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FALSE2026Q2COSTCO WHOLESALE CORP 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 15, 2026
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-20355
Costco Wholesale Corporation
(Exact name of registrant as specified in its charter)
Washington 91-1223280
(State or other jurisdiction of
incorporation or organization)		 (I.R.S. Employer Identification No.)
999 Lake Drive, Issaquah, WA 98027
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code): (425) 313-8100

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, $.005 Par ValueCOSTThe Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐   No ☒

The number of shares outstanding of the issuer's common stock as of March 4, 2026, was 443,652,540.
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COSTCO WHOLESALE CORPORATION
INDEX TO FORM 10-Q
  Page
PART I
Item 1.
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

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PART I—FINANCIAL INFORMATION
Item 1—Financial Statements
COSTCO WHOLESALE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(amounts in millions, except per share data) (unaudited)
12 Weeks Ended24 Weeks Ended
February 15,
2026		February 16,
2025		February 15,
2026		February 16,
2025
REVENUE
Net sales$68,242 $62,530 $134,220 $123,515 
Membership fees1,355 1,193 2,684 2,359 
Total revenue69,597 63,723 136,904 125,874 
OPERATING EXPENSES
Merchandise costs60,719 55,744 119,229 109,853 
Selling, general and administrative6,272 5,663 12,606 11,509 
Operating income2,606 2,316 5,069 4,512 
OTHER INCOME (EXPENSE)
Interest expense(33)(36)(68)(73)
Interest income and other, net148 142 303 289 
INCOME BEFORE INCOME TAXES2,721 2,422 5,304 4,728 
Provision for income taxes686 634 1,268 1,142 
NET INCOME$2,035 $1,788 $4,036 $3,586 
NET INCOME PER COMMON SHARE:
Basic$4.58 $4.03 $9.09 $8.08 
Diluted$4.58 $4.02 $9.08 $8.06 
Shares used in calculation (000s):
Basic443,946 443,982 443,954 443,985 
Diluted444,420 444,886 444,468 444,888 

The accompanying notes are an integral part of these condensed consolidated financial statements.


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COSTCO WHOLESALE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(amounts in millions) (unaudited)
 12 Weeks Ended24 Weeks Ended
 February 15,
2026		February 16,
2025		February 15,
2026		February 16,
2025
NET INCOME$2,035 $1,788 $4,036 $3,586 
Foreign-currency translation adjustment and other, net370 (90)164 (414)
COMPREHENSIVE INCOME$2,405 $1,698 $4,200 $3,172 



The accompanying notes are an integral part of these condensed consolidated financial statements.

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COSTCO WHOLESALE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in millions, except par value and share data) (unaudited)


February 15,
2026		August 31,
2025
ASSETS
CURRENT ASSETS
Cash and cash equivalents$17,383 $14,161 
Short-term investments857 1,123 
Receivables, net3,782 3,203 
Merchandise inventories18,991 18,116 
Other current assets2,120 1,777 
Total current assets43,133 38,380 
OTHER ASSETS
Property and equipment, net33,645 31,909 
Operating lease right-of-use assets2,759 2,725 
Other long-term assets4,102 4,085 
TOTAL ASSETS$83,639 $77,099 
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable$20,647 $19,783 
Accrued salaries and benefits5,635 5,205 
Accrued member rewards2,833 2,677 
Deferred membership fees3,126 2,854 
Other current liabilities8,522 6,589 
Total current liabilities40,763 37,108 
OTHER LIABILITIES
Long-term debt, excluding current portion5,688 5,713 
Long-term operating lease liabilities2,477 2,460 
Other long-term liabilities2,624 2,654 
TOTAL LIABILITIES51,552 47,935 
COMMITMENTS AND CONTINGENCIES
EQUITY
Preferred stock $0.005 par value; 100,000,000 shares authorized; no shares issued and outstanding— — 
Common stock $0.005 par value; 900,000,000 shares authorized; 443,692,000 and 443,237,000 shares issued and outstanding2 2 
Additional paid-in capital8,570 8,282 
Accumulated other comprehensive loss(1,606)(1,770)
Retained earnings25,121 22,650 
TOTAL EQUITY32,087 29,164 
TOTAL LIABILITIES AND EQUITY$83,639 $77,099 

The accompanying notes are an integral part of these condensed consolidated financial statements.

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COSTCO WHOLESALE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(amounts in millions) (unaudited)
12 Weeks Ended February 15, 2026
 Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive Income (Loss)
Retained
Earnings		Total
Equity
 Shares (000s)Amount
BALANCE AT NOVEMBER 23, 2025443,919 $2 $8,408 $(1,976)$23,869 $30,303 
Net income— — — — 2,035 2,035 
Foreign-currency translation adjustment and other, net— — — 370 — 370 
Stock-based compensation— — 167 — — 167 
Release of vested restricted stock units (RSUs), including tax effects2 — (1)— — (1)
Repurchases of common stock(229)— (4)— (206)(210)
Cash dividend declared— — — — (577)(577)
BALANCE AT FEBRUARY 15, 2026443,692 $2 $8,570 $(1,606)$25,121 $32,087 


12 Weeks Ended February 16, 2025
 Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive Income (Loss)
Retained
Earnings		Total
Equity
 Shares (000s)Amount
BALANCE AT NOVEMBER 24, 2024443,942 $2 $7,901 $(2,152)$18,700 $24,451 
Net income— — — — 1,788 1,788 
Foreign-currency translation adjustment and other, net— — — (90)— (90)
Stock-based compensation— — 151 — — 151 
Release of vested RSUs, including tax effects1 — (1)— — (1)
Repurchases of common stock(213)— (4)— (203)(207)
Cash dividend declared— — — — (515)(515)
BALANCE AT FEBRUARY 16, 2025443,730 $2 $8,047 $(2,242)$19,770 $25,577 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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COSTCO WHOLESALE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(amounts in millions) (unaudited)
24 Weeks Ended February 15, 2026
 Common StockAdditional
Paid-in
Capital		Accumulated
Other
Comprehensive Income (Loss)		Retained
Earnings		Total
Equity
 Shares (000s)Amount
BALANCE AT AUGUST 31, 2025443,237 $2 $8,282 $(1,770)$22,650 $29,164 
Net income— — — — 4,036 4,036 
Foreign-currency translation adjustment and other, net— — — 164 — 164 
Stock-based compensation— — 655 — — 655 
Release of vested RSUs, including tax effects909 — (358)— — (358)
Repurchases of common stock(454)— (9)— (411)(420)
Cash dividend declared— — — — (1,154)(1,154)
BALANCE AT FEBRUARY 15, 2026443,692 $2 $8,570 $(1,606)$25,121 $32,087 


24 Weeks Ended February 16, 2025
 Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive Income (Loss)
Retained
Earnings		Total
Equity
 Shares (000s)Amount
BALANCE AT SEPTEMBER 1, 2024443,126 $2 $7,829 $(1,828)$17,619 $23,622 
Net income— — — — 3,586 3,586 
Foreign-currency translation adjustment and other, net— — — (414)— (414)
Stock-based compensation— — 616 — — 616 
Release of vested RSUs, including tax effects1,047 — (390)— — (390)
Repurchases of common stock(443)— (8)— (405)(413)
Cash dividend declared— — — — (1,030)(1,030)
BALANCE AT FEBRUARY 16, 2025443,730 $2 $8,047 $(2,242)$19,770 $25,577 

The accompanying notes are an integral part of these condensed consolidated financial statements.

