Membership-only discount retailer Costco (NASDAQ: COST) reported calendar Q3 2026 (fiscal Q4 2026) results beating Wall Street’s revenue expectations, with sales up 11.1% year on year to $95.72 billion. Its non-GAAP profit of $6.60 per share was 1.2% above analysts’ consensus estimates.

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StockStory’s Take

Costco’s third quarter results were met with a positive market reaction, driven by broad-based growth across both traditional and digital sales channels. Management cited strong performance from ancillary businesses such as gas, pharmacy, and travel, with CEO Ron Vachris highlighting that “gas, pharmacy, and travel led the way, all growing at a faster pace than our overall growth rate.” CFO Gary Millerchip further noted the impact of increased executive membership penetration and digital sign-ups, which contributed to higher renewal rates and spending per member.

Looking ahead, management’s guidance is underpinned by plans to accelerate warehouse expansion, continued investments in digital capabilities, and efforts to attract younger members who are increasingly engaging with online and delivery offerings. Millerchip emphasized, “We believe we’ve got a path for the next 5 to 10 years of targeting 30 new warehouses a year,” while also pointing to opportunities for higher engagement through partnerships with platforms like Uber Eats and DoorDash. The company is also focused on leveraging AI-driven personalization and data analytics to enhance both digital and in-warehouse experiences.

Key Insights from Management’s Remarks

Management attributed third quarter performance to robust ancillary business growth, digital expansion, and a younger, more engaged membership base.

• Ancillary business momentum: Gas stations, pharmacy, and travel services outperformed core retail, with gas membership penetration reaching new highs as consumers sought value amid rising fuel prices. The pharmacy saw nearly 20% sales growth, supported by digital initiatives such as Rx Mobile Pay Ahead and Pickup Lockers.

• Digital sales acceleration: Digitally enabled sales, including third-party delivery partnerships with Uber Eats and DoorDash, grew over 20%. Management noted that these channels primarily attract younger members, with digital engagement now a significant contributor to incremental sales rather than cannibalizing in-warehouse activity.

• Membership dynamics: Executive member penetration reached an all-time high, driving improvements in overall renewal rates. The base of members under 40 has grown nearly 60% since COVID, and these younger members, while initially spending less, are expected to become higher-value customers over time.

• Merchandise assortment and pricing actions: The company reinvested tariff refunds into price reductions on everyday grocery and select nonfood items, aiming to reinforce Costco’s value proposition. Management stressed that such pricing moves are designed to maintain member loyalty and stimulate unit growth.

• AI and personalization initiatives: AI-driven search and personalized recommendations contributed to triple-digit growth in related digital sales. Management highlighted that AI-originated site traffic, while still small, shows the highest conversion rates and is helping to raise awareness of membership benefits.

Drivers of Future Performance

Costco’s forward outlook is shaped by warehouse expansion, digital investments, and a focus on attracting and retaining high-quality members amid evolving consumer preferences.

• Accelerated warehouse rollout: Management plans to open 30 net new warehouses annually, targeting both domestic infill locations and international markets, especially in Asia and Europe. These expansion efforts are expected to drive new member growth and provide long-term sales momentum.

• Digital and delivery platform growth: The company is investing in digital infrastructure and partnering with third-party delivery platforms to serve a younger, digitally native audience. Management believes these channels will continue to contribute incremental sales and deeper member engagement, but also notes the need to maintain consistency between online and in-warehouse experiences.

• Margin and cost management risks: While supply chain efficiencies and SG&A leverage are expected to support margins, management acknowledged potential headwinds from ongoing inflation, labor costs, and healthcare expenses. Additionally, the reinvestment of tariff refunds into member pricing may affect near-term profitability, though leadership remains confident in long-term value creation.

Catalysts in Upcoming Quarters

In upcoming quarters, our analysts will be watching (1) the execution and pace of new warehouse openings, both in the U.S. and internationally, (2) the effectiveness of digital initiatives and third-party delivery expansion in sustaining incremental sales, and (3) trends in membership growth and renewal, particularly among younger and executive members. The impact of ongoing price investments and supply chain management will also be key indicators of operational discipline.

Costco currently trades at $922.26, up from $897.41 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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