Costco Membership Growth Slows, Yet Q1 Earnings Beat Expectations
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Dec 25 2025
0mins
Source: Fool
- Membership Growth Slowdown: Costco's recent quarter saw only 400,000 new memberships compared to the typical 1 million, with management attributing this to younger members signing up online and renewing at a slower pace, a trend expected to persist for a few more quarters.
- Strong Quarterly Performance: Despite the stock price decline, Costco reported earnings per share of $4.50, surpassing Wall Street's estimate of $4.27, with revenue increasing 8% to $67.3 billion, indicating robust growth potential for the company.
- Significant Sales Growth: Comparable sales rose 5.9% in the U.S. and 6.4% overall, while digital sales surged by 20.5%, website traffic increased by 24%, and mobile app traffic jumped 48%, demonstrating sustained consumer demand for Costco's offerings.
- Continued Member Loyalty: Costco currently has 81.4 million paid members, a 5.2% increase from the previous year, with North American renewal rates at 92.2%, slightly below historical averages, yet still reflecting strong customer loyalty.
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Analyst Views on COST
Wall Street analysts forecast COST stock price to rise
24 Analyst Rating
19 Buy
4 Hold
1 Sell
Strong Buy
Current: 1002.930
Low
769.00
Averages
1061
High
1205
Current: 1002.930
Low
769.00
Averages
1061
High
1205
About COST
Costco Wholesale Corporation (Costco) operates membership warehouses and e-commerce sites that offer a selection of nationally branded and private-label products in a wide range of categories. The Company buys the majority of its merchandise directly from suppliers and route it to cross-docking consolidation points (depots) or directly to its warehouses. It operates 891 warehouses, including 614 in the United States and Puerto Rico, 108 in Canada, 40 in Mexico, 35 in Japan, 29 in the United Kingdom, 19 in Korea, 15 in Australia, 14 in Taiwan, seven in China, five in Spain, two in France, and one each in Iceland, New Zealand and Sweden. It also operates e-commerce sites in the United States, Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan and Australia. The Company provides wide selection of merchandise, plus the convenience of specialty departments and exclusive member services.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Stable Earnings Growth: Costco achieved a same-store sales growth of 5.9% in fiscal 2025, which increased to 7.4% in Q2 2026, demonstrating strong performance in an uncertain economic environment and boosting investor confidence.
- Strong Membership Base: With a paid membership base of 82.1 million and a global renewal rate of 89.7%, Costco's business model remains attractive amid economic fluctuations, ensuring a steady revenue stream.
- High Market Valuation: Despite being a high-quality company, Costco's price-to-earnings ratio stands at 53.5, which is 62% higher than Nvidia, prompting investors to exercise caution regarding investment timing due to elevated valuation risks.
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- Membership Model Advantage: Costco's membership model reduces its sensitivity to macroeconomic conditions, with most profits derived from membership fees, attracting a higher-income customer base that strengthens its market position.
- Comparable Sales Growth: For the four weeks ending May 3, comparable sales adjusted for gas prices and foreign exchange rose by 7.8%, surpassing the 6.5% growth in the first 35 weeks, indicating sustained consumer demand for its offerings.
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See More
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- Sales Trend Analysis: Key topics for analysts include comparable sales and traffic trends, particularly shifts in basket size and category mix, which will influence the company's future sales strategies and market positioning.
- Membership Renewal Dynamics: Investors are keen to hear updates on membership renewal rates and the timeline for potential membership fee adjustments, which will directly impact the company's revenue stability and customer loyalty.
- International Expansion Plans: Costco's plans for international store openings will be a focal point of the call, with analysts believing the company is well-positioned to navigate high fuel prices, potentially benefiting from increased traffic due to fueling visits.
See More
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- AI's Impact on Finance: Standard Chartered announced plans to cut nearly 8,000 jobs, with CEO Bill Winters stating that technology will replace 'lower-value human capital', indicating a rapid acceleration of AI applications in finance that could lead to broader employment shifts across the sector.
- Bank of Japan Rate Hike Expectations: Market expectations for a rate hike by the Bank of Japan next month are growing, with economists forecasting a 1.5% rise in Tokyo's core consumer price index, despite being the slowest pace in four years, which could drive normalization of monetary policy.
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- Robust Membership Revenue: Membership fee income grew 13.6% to $1.36 billion in Q2, and even excluding the impact of a 2024 fee increase, the underlying growth rate was still 7.5%, reflecting the strength of its membership base and customer loyalty.
- Strong Digital Sales: In the latest quarter, digitally enabled sales (online and app-based orders) surged over 22%, significantly outpacing in-store sales and alleviating investor concerns about Costco's competitiveness in the e-commerce space, demonstrating its adaptability to market changes.
- Valuation Challenges: Despite excellent business performance, Costco's price-to-earnings ratio stands at approximately 52, well above its 10-year average of 37, suggesting that the current stock price may reflect overly optimistic expectations, prompting investors to carefully assess entry timing.
See More
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- Stable Earnings Growth: Costco achieved a same-store sales growth of 5.9% in fiscal 2025, which increased to 7.4% in Q2 2026, demonstrating strong performance in an uncertain economic environment and boosting investor confidence.
- Strong Membership Base: With a paid membership base of 82.1 million and a global renewal rate of 89.7%, Costco's business model remains attractive amid economic fluctuations, ensuring a steady revenue stream.