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COSTCO WHOLESALE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in millions) (unaudited)
24 Weeks Ended
February 15,
2026		February 16,
2025
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$4,036 $3,586 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization1,194 1,100 
Non-cash lease expense149 137 
Stock-based compensation652 614 
Other non-cash operating activities, net66 (79)
Changes in operating assets and liabilities:
Merchandise inventories(783)(362)
Accounts payable731 (458)
Other operating assets and liabilities, net1,639 1,470 
Net cash provided by operating activities7,684 6,008 
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment(2,815)(2,401)
Purchases of short-term investments(250)(345)
Maturities of short-term investments510 752 
Other investing activities, net(13)(13)
Net cash used in investing activities(2,568)(2,007)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of short-term borrowings(65)(389)
Proceeds from short-term borrowings136 370 
Tax withholdings on stock-based awards(358)(390)
Repurchases of common stock(419)(412)
Cash dividend payments(1,154)(515)
Financing lease payments and other financing activities, net(37)(98)
Net cash used in financing activities(1,897)(1,434)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS3 (117)
Net change in cash and cash equivalents3,222 2,450 
CASH AND CASH EQUIVALENTS BEGINNING OF YEAR14,161 9,906 
CASH AND CASH EQUIVALENTS END OF PERIOD$17,383 $12,356 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the first 24 weeks of the year for:
Interest$51 $55 
Income taxes, net$1,016 $798 
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Cash dividend declared, but not yet paid$— $515 
Financing lease assets obtained in exchange for new or modified leases$58 $103 
Operating lease assets obtained in exchange for new or modified leases$134 $57 
Capital expenditures included in liabilities$235 $164 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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COSTCO WHOLESALE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in millions, except share, per share, and warehouse count data)
(unaudited)
Note 1—Summary of Significant Accounting Policies
Description of Business
Costco Wholesale Corporation (Costco or the Company), a Washington corporation, and its subsidiaries operate membership warehouses based on the concept that offering members low prices on a limited selection of nationally-branded and private-label products in a wide range of merchandise categories will produce high sales volumes and rapid inventory turnover. At February 15, 2026, Costco operated 924 warehouses worldwide: 634 in the United States (U.S.) located in 47 states, Washington, D.C., and Puerto Rico, 114 in Canada, 42 in Mexico, 37 in Japan, 29 in the United Kingdom (U.K.), 20 in Korea, 15 in Australia, 14 in Taiwan, seven in China, five in Spain, three in France, two in Sweden and one each in Iceland and New Zealand. The Company operates e-commerce sites in the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan, and Australia.
Basis of Presentation
The condensed consolidated financial statements include the accounts of Costco and its wholly-owned subsidiaries. All material inter-company transactions among the Company and its consolidated subsidiaries have been eliminated in consolidation.
These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interim financial reporting pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). While these statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (U.S. GAAP) for complete financial statements. Therefore, the interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2025.
Fiscal Year End
The Company operates on a 52/53 week fiscal year basis, with the fiscal year ending on the Sunday closest to August 31. Fiscal 2026 is a 52-week year ending on August 30, 2026. References to the second quarter of 2026 and 2025 relate to the 12-week fiscal quarters ended February 15, 2026, and February 16, 2025. References to the first half of 2026 and 2025 relate to the 24 weeks ended February 15, 2026, and February 16, 2025.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect: the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements; and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions take into account historical and forward-looking factors that the Company believes are reasonable. Actual results could differ from those estimates and assumptions.
Recent Accounting Pronouncements Not Yet Adopted By The Company
In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, which requires public business entities on an annual basis to disclose specific categories in the income-tax rate reconciliation, provide information for reconciling items that meet a quantitative threshold, and disclose
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certain information about income taxes paid. The standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted.
In November 2024, the FASB issued ASU 2024-03, which requires disaggregated disclosures of certain costs and expenses on the income statement on an annual and interim basis. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.
These standards should be applied on a prospective basis. Retrospective application is permitted. The Company is evaluating these standards.
Note 2—Investments
The Company's investments were as follows:
February 15, 2026:Cost
Basis		Unrealized
Gains, Net		Recorded
Basis
Available-for-sale:
Government and agency securities$794 $7 $801 
Held-to-maturity:
Certificates of deposit56 — 56 
Total short-term investments$850 $7 $857 
August 31, 2025:Cost
Basis		Unrealized
Gains, Net		Recorded
Basis
Available-for-sale:
Government and agency securities$783 $3 $786 
Held-to-maturity:
Certificates of deposit337 — 337 
Total short-term investments$1,120 $3 $1,123 
Gross unrealized holding gains and losses on available-for-sale securities were not material for the periods ended February 15, 2026, or August 31, 2025. At those dates, there were no available-for-sale securities in a material continuous unrealized-loss position. There were no sales of available-for-sale securities during the first half of 2026 or 2025.
The maturities of available-for-sale and held-to-maturity securities at February 15, 2026, are as follows:
 Available-For-SaleHeld-To-Maturity
 Cost BasisFair Value
Due in one year or less$102 $102 $56 
Due after one year through five years474 479 — 
Due after five years218 220 — 
Total$794 $801 $56 
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Note 3—Fair Value Measurement
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The table below presents information regarding the Company’s financial assets and financial liabilities that are measured at fair value on a recurring basis and indicates the level within the hierarchy reflecting the valuation techniques utilized.
Level 2
February 15,
2026		August 31,
2025
Investment in government and agency securities$801 $786 
Forward foreign-exchange contracts, in asset position(1)
2 6 
Forward foreign-exchange contracts, in (liability) position(1)
(18)(14)
Total$785 $778 
_______________
(1) The asset and liability values are included in other current assets and other current liabilities, respectively, in the accompanying condensed consolidated balance sheets.
On February 15, 2026, and August 31, 2025, the Company did not hold any Level 1 or 3 financial assets or liabilities that were measured at fair value on a recurring basis. There were no transfers between levels during the first half of 2026 or 2025.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Assets and liabilities recognized and disclosed at fair value on a nonrecurring basis include items such as financial assets measured at amortized cost and long-lived nonfinancial assets. These assets are measured at fair value if determined to be impaired. There were no fair value adjustments to these items during the first half of 2026 or 2025.
