Costco might be the most predictable great business on the stock market: people pay an annual fee for the privilege of shopping in a warehouse, almost nobody ever cancels, and the numbers go up. This quarter delivered exactly that — revenue of $70.5 billion, up from $63.2 billion a year ago and ahead of expectations, comparable sales up 9.8%, and a renewal rate in the US and Canada of 92.2%. Earnings of $4.93 per share landed essentially in line. The stock barely moved. With Costco, the drama is never in the results — it's in the price investors pay for them.
Here's what happened.
The Numbers: Reliable as Ever
- Total revenue: $70.53 billion vs $69.81 billion expected — net sales up 11.6%
- EPS: $4.93, up 15% from $4.28 — essentially in line with the ~$4.92 consensus
- Net income: $2.19 billion, up 15%
- Comparable sales: up 9.8% (up 6.6% excluding petrol prices and currency)
- Digitally-enabled sales: up 21.5%, with website and app traffic up 37%
- Membership fee income: $1.37 billion, up 10.7%
- Renewal rates: 92.2% in US/Canada; 89.7% worldwide
- Paid members: 82.9 million, up 4.1% — roughly 149 million total cardholders
- Stock reaction: essentially flat
Costco's fiscal year ends in late August, so Q3 FY2026 covers the twelve weeks to May 10, 2026. Two numbers tell the whole story. First, comparable sales up 9.8% — existing warehouses selling dramatically more, which at Costco's scale is exceptional. Second, the 92.2% renewal rate: out of every hundred members whose subscription came due, ninety-two paid again. That's the retention rate of a beloved software product, achieved by a warehouse that sells rotisserie chickens.
The Membership Machine
Here's the famous secret of Costco's business model: the merchandise barely makes money on purpose. Gross margin on goods was just 11% — Costco marks products up only enough to cover costs, deliberately passing its scale advantages to members as low prices.
The actual profit engine is the membership fee: $1.37 billion this quarter, up 10.7%, nearly all of which flows straight to the bottom line. Executive memberships — the higher tier — grew 9.6% to 41.2 million, and now represent the majority of paid members.
Most retailers profit from the gap between what goods cost and what you pay. Costco essentially refuses that profit, selling close to cost — which makes its prices nearly impossible to beat — and earns its money from the entry fee instead. The genius is the loop: low prices attract members, member fees fund even lower prices, and the value becomes so obvious that 92% renew. The shop is the bait; the subscription is the business.
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Digitally-enabled comparable sales jumped 21.5%, with traffic to Costco's website and app up 37%. The strongest categories included pharmacy, home furnishings, and — in a very Costco detail — gold and jewellery, where its bullion bars have become a cult phenomenon.
For years, digital was considered Costco's weakness; the model seemed welded to the physical treasure-hunt of the warehouse. Growth like this suggests the membership loyalty transfers online just fine.
"Digitally-enabled" covers orders placed through the website or app, including delivery and curbside collection. Costco growing 21.5% online matters because e-commerce was the one credible threat to its model — the fear was that members would drift to Amazon for anything that didn't require a warehouse trip. Instead, members appear to treat the app as another aisle. When your customers pay to shop with you, channel barely matters.
The Only Real Question: The Price Tag
The quarter's results were superb. The debate is the valuation: Costco trades at a price-to-earnings ratio above 50 — meaning investors are paying more than fifty years' worth of current profits for a slice of the company. That's a multiple normally reserved for fast-growing tech firms, attached to a retailer growing earnings about 15% a year.
The flat stock reaction to excellent results is that tension in action: the business keeps delivering, and the price already assumes it will forever.
The P/E ratio is the price of a share divided by its annual earnings — a rough measure of how many years of profit you're paying for upfront. The market average sits in the high teens to low twenties. Costco at 50+ means investors believe its reliability deserves a luxury price. Maybe so — but it means even perfect quarters mostly just justify the existing price rather than lifting it, and any stumble has a long way to fall. Great company and great stock are not always the same thing at the same price.
What's Coming Next
More of the same, by design: steady warehouse expansion (931 locations and counting), continued digital growth, and the membership flywheel turning. Costco's monthly sales reports — a rarity among retailers — mean investors get real-time updates between quarters. In an environment of tariffs and price-sensitive consumers, Costco's whole identity as the place scale goes to die for middlemen positions it well.
Costco publishes its sales every month, not just quarterly — a confidence move almost no other retailer makes. It also means fewer surprises at earnings time, which suits a company whose entire appeal is the absence of surprise. In inflationary or tariff-pressured times, Costco historically gains share: when prices rise everywhere, the cheapest trustworthy option wins.
The Bottom Line
↑ Why This Matters (Bull Case)
This is one of the most durable business models in the world performing at its peak: comparable sales up 9.8%, membership income up 10.7%, renewal rates at record-grade levels, and digital — the supposed weakness — growing 21.5%. The membership model makes revenue unusually predictable, and tariff-era price sensitivity pushes more shoppers toward Costco's value. Earnings compounding at 15% with this consistency is precisely why the market awards it a premium — quality this reliable almost never goes on sale.
↓ Why This Might Worry You (Bear Case)
Everything good about Costco is already in the price — and then some. A P/E above 50 for mid-teens earnings growth leaves the stock vulnerable to even mild disappointment or a general shift away from expensive defensive stocks; note that this quarter's excellent results moved the shares nowhere. Gross margins ticked down as Costco absorbed costs to hold prices, a strategy that protects members at shareholders' expense if tariff pressure persists. And growth maths gets harder: with renewal rates already at 92%, the easy gains from signing up the willing world are largely behind it.
The question isn't whether Costco is a great business — it demonstrably is. It's whether paying fifty-plus years of profits upfront leaves any room for the stock, rather than the company, to perform.
References
- Costco Wholesale — Q3 Fiscal 2026 Earnings Press Release (May 28, 2026)
- The Motley Fool — Costco Q3 2026 Earnings Call Transcript (May 28, 2026)
- CNBC — Costco Q3 2026 Earnings (May 28, 2026)
Ticker: COST (NASDAQ) · Reported: May 28, 2026
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