- High Market Valuation: Despite being a high-quality company, Costco's price-to-earnings ratio stands at 53.5, which is 62% higher than Nvidia, prompting investors to exercise caution regarding investment timing due to elevated valuation risks.
- Diversification Investment Advice: Analysts recommend that investors should not rely solely on a single stock for wealth growth but should build a diversified portfolio to navigate market volatility and achieve long-term returns.
See More
Wall Street Rises with Strong Tech Stock Performance
- Strong Market Rally: Futures indicate an up day for Wall Street as the S&P 500 and Nasdaq hit record highs, driven by AI-related stocks like Micron, which surged 19% and surpassed a $1 trillion market cap, reflecting robust demand for AI chips.
- Micron's Continued Ascent: Micron's stock rose another 7% in premarket trading, achieving a remarkable increase from $500 billion to $1 trillion in just 48 days, the fastest on record, highlighting the ongoing shortage and insatiable demand for memory chips, suggesting significant future growth potential.
- SK Hynix Joins the $1 Trillion Club: South Korean memory giant SK Hynix also crossed the $1 trillion market cap threshold in today's trading, underscoring the strong growth in the global memory market and the increasing demand driven by the AI era.
- Upgrades for FedEx and Danaher: JPMorgan upgraded FedEx from hold to buy with a price target raised to $460, citing attractive risk/reward ahead of its freight unit separation; meanwhile, Citi reinstated Danaher with a buy rating and a $230 price target, reflecting optimism in the bioprocessing sector.
See More
Costco's Third Quarter Earnings Preview
- Revenue Growth Expectations: Analysts anticipate Costco's third-quarter revenue to rise by 10.2% to $69.6 billion, reflecting its ongoing competitiveness in the retail sector despite inflationary pressures.
- Membership Model Advantage: Costco's membership model reduces its sensitivity to macroeconomic conditions, with most profits derived from membership fees, attracting a higher-income customer base that strengthens its market position.
- Comparable Sales Growth: For the four weeks ending May 3, comparable sales adjusted for gas prices and foreign exchange rose by 7.8%, surpassing the 6.5% growth in the first 35 weeks, indicating sustained consumer demand for its offerings.
- Valuation Considerations: While Costco's business remains robust, its price-to-earnings ratio of 52 is significantly higher than its peers, prompting investors to carefully consider entry points to mitigate potential stock price corrections.
See More
Costco Set to Report Strong Q3 Earnings Amidst Challenges
- Earnings Expectations: Costco is projected to report Q3 revenue of $69.7 billion, reflecting growth from last year, with an expected EPS of $4.97, indicating strong performance amidst inflation and fuel cost pressures.
- Sales Trend Analysis: Key topics for analysts include comparable sales and traffic trends, particularly shifts in basket size and category mix, which will influence the company's future sales strategies and market positioning.
- Membership Renewal Dynamics: Investors are keen to hear updates on membership renewal rates and the timeline for potential membership fee adjustments, which will directly impact the company's revenue stability and customer loyalty.
- International Expansion Plans: Costco's plans for international store openings will be a focal point of the call, with analysts believing the company is well-positioned to navigate high fuel prices, potentially benefiting from increased traffic due to fueling visits.
See More
Analyst Blog Highlights: Market Themes and Corporate Insights
- U.S. PCE Data Release: The April Core Personal Consumption Expenditures (PCE) data is set to be released on Thursday, with market participants closely watching this Fed-favored inflation gauge, which is expected to influence investor expectations regarding future interest rate policies amid rising energy prices.
- AI's Impact on Finance: Standard Chartered announced plans to cut nearly 8,000 jobs, with CEO Bill Winters stating that technology will replace 'lower-value human capital', indicating a rapid acceleration of AI applications in finance that could lead to broader employment shifts across the sector.
- Bank of Japan Rate Hike Expectations: Market expectations for a rate hike by the Bank of Japan next month are growing, with economists forecasting a 1.5% rise in Tokyo's core consumer price index, despite being the slowest pace in four years, which could drive normalization of monetary policy.
- Political Turmoil in Turkey: A Turkish court's decision to oust the main opposition leader has led to significant market reactions, with stocks plunging and the lira hitting a record low, highlighting the potential economic threats posed by political instability, particularly in an energy-import-sensitive context.
See More
Costco Stock Pullback: A Potential Buying Opportunity
- Accelerated Sales Growth: Costco's net sales rose 9.1% year-over-year in Q2 2026, reaching $68.24 billion, while net income increased nearly 14% to $2.04 billion, indicating strong performance and sustained growth potential in the retail market.
- Robust Membership Revenue: Membership fee income grew 13.6% to $1.36 billion in Q2, and even excluding the impact of a 2024 fee increase, the underlying growth rate was still 7.5%, reflecting the strength of its membership base and customer loyalty.
- Strong Digital Sales: In the latest quarter, digitally enabled sales (online and app-based orders) surged over 22%, significantly outpacing in-store sales and alleviating investor concerns about Costco's competitiveness in the e-commerce space, demonstrating its adaptability to market changes.
- Valuation Challenges: Despite excellent business performance, Costco's price-to-earnings ratio stands at approximately 52, well above its 10-year average of 37, suggesting that the current stock price may reflect overly optimistic expectations, prompting investors to carefully assess entry timing.
See More