Note 4—Debt
The carrying value of the Company’s long-term debt consisted of the following:
February 15,
2026		August 31,
2025
3.000% Senior Notes due May 2027
$1,000 $1,000 
1.375% Senior Notes due June 2027
1,250 1,250 
1.600% Senior Notes due April 2030
1,750 1,750 
1.750% Senior Notes due April 2032
1,000 1,000 
Other long-term debt775 805 
Total long-term debt
5,775 5,805 
Less unamortized debt discounts and issuance costs
15 17 
Less current portion(1)
72 75 
Long-term debt, excluding current portion
$5,688 $5,713 
_______________
(1) Net of unamortized debt discounts and issuance costs and included in other current liabilities in the accompanying condensed consolidated balance sheets.
The fair value of the Senior Notes is estimated using Level 2 inputs. Other long-term debt consists of Guaranteed Senior Notes issued by the Company's Japan subsidiary, valued using Level 3 inputs. The fair value of the Company's long-term debt, including the current portion, was approximately $5,384 and $5,370 at February 15, 2026, and August 31, 2025.
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Note 5—Equity
Dividends
A quarterly cash dividend of $1.30 per share was declared on January 15, 2026, and paid on February 13, 2026. The dividend was $1.16 per share in the second quarter of 2025.
Stock Repurchase Programs
The Company's stock repurchase program is conducted under a $4,000 authorization by the Board of Directors, which expires in January 2027. At February 15, 2026, the remaining amount available under the program was $1,542. The following table summarizes the repurchase activity:
Shares Repurchased (000s)Average Price per ShareTotal Cost
Second quarter of 2026229 $917.02 $210 
First half of 2026454 $924.46 $420 
Second quarter of 2025213 $967.29 $207 
First half of 2025443 $932.03 $413 
These amounts may differ from the accompanying condensed consolidated statements of cash flows due to changes in unsettled stock repurchases at the end of each quarter. Purchases are made from time to time, as conditions warrant, potentially including the open market, block purchases and pursuant to plans under SEC Rule 10b5-1.
Note 6—Stock-Based Compensation
The 2019 Incentive Plan authorizes the issuance of up to 15,885,000 RSUs. The Company issues new shares of common stock upon vesting and settlement of RSUs. Shares for vested RSUs are generally delivered to participants annually, net of shares withheld for taxes.
Summary of Restricted Stock Unit Activity
At February 15, 2026, 5,234,000 shares were available to be granted as RSUs, and the following awards were outstanding:
•1,934,000 time-based RSUs, which vest upon continued employment over specified periods. Some of these RSUs accelerate upon achievement of a long-service term;
•60,000 performance-based RSUs granted to executive officers, for which the performance targets have been met. The awards vest upon continued employment over specified periods of time and upon achievement of a long-service term; and
•67,000 performance-based RSUs granted to executive officers, subject to achievement of performance targets for 2026, as determined by the Compensation Committee of the Board of Directors after the end of the fiscal year. These awards are included in the table below and in the amount of unrecognized compensation cost. The Company recognized compensation expense for these awards in the second quarter of 2026, as it is currently deemed probable that the targets will be achieved.
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The following table summarizes RSU transactions during the first half of 2026:
Number of
Units (in 000s)		Weighted-Average
Grant Date Fair Value
Outstanding at August 31, 20252,308 $597.00 
Granted1,088 933.56 
Vested and delivered(1,288)669.71 
Forfeited(47)686.29 
Outstanding at February 15, 20262,061 $727.17 
The remaining unrecognized compensation cost related to RSUs unvested at February 15, 2026, was $1,224, and the weighted-average period over which this cost will be recognized is 1.6 years.
Summary of Stock-Based Compensation
The following table summarizes stock-based compensation expense and the related tax benefits:
12 Weeks Ended24 Weeks Ended
February 15,
2026		February 16,
2025		February 15,
2026		February 16,
2025
Stock-based compensation expense
$166 $151 $652 $614 
Less recognized income tax benefits34 28 151 129 
Stock-based compensation expense, net$132 $123 $501 $485 
Note 7—Net Income per Common and Common Equivalent Share
The following table shows the amounts used in computing net income per share and the weighted average number of shares of basic and of potentially dilutive common shares outstanding (shares in 000s):
12 Weeks Ended24 Weeks Ended
February 15,
2026		February 16,
2025		February 15,
2026		February 16,
2025
Net income
$2,035 $1,788 $4,036 $3,586 
Weighted average basic shares
443,946 443,982 443,954 443,985 
RSUs474 904 514 903 
Weighted average diluted shares
444,420 444,886 444,468 444,888 
Anti-dilutive RSUs
523 — 123 — 
Anti-dilutive shares are excluded from the calculation of diluted shares and earnings per diluted share because their impact would increase earnings per diluted shares.
Basic earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is calculated based on the dilutive effect of RSUs using the treasury stock method.
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Note 8—Commitments and Contingencies
Legal Proceedings
The Company is involved in many claims, proceedings and litigations arising from its business and property ownership. In accordance with accounting guidance, the Company establishes an accrual for legal proceedings if and when those matters present loss contingencies that are both probable and reasonably estimable. There may be actual losses in excess of amounts accrued. The Company monitors those matters for developments that would affect the likelihood of a loss (considering where applicable indemnification arrangements concerning suppliers and insurers) and the accrued amount, if any, thereof, and adjusts the amount as appropriate. The Company has recorded an immaterial accrual with respect to some matters described below, in addition to other immaterial accruals for matters not described below. If the loss contingency at issue is not both probable and reasonably estimable, the Company does not establish an accrual, but monitors for developments that make the contingency both probable and reasonably estimable. In each case, there is a reasonable possibility that a loss may be incurred, including a loss in excess of the applicable accrual. For matters where no accrual has been recorded, the possible loss or range of loss (including any loss in excess of the accrual) cannot, in the Company's view, be reasonably estimated because, among other things: the remedies or penalties sought are indeterminate or unspecified; the legal and/or factual theories are not well developed; and/or the matters involve complex or novel legal theories or a large number of parties.
In November 2023, a former employee filed a class action against the Company alleging claims under California law for failure to pay minimum wage, failure to pay overtime, failure to provide meal and rest breaks, failure to provide accurate wage statements, failure to reimburse expenses, failure to pay wages when due, and failure to pay sick pay. Martin Reyes v. Costco Wholesale Corporation, Sacramento County Superior Court (No. 23cv011351), removed to federal court, No. 2:24-cv-00300 (E.D. Cal.). A second amended complaint was filed, which the Company has moved to dismiss. In January 2024, the same plaintiff filed a related Private Attorneys General Act (PAGA) representative action, seeking civil penalties and asserting the same alleged underlying Labor Code violations and an additional suitable seating claim. In May 2024, the plaintiff filed an amended PAGA complaint; the Company has denied the material allegations of the complaint and filed a motion to stay the action. The motion was granted on December 18, 2024.
