could recover significant past duties, potentially bolstering cash flow and future capital returns. [37]
Either way, investors will be scrutinizing any commentary on how the lawsuit might intersect with Costco’s pricing, margin strategy, and long‑term capital allocation.
No Special Dividend (Yet) Despite Rising Speculation
Ahead of the report, 24/7 Wall St. revived a perennial Costco storyline: Will there be another special dividend? The outlet noted that December 11 could be an opportune moment, pointing to the company’s history of occasional outsized cash payouts. [38]
For context:
- In December 2023, Costco paired its Q1 results with a $15 per‑share special dividend, a massive return of capital that underscored the strength of its balance sheet. [39]
This time, however, the Q1 2026 press release contained no announcement of a special dividend, only the continuation of the regular quarterly payout (yielding roughly 0.6% at recent prices). [40]
That doesn’t rule out a special distribution later in fiscal 2026, but for now, the company appears to be prioritizing:
- Ongoing store expansion (923 warehouses and counting).
- Continued investment in logistics and digital capabilities.
- Maintaining a fortress‑like balance sheet, with cash and equivalents topping $16.2 billion at quarter‑end. [41]
Valuation and Stock Reaction: Can Strong Fundamentals Silence Skeptics?
Even before today’s beat, Costco’s fundamentals were not the main concern — its valuation was.
- StockStory and other research outlets estimate Costco is trading at roughly 44x forward earnings, a premium multiple even by high‑quality retail standards. [42]
- Barron’s recently noted that after years of outperformance, Costco shares have lagged the broader market in 2025, despite resilient operations, raising the question of whether earnings growth can catch up with the price. [43]
Some observers, including UBS with its $1,205 price target (~30‑plus percent implied upside from recent levels), argue that Costco’s consistent high‑single‑digit sales growth, double‑digit earnings growth, and sticky membership base justify that premium. [44]
Others are more cautious, pointing to:
- Slightly softening renewal rates as digital sign‑ups proliferate. [45]
- Competitive pressure as Walmart leans aggressively into omnichannel and retail media growth. [46]
- Macro uncertainty around tariffs, interest rates, and consumer spending in 2026. [47]
Today’s print gives the bullish camp fresh ammunition: a clear earnings beat, robust digital growth, and another powerful quarter of membership income. Whether that’s enough to re‑rate the stock higher from already lofty levels will likely depend on what management says about tariffs, margins, and capital returns on the earnings call.
What to Watch Next
For investors and observers tracking Costco after this pivotal Q1 2026 report, several near‑term catalysts stand out:
- Q1 2026 earnings call (December 11, 2025): color on tariffs, pricing, traffic trends, and any hints about future special dividends. [48]
- December sales update on January 7, 2026, which will offer an early read on how the peak holiday season is shaping up. [49]
- Supreme Court decision on “Liberation Day” tariffs, which could reshape the cost landscape for Costco and its peers — and determine whether its lawsuit yields a windfall or a procedural footnote. [50]
For now, the headline is straightforward: Costco just delivered the earnings beat that many hoped would “rev up” the stock — and it did so by leaning into exactly what the pre‑earnings coverage highlighted: digital growth and the power of its membership model.
References
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