In August 2024, an employee filed an action under PAGA against the Company, alleging claims for penalties for various alleged violations of the California Labor Code. Nader v. Costco (No. CV-24-006198; Stanislaus County Superior Court). An amended complaint was filed in November 2024. In February 2025 the court granted the Company’s motion to strike portions of the complaint. The plaintiff filed a further amended complaint; the Company's motion to strike a portion of this complaint was granted on May 13, 2025. The Company's motion to stay the action was granted on November 13, 2025.
In January 2026, a class action on behalf of Washington employees was filed against the Company alleging failure to provide meal periods and rest breaks and to compensate for violations, wage theft, and failure to furnish accurate wage statements. The complaint seeks compensatory and exemplary damages, interest, and attorneys' fees. Madera v. Costco Wholesale Corp. (No. 26-2-02879-6, King County Superior Court).
Beginning in December 2017, the United States Judicial Panel on Multidistrict Litigation consolidated numerous cases concerning the impacts of opioid abuses filed against various defendants by counties, cities, hospitals, Native American tribes, third-party payors, and others. In re National Prescription Opiate Litigation (MDL No. 2804) (N.D. Ohio). Included are cases filed against the Company by counties and cities in Michigan, New Jersey, Oregon, Virginia and South Carolina, a third-party payor in Ohio, and a hospital in Texas, class actions filed on behalf of infants born with opioid-related medical conditions in 40 states, and class actions and individual actions filed on behalf of individuals seeking to recover alleged increased insurance costs associated with opioid abuse in 43 states and American Samoa. Claims against the Company filed in federal court outside the MDL by one county in Georgia are pending, and
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claims filed by certain cities and counties in New York are pending in state court, as are claims by certain county district attorneys in Pennsylvania. Claims against the Company in state courts in New Jersey, Oklahoma, Utah, and Arizona have been dismissed. Claims against the Company in federal court in Georgia and Florida have been dismissed. The Company is defending all of the pending matters except for a small number that have been resolved for immaterial amounts.
Between September 25 and October 31, 2023, five class action suits were filed against the Company alleging privacy law violations stemming from pixel trackers on Costco.com: Birdwell v. Costco Wholesale Corp., No. C23-02416, Contra Costa County Superior Court; and Scott v. Costco Wholesale Corp., No. 2:23-cv-08808 (C.D. Cal.), now consolidated with R.S. v. Costco Wholesale Corp., No. 2:23-cv-01628 (W.D. Wash.); Groves, et ano., v. Costco Wholesale Corp., No. 2:23-cv-01662 (W.D. Wash.), and Castillo v. Costco Wholesale Corp., under No. 2:34-cv-01548 (W.D. Wash.). The Castillo plaintiffs filed a consolidated complaint on January 26, 2024, which seeks damages, equitable relief and attorneys’ fees under various statutes, including the Washington Consumer Protection Act, Washington Privacy Act, Washington Uniform Health Care Information Act, Electronic Communications Privacy Act, California Invasion of Privacy Act, and California Confidentiality of Medical Information Act. The consolidated complaint also alleges breach of implied contract, invasion of privacy, conversion, and unjust enrichment. The Company filed a motion to dismiss the Castillo complaint on March 11, 2024. In November 2024 the court denied the motion to dismiss in substantial part. On May 16, 2024, the parties stipulated to stay Birdwell pending resolution of Castillo. On January 2, and August 22, 2024, the Company received related civil investigative demands from the Washington Attorney General's Office. On January 3, 2024, the Company received a related pre-litigation letter from the Los Angeles Office of the County Counsel. The Company is in the process of responding to both agencies.
In October and November 2025, two class actions were filed against the Company alleging violations of consumer protection and other laws arising from the Company’s sale of Kirkland Signature tequila products in the United States: Glazer v. Costco Wholesale Corp., Case No. 1:25-cv-25057 (S.D. Fla.); and Salisbury et al. v. Costco Wholesale Corp., Case No. 2:25-cv-02277 (W.D. Wash.). Plaintiffs allege that the Company’s Kirkland Signature tequilas are labeled “100% de Agave” but contain alcohol derived from non-agave sugars. They seek damages, statutory penalties, punitive and treble damages, and disgorgement. The Glazer action was subsequently dismissed without prejudice.
In January 2023 the Company received a Civil Investigative Demand from the U.S. Attorney's Office, Western District of Washington, requesting documents. The government is conducting a False Claims Act investigation concerning whether the Company presented or caused to be presented to the federal government for payment false claims relating to prescription medications.
The Company does not believe that any pending claim, proceeding or litigation, either alone or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or cash flows; it is possible that an unfavorable outcome of some or all of the matters, however unlikely, could result in a charge that might be material to the results of an individual fiscal quarter or year.
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Note 9—Segment Reporting
The Company is principally engaged in the operation of membership warehouses through wholly owned subsidiaries in the U.S., Canada, Mexico, Japan, the U.K., Korea, Australia, Taiwan, China, Spain, France, Sweden, Iceland and New Zealand. Reportable segments are largely based on management’s organization of the operating segments for operational decisions and assessments of financial performance, which considers geographic locations. The material accounting policies of the segments are as described in the notes to the consolidated financial statements included in the Company's Annual Report filed on Form 10-K for the fiscal year ended August 31, 2025, and Note 1 above. Inter-segment net sales and expenses, including royalties, have been eliminated in computing total revenue and operating income.
The chief operating decision maker (CODM) is the Company's President and Chief Executive Officer. The CODM utilizes operating income, as reported in the condensed consolidated statement of income, along with internal management reports, in evaluating performance and allocating resources.
The following table provides the revenue, significant expenses, and operating income for the Company's reportable segments:
12 Weeks Ended24 Weeks Ended
February 15,
2026		February 16,
2025		February 15,
2026		February 16,
2025
United States
Total revenue$49,931 $46,413 $98,500 $91,501 
Merchandise costs43,510 40,535 85,642 79,683 
Selling, general and administrative expenses4,786 4,363 9,607 8,805 
Operating income$1,635 $1,515 $3,251 $3,013 
Canada
Total revenue$9,291 $8,296 $18,364 $16,700 
Merchandise costs8,088 7,253 15,985 14,594 
Selling, general and administrative expenses727 640 1,469 1,341 
Operating income$476 $403 $910 $765 
Other International
Total revenue$10,375 $9,014 $20,040 $17,673 
Merchandise costs9,121 7,956 17,602 15,576 
Selling, general and administrative expenses759 660 1,530 1,363 
Operating income$495 $398 $908 $734 
Total
Total revenue$69,597 $63,723 $136,904 $125,874 
Merchandise costs60,719 55,744 119,229 109,853 
Selling, general and administrative expenses6,272 5,663 12,606 11,509 
Operating income2,606 2,316 5,069 4,512 
Other income(1)
115 106 235 216 
Income before income taxes$2,721 $2,422 $5,304 $4,728 
_______________
(1)Other income consists of interest expense and interest income and other, net.


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The following table provides depreciation and amortization and additions to property and equipment for the Company's reportable segments:
12 Weeks Ended24 Weeks Ended
February 15,
2026		February 16,
2025		February 15,
2026		February 16,
2025
United States
Depreciation and amortization$464 $435 $928 $863 
Additions to property and equipment1,016 938 2,192 1,852 
Canada
Depreciation and amortization$47 $43 $96 $88 
Additions to property and equipment152 66 342 253 
Other International
Depreciation and amortization$86 $74 $170 $149 
Additions to property and equipment121 133 281 296 
Total
Depreciation and amortization$597 $552 $1,194 $1,100 
Additions to property and equipment1,289 1,137 2,815 2,401 
The following table provides property and equipment, net and total assets for the Company's reportable segments:
February 15,
2026		August 31,
2025
United States
Property and equipment, net$24,070 $22,790 
Total assets60,142 54,862 
Canada
Property and equipment, net$3,206 $2,930 
Total assets7,639 7,304 
Other International
Property and equipment, net$6,369 $6,189 
Total assets15,858 14,933 
Total
Property and equipment, net$33,645 $31,909 
Total assets83,639 77,099 
Disaggregated Revenue
The following table summarizes net sales by merchandise category; sales from e-commerce sites and business centers have been allocated to the applicable merchandise categories:
12 Weeks Ended24 Weeks Ended
February 15,
2026		February 16,
2025		February 15,
2026		February 16,
2025
Foods and Sundries$27,149 $25,112 $54,092 $50,174 
Non-Foods19,153 17,526 36,593 33,697 
Fresh Foods9,887 8,836 18,903 17,054 
Warehouse Ancillary and Other Businesses12,053 11,056 24,632 22,590 
Total net sales
$68,242 $62,530 $134,220 $123,515 
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Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations
(amounts in millions, except per share, share, percentages and warehouse count data)
FORWARD-LOOKING STATEMENTS
Certain statements contained in this document constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For these purposes, forward-looking statements are statements that address activities, events, conditions or developments that the Company expects or anticipates may occur in the future and may relate to such matters as net sales growth, changes in comparable sales, cannibalization of existing locations by new openings, price or fee changes, earnings performance, earnings per share, stock-based compensation expense, warehouse openings and closures, capital spending, the effect of adopting certain accounting standards, future financial reporting, financing, margins, return on invested capital, investments in technology, strategic direction, expense controls, membership fee changes, signups, and renewal rates, shopping frequency, litigation, attainment of sustainability goals, and the demand for our products and services. In some cases, forward-looking statements can be identified because they contain words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or similar expressions and the negatives of those terms. Such forward-looking statements involve risks and uncertainties that may cause actual events, results or performance to differ materially from those indicated by such statements. These risks and uncertainties include, but are not limited to, domestic and international economic conditions, including exchange rates, inflation or deflation, the effects of competition and regulation, uncertainties in the financial markets, consumer and small business spending patterns and debt levels, breaches of security or privacy of member or business information, conditions affecting the acquisition, development, ownership or use of real estate, capital spending, actions of vendors, rising costs associated with employees (generally including health-care costs and wages), workforce interruptions, energy and certain commodities, geopolitical conditions (including tariffs and global conflicts), the ability to maintain effective internal control over financial reporting, regulatory and other impacts related to environmental and social matters, public-health related factors, and other risks identified from time to time in the Company's public statements and reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made, and the Company does not undertake to update these statements, except as required by law.
OVERVIEW
Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to promote understanding of the results of operations and financial condition. MD&A is provided as a supplement to and should be read in conjunction with our condensed consolidated financial statements and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q), as well as our consolidated financial statements, the accompanying Notes to Financial Statements, and the related MD&A in our fiscal year 2025 Form 10-K, which was filed with the Securities and Exchange Commission on October 8, 2025.
We operate membership warehouses and e-commerce sites based on the concept that offering low prices on a limited selection of nationally-branded and private-label products in a wide range of categories will produce high sales volumes and rapid inventory turnover. When combined with the operating efficiencies achieved by volume purchasing, efficient distribution and reduced handling of merchandise in no-frills, self-service warehouse facilities, these volumes and turnover enable us to operate profitably at significantly lower gross margins (net sales less merchandise costs) than most other retailers. We often sell inventory before we are required to pay for it, even while taking advantage of early payment discounts.
We believe that the most important driver of our profitability is increasing net sales, particularly comparable sales. Net sales includes our core merchandise categories (foods and sundries, non-foods, and fresh foods), warehouse ancillary (gasoline, pharmacy, optical, food court, hearing aids, and tire
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installation) and other businesses (e-commerce, business centers, travel, and other). E-commerce and business center sales are allocated to the appropriate merchandise categories in the Net Sales discussion. The 2% reward associated with Executive membership reduces net sales and is allocated to the category in which the reward is generated (core merchandise categories, warehouse ancillary, and other businesses). Comparable sales is defined as net sales from warehouses and digitally-enabled businesses operating for more than one year, including remodels, relocations and expansions. Starting this year, we changed our e-commerce comparable sales metric to digitally-enabled comparable sales. This metric represents sales delivered to members that are initiated through a digital device, whether fulfilled through a warehouse or a distribution center, as well as Costco Travel. The comparable sales measures are intended as supplemental information and are not a substitute for net sales presented in accordance with U.S. GAAP and should be reviewed in conjunction with results reported in accordance with U.S. GAAP. Comparable sales growth is achieved through increasing shopping frequency from new and existing members and the amount they spend on each visit (average ticket). Sales comparisons can also be particularly influenced by certain factors that are beyond our control: fluctuations in currency exchange rates (with respect to our international operations) and inflation or deflation in the cost of gasoline and associated competitive conditions. The higher our comparable sales exclusive of these items, the more we can leverage our selling, general and administrative (SG&A) expenses, reducing them as a percentage of sales and enhancing profitability. Generating comparable sales growth is foremost a question of making available the right merchandise at the right prices, a skill that we believe we have repeatedly demonstrated over the long-term. Another substantial factor in net sales growth is the health of the economies in which we do business, including the effects of inflation or deflation, especially the United States. Net sales growth and gross margins are also impacted by competition, which is vigorous and widespread, across a wide range of global, national and regional wholesalers and retailers, including those with e-commerce operations. While we cannot control or reliably predict general economic health or changes in competition, we believe that we have been successful historically in adapting our business to these changes, such as through adjustments to our pricing and merchandise mix, including increasing the penetration of our private-label items, and through online offerings.
Our philosophy is to provide our members with quality goods and services at competitive prices. We do not focus in the short-term on maximizing prices charged, but instead seek to maintain what we believe is a perception among our members of our “pricing authority” – consistently providing the most competitive values. Our net sales and gross margin are influenced in part by our merchandising and pricing strategies in response to cost increases. Those strategies can include, but are not limited to, working with our suppliers to share in absorbing cost increases, earlier-than-usual purchasing and in greater volumes, sourcing in the countries and regions where items are sold, as well as passing cost increases on to our members. Our investments in merchandise pricing may include reducing prices on merchandise to drive sales or meet competition and holding prices steady despite cost increases instead of passing the increases on to our members, negatively impacting gross margin and gross margin as a percentage of net sales (gross margin percentage) in the near term. Our digitally-enabled business, domestically and internationally, has a lower gross-margin percentage than our warehouse operations.
Government actions in various countries relating to tariffs affect the costs of some of our merchandise. The degree of our exposure is dependent on (among other things) the type of goods, rates imposed, and timing of the tariffs. Higher tariffs are more likely to adversely impact rather than improve our results.
We believe our gasoline business enhances traffic in our warehouses; it generally has a lower gross margin percentage and lower SG&A expense relative to our non-gasoline businesses. A higher penetration of gasoline sales will generally lower our gross margin percentage. Generally, rising gasoline prices benefit net sales growth which, given the higher sales base, negatively impacts our gross margin percentage but decreases our SG&A expenses as a percentage of net sales. A decline in gasoline prices has the inverse effect.
We also achieve net sales growth by opening new warehouses. As our warehouse base grows and available and desirable sites become more difficult to secure, square footage growth becomes a comparatively less substantial component of growth. Negative aspects of such growth include lower initial
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operating profitability relative to existing warehouses and cannibalization of sales at existing warehouses when openings occur in existing markets. Our rate of square footage growth is generally higher in many of our foreign markets, due to the smaller base in those markets, and we expect that to continue.
The membership format is integral to our business and profitability. This format is designed to reinforce member loyalty and provide continuing fee revenue. The extent to which we achieve growth in our membership base, increase the penetration of Executive memberships, and sustain high renewal rates materially influences our profitability. Our renewal rate, which excludes affiliates of Business members, is a trailing calculation that captures renewals during the period seven to eighteen months prior to the reporting date. Our paid-membership growth rate may be adversely impacted when warehouse openings occur in existing markets as compared to new markets. Our worldwide renewal rate is adversely impacted by membership growth in newer international markets and a higher penetration of memberships sold online, including through digital membership promotions, which renew at a slightly lower rate on average.
Our financial performance depends heavily on controlling costs. While we believe that we have achieved successes in this area, some significant costs are partially outside our control, particularly health care and utility expenses. With respect to the compensation of our employees, our philosophy is not to seek to minimize their wages and benefits. Rather, we believe that achieving our longer-term objectives of reducing employee turnover, increasing productivity and enhancing employee satisfaction requires maintaining compensation levels that are better than the industry average for much of our workforce. This may cause us, for example, to absorb costs that other employers might seek to pass through to their workforces. Because our business operates on very low margins, modest changes in various items in the consolidated statements of income, particularly merchandise costs and SG&A expenses, can have substantial impacts on net income.
Our operating models are generally the same across our U.S., Canadian, and Other International operating segments (see Note 9 to the condensed consolidated financial statements included in Part I, Item 1, of this Report). Certain operations in the Other International segment have relatively higher rates of square footage growth, lower wage and benefit costs as a percentage of sales, less or no direct membership warehouse competition, or lack e-commerce or business delivery.
In discussions of our consolidated operating results, we refer to the impact of changes in foreign currencies relative to the U.S. dollar, which are differences between the foreign-exchange rates we use to convert the financial results of our international operations from local currencies into U.S. dollars. This impact is calculated based on the difference between the current and prior period's exchange rates. The impact of changes in gasoline prices on net sales is calculated based on the difference between the current and prior period's average price per gallon. Results expressed excluding the impacts of foreign-exchange and gasoline prices are intended as supplemental information and are not a substitute for net sales presented in accordance with U.S. GAAP and should be reviewed in conjunction with results reported in accordance with U.S. GAAP.
Our fiscal year ends on the Sunday closest to August 31. References to the second quarter of 2026 and 2025 relate to the 12-week fiscal quarters ended February 15, 2026, and February 16, 2025. References to the first half of 2026 and 2025 relate to the 24 weeks ended February 15, 2026, and February 16, 2025. Certain percentages presented are calculated using actual results prior to rounding.
Highlights for the second quarter of 2026 versus 2025 include:
•We opened four new warehouses, including one relocation, for a total of three net new warehouses: one in the U.S. and two in our Canadian segment, compared to one new warehouse in the U.S.;
•Net sales increased 9% to $68,242, driven by an increase in comparable sales and sales at 27 net new warehouses opened since the end of the second quarter of 2025;
•Membership fee revenue increased 14% to $1,355, primarily driven by new member sign-ups and membership fee increases;
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•Gross margin as a percentage of net sales and excluding the impact of gasoline price deflation increased 11 basis points;
•SG&A expenses as a percentage of net sales and excluding the impact of gasoline price deflation increased eight basis points;
•The effective tax rate was 25.2%, compared to 26.2%;
•Net income increased to $2,035, $4.58 per diluted share, compared to $1,788, $4.02 per diluted share; and
•A quarterly cash dividend of $1.30 per share was declared on January 15, 2026, and paid on February 13, 2026.
RESULTS OF OPERATIONS
Net Sales
12 Weeks Ended24 Weeks Ended
February 15,
2026		February 16,
2025		February 15,
2026		February 16,
2025
Net Sales
$68,242 $62,530 $134,220 $123,515 
Increases in net sales:
U.S.7 %11 %8 %9 %
Canada12 %5 %10 %6 %
Other International 15 %5 %13 %6 %
Total Company9 %9 %9 %8 %
Increases in comparable sales:
U.S.6 %8 %6 %7 %
Canada10 %5 %8 %5 %
Other International13 %2 %11 %3 %
Total Company7 %7 %7 %6 %
Increases in comparable sales excluding the impact of changes in foreign-currency and gasoline prices:
U.S.6 %9 %6 %8 %
Canada8 %10 %8 %9 %
Other International7 %10 %7 %9 %
Total Company7 %9 %7 %8 %
Net sales increased $5,712 or 9%, and $10,705 or 9% during the second quarter and first half of 2026. The improvement was primarily attributable to an increase in comparable sales of $4,618 or 7% and $8,497 or 7% during the second quarter and first half of 2026. Comparable sales were positively impacted by increases of approximately 4% in average ticket and 3% in shopping frequency in both the second quarter and first half of 2026. The remaining increase was driven by sales at the 27 net new warehouses opened since the end of the second quarter of 2025.
Digitally-enabled comparable sales increased 23% and 22% during the second quarter and first half of 2026 and increased 22% and 21% excluding the impact of changes in foreign-currencies.
Sales increased $4,715 or 9% and $8,663 or 9% in core merchandise categories during the second quarter and first half of 2026, increasing in all categories. Sales increased $997 or 9% and $2,042 or 9% in warehouse ancillary and other businesses during the second quarter and first half of 2026.
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The volume of gasoline sold increased approximately 4%, positively impacting net sales by $209, or 33 basis points and $443 or 36 basis points during the second quarter and first half of 2026. Lower gasoline prices negatively impacted net sales by $402, or 64 basis points, and $431, or 35 basis points during the second quarter and first half of 2026, with a 5% and 3% decrease in the average price per gallon.
Changes in foreign-currencies relative to the U.S. dollar attributable to our Other International and Canadian operations positively impacted net sales by approximately $899, or 144 basis points, and approximately $935, or 76 basis points, during the second quarter and first half of 2026.
Membership Fees
12 Weeks Ended24 Weeks Ended
February 15,
2026		February 16,
2025		February 15,
2026		February 16,
2025
Membership fees$1,355 $1,193 $2,684 $2,359 
Total paid members (000s)82,100 78,400 — — 
Total cardholders (000s)147,200 140,600 — — 
Membership fee revenue increased 14% in the second quarter and first half of 2026, driven by new member sign-ups and membership fee increases. At the end of the second quarter of 2026, our renewal rates were 92.1% in the U.S. and Canada and 89.7% worldwide. Renewal rates were negatively impacted by a higher number of memberships sold online, including through digital promotions, entering the renewal rate calculation. These memberships renew at a slightly lower rate on average.
As previously reported, we increased our annual membership fees in the U.S. and Canada, effective September 1, 2024. We account for membership fee revenue on a deferred basis, recognized ratably over the one-year membership period. The fee income increase accounted for approximately 35% and 40% of membership income growth during the second quarter and first half of 2026.
Gross Margin
12 Weeks Ended24 Weeks Ended
February 15,
2026		February 16,
2025		February 15,
2026		February 16,
2025
Net sales$68,242 $62,530 $134,220$123,515
Less merchandise costs60,719 55,744 119,229109,853
Gross margin$7,523 $6,786 $14,991$13,662
Gross margin percentage
11.02 %10.85 %11.17 %11.06 %
Quarterly Results
Gross margin as a percentage of net sales increased by 17 basis points. Excluding the impact of gasoline price deflation on net sales, gross margin percentage was 10.96%, an increase of 11 basis points. The increase was positively impacted by 17 basis points in our warehouse ancillary and other businesses, primarily gasoline and pharmacy, and five basis points from a non-recurring legal settlement. Gross margin percentage was negatively impacted by seven basis points in our core merchandise categories, primarily due to 2% rewards and our co-branded credit card program, partially offset by an increase in non-foods and fresh foods. A LIFO charge in the second quarter of 2026 compared to a benefit in the second quarter of 2025 also negatively impacted gross margin by four basis points. Changes in foreign currencies relative to the U.S. dollar positively impacted gross margin by approximately $97, compared to the second quarter of 2025, attributable to Other International and Canadian operations.
The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), increased 22 basis points, with increases in all categories. This
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measure eliminates the impact of changes in sales penetration and gross margin from our warehouse ancillary and other businesses.
Gross margin percentage on a segment basis, when expressed as a percentage of the segment's own sales and excluding the impact of changes in gasoline prices on net sales (segment gross margin percentage), increased in our U.S. segment, which performed similarly to the consolidated results above. Our Canadian segment gross margin percentage increased, primarily due to increases in warehouse ancillary and other businesses, partially offset by decreases in core merchandise categories. Gross margin increased in our Other International segment, primarily due to increases in warehouse ancillary and other businesses and core merchandise categories.
Year-to-date Results
Gross margin as a percentage of net sales increased by 11 basis points. Excluding the impact of gasoline price deflation on net sales, gross margin percentage was 11.13%, an increase of seven basis points. The increase was positively impacted by 12 basis points in our warehouse ancillary and other businesses, primarily gasoline and pharmacy, and two basis points from a non-recurring legal settlement. Gross margin percentage was negatively impacted by four basis points in our core merchandise categories, primarily due to our co-branded credit card program and 2% rewards, partially offset by increases in non-foods, fresh foods, and foods and sundries. A LIFO charge in the first half of 2026 compared to a benefit in the first half of 2025 also negatively impacted gross margin by three basis points. Changes in foreign currencies relative to the U.S. dollar positively impacted gross margin by approximately $101, compared to the first half of 2025, attributable to Other International and Canadian operations.
The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), increased 26 basis points. The increase was across all categories.
Segment gross margin percentage increased in all segments. Our U.S. segment performed similarly to the consolidated results above. Our Canadian segment gross margin percentage increased, primarily due to increases in warehouse ancillary and other businesses, partially offset by decreases in core merchandise categories. Gross margin increased in our Other International segment, primarily due to increases in warehouse ancillary and other businesses and core merchandise categories.
Selling, General and Administrative Expenses
12 Weeks Ended24 Weeks Ended
February 15,
2026		February 16,
2025		February 15,
2026		February 16,
2025
SG&A expenses$6,272 $5,663 $12,606 $11,509 
SG&A expenses as a percentage of net sales9.19 %9.06 %9.39 %9.32 %
Quarterly Results
SG&A expenses as a percentage of net sales increased by 13 basis points. SG&A expenses as a percentage of net sales excluding the impact of gasoline price deflation was 9.14%, an increase of eight basis points. Compared to last year, results were negatively impacted by six basis points attributable to self-insured general liability claims expense and three basis points from central operating costs. Preopening costs were higher by one basis point. SG&A was favorably impacted by two basis points attributable to warehouse operations and other businesses. Changes in foreign currencies relative to the U.S. dollar increased SG&A expenses by approximately $65 compared to the second quarter of 2025, attributable to our Other International and Canadian operations. SG&A expenses as a percentage of net sales were higher in all segments.
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Year-to-date Results
SG&A expenses as a percentage of net sales increased by seven basis points. SG&A expenses as a percentage of net sales excluding the impact of gasoline price deflation was 9.36%, an increase of four basis points. Compared to last year, results were negatively impacted by three basis points attributable to self-insured general liability claims expense and two basis points due to a charge related to a tax assessment for prior years. Preopening costs were higher by one basis point. Warehouse operations and other businesses and stock compensation favorably impacted results by one basis point each. Changes in foreign currencies relative to the U.S. dollar increased SG&A expenses by approximately $65 compared to the first half of 2025, attributable to our Other International and Canadian operations. SG&A expenses as a percentage of net sales were higher in our U.S. segment, flat in our Canadian segment, and lower in our Other International segment.
Interest Expense
12 Weeks Ended24 Weeks Ended
February 15,
2026		February 16,
2025		February 15,
2026		February 16,
2025
Interest expense$33 $36 $68 $73 
Interest expense is primarily related to Senior Notes and financing leases.
Interest Income and Other, Net
12 Weeks Ended24 Weeks Ended
February 15,
2026		February 16,
2025		February 15,
2026		February 16,
2025
Interest income$140 $109 $262 $205 
Foreign-currency transaction gains (losses), net
(4)23 21 66 
Other, net12 10 20 18 
Interest income and other, net$148 $142 $303 $289 
The increase in interest income in the second quarter and first half of 2026 was due to higher cash balances, partially offset by lower interest rates. Foreign-currency transaction gains (losses), net, include revaluation or settlement of monetary assets and liabilities by our Canadian and Other International operations and mark-to-market adjustments for forward foreign-exchange contracts. See Derivatives and Foreign Currency sections in Item 8, Note 1 of our Annual Report on Form 10-K, for the fiscal year ended August 31, 2025.
Provision for Income Taxes
 12 Weeks Ended24 Weeks Ended
 February 15,
2026		February 16,
2025		February 15,
2026		February 16,
2025
Provision for income taxes$686 $634 $1,268 $1,142 
Effective tax rate25.2 %26.2 %23.9 %24.2 %
The effective tax rate for the first half of 2026 and 2025 was favorably impacted by discrete tax benefits of $72 and $100 related to stock compensation.
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LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes our significant sources and uses of cash and cash equivalents:
24 Weeks Ended
February 15,
2026		February 16,
2025
Net cash provided by operating activities$7,684 $6,008 
Net cash used in investing activities(2,568)(2,007)
Net cash used in financing activities(1,897)(1,434)
Our primary sources of liquidity are cash flows from operations, cash and cash equivalents, and short-term investments. Cash and cash equivalents and short-term investments were $18,240 and $15,284 at February 15, 2026, and August 31, 2025. Of these balances, unsettled credit and debit card receivables represented approximately $2,872 and $2,670 at February 15, 2026, and August 31, 2025. These receivables generally settle within four days.
Material contractual obligations arising in the normal course of business primarily consist of purchase obligations, long-term debt and related interest payments, leases, and construction and land purchase obligations. Purchase obligations consist of contracts primarily related to merchandise, equipment, and third-party services, the majority of which are due in the next 12 months. Construction and land-purchase obligations consist of contracts primarily related to the development and opening of new and relocated warehouses, the majority of which (other than leases) are due in the next 12 months.
We believe that our cash and investment positions and operating cash flow, with capacity under existing and available credit agreements, will be sufficient to meet our liquidity and capital requirements for the foreseeable future and that our U.S. current and projected asset position is sufficient to meet our U.S. liquidity requirements.
Cash Flows from Operating Activities
Net cash provided by operating activities totaled $7,684 in the first half of 2026, compared to $6,008 in the first half of 2025. Our cash flow provided by operations is primarily from net sales and membership fees. Cash flow used in operations generally consists of payments to suppliers, warehouse operating costs, including wages and employee benefits, utilities, credit and debit card processing fees, and operating leases. Cash used in operations also includes payments for income taxes. Changes in our net investment in merchandise inventories (the difference between merchandise inventories and accounts payable) is impacted by several factors, including inventory levels and turnover, payment terms with suppliers, and early payments to obtain discounts.
Cash Flows from Investing Activities
Net cash used in investing activities totaled $2,568 in the first half of 2026, compared to $2,007 in the first half of 2025, and is primarily related to capital expenditures. Net cash from investing activities also includes purchases and maturities of short-term investments.
Capital Expenditure Plans
Our primary requirements for capital are acquiring land, buildings, and equipment for new and remodeled warehouses, information systems, and manufacturing and distribution facilities. In the first half of 2026, we spent $2,815 on capital expenditures, and it is our current intention to spend approximately $6,500 during fiscal 2026, as we continue to invest in new warehouse openings, remodel existing locations, expand our depot network, and further develop our digitally-enabled businesses. These expenditures are expected to be financed with cash from operations, cash and cash equivalents, and short-term investments. We opened 12 new warehouses, including two relocations, in the first half of 2026, and plan to open 21 additional new warehouses, including three relocations, in the remainder of fiscal 2026. There
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can be no assurance that current expectations will be realized, and plans are subject to change upon further review of our capital expenditure needs and the economic environment.
Cash Flows from Financing Activities
Net cash used in financing activities totaled $1,897 in the first half of 2026, compared to $1,434 in the first half of 2025. Cash flow used in financing activities during the first half of 2026 was primarily related to the payment of dividends, repurchases of common stock, and withholding taxes on stock-based awards.
Dividends
A quarterly cash dividend of $1.30 per share was declared on January 15, 2026, and paid on February 13, 2026.
Share Repurchase Program
On January 19, 2023, the Board of Directors authorized a share repurchase program in the amount of $4,000, which expires in January 2027. During the first half of 2026 and 2025, we repurchased 454,000 and 443,000 shares of common stock, at an average price per share of $924.46 and $932.03, totaling approximately $420 and $413. These amounts may differ from the accompanying condensed consolidated statements of cash flows due to changes in unsettled repurchases at the end of a quarter. Purchases are made from time to time, as conditions warrant, potentially including the open market, block purchases and pursuant to plans under SEC Rule 10b5-1. Repurchased shares are retired, in accordance with the Washington Business Corporation Act. The remaining amount available to be purchased under our approved plan was $1,542 at the end of the second quarter.
Bank Credit Facilities and Commercial Paper Programs
We maintain bank credit facilities for working capital and general corporate purposes. At February 15, 2026, we had borrowing capacity under these facilities of $1,447. Our Canadian and Other International operations maintain $946 of this capacity under bank credit facilities, of which $293 is guaranteed by the Company. Short-term borrowings outstanding under the bank credit facilities, which are included in other current liabilities on the condensed consolidated balance sheets, were $98 at the end of the second quarter of 2026 and immaterial at the end of 2025.
We have letter of credit facilities, for commercial and standby letters of credit, totaling $236. The outstanding commitments under these facilities at the end of the second quarter of 2026 totaled $204, most of which were standby letters of credit that do not expire or have expiration dates within one year. The bank credit facilities have various expiration dates, most within one year, and we generally intend to renew these facilities. The amount of borrowings available at any time under our bank credit facilities is reduced by the amount of standby and commercial letters of credit outstanding.
Critical Accounting Estimates
The preparation of our consolidated financial statements in accordance with U.S. GAAP requires that we make estimates and judgments. We base these on historical experience and on assumptions that we believe to be reasonable. Our critical accounting policies are discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K, for the fiscal year ended August 31, 2025. There have been no material changes to the critical accounting estimates previously disclosed in that Report.
Recent Accounting Pronouncements
See discussion of Recent Accounting Pronouncements in Note 1 to the condensed consolidated financial statements included in Part I, Item 1 of this Report.
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Item 3—Quantitative and Qualitative Disclosures about Market Risk
Our direct exposure to financial market risk results from fluctuations in foreign-currency exchange rates and interest rates. There have been no material changes to our market risks as disclosed in our Annual Report on Form 10-K, for the fiscal year ended August 31, 2025.
Item 4—Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to management, including our principal executive and financial officers, to allow timely decisions regarding disclosure. The Chief Executive Officer and the Chief Financial Officer, with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures as of February 15, 2026, and, based on their evaluation, have concluded the disclosure controls and procedures were effective as of such date.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the second quarter of fiscal 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1—Legal Proceedings
See discussion of Legal Proceedings in Note 8 to the condensed consolidated financial statements included in Part I, Item 1 of this Report.
Item 1A—Risk Factors
In addition to the other information set forth in the Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K, for the fiscal year ended August 31, 2025. There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K.
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Item 2—Unregistered Sales of Equity Securities and Use of Proceeds
The following table sets forth information on our common stock repurchase activity for the second quarter of 2026 (amounts in millions, except share and per share data):
PeriodTotal Number of Shares PurchasedAverage Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Programs(1)
Maximum Dollar Value of Shares that May Yet be Purchased Under the Programs(1)
November 24, 2025 — December 21, 202579,000 $884.85 79,000 $1,682 
December 22, 2025 — January 18, 202678,000 894.05 78,000 1,612 
January 19, 2026 — February 15, 202672,000 977.69 72,000 1,542 
Total second quarter229,000 $917.02 229,000 
_______________
(1) Our share repurchase program is conducted under a $4,000 authorization approved by our Board of Directors in January 2023, which expires in January 2027.
Item 3—Defaults Upon Senior Securities
None.
Item 4—Mine Safety Disclosures
Not applicable.
Item 5—Other Information
None.
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Item 6—Exhibits
The following exhibits are filed as part of this Quarterly Report on Form 10-Q or are incorporated herein by reference.
  Incorporated by Reference
Exhibit
Number		Exhibit DescriptionFiled
Herewith		FormPeriod 
Ending		Filing Date
3.110-K8/28/202210/5/2022
3.28-K9/20/2024
10.1*10-Q11/23/202512/17/2025
31.1x
32.1**
101.INSInline XBRL Instance Documentx
101.SCHInline XBRL Taxonomy Extension Schema Documentx
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Documentx
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Documentx
101.LABInline XBRL Taxonomy Extension Label Linkbase Documentx
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Documentx
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)x
_______________
* Management contract, compensatory plan or arrangement.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
COSTCO WHOLESALE CORPORATION
(Registrant)
March 11, 2026By
/s/ RON M. VACHRIS
DateRon M. Vachris
President and Chief Executive Officer
March 11, 2026By
/s/ GARY MILLERCHIP
DateGary Millerchip
Executive Vice President and Chief Financial Officer
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