Executive Summary
Costco delivered a solid top-line performance in QQ1 2025 with revenue of $62.15 billion, up 6.35% year over year, reflecting ongoing demand dynamics in membership-driven warehouse clubs. Despite stronger revenue, quarter-on-quarter momentum decelerated sharply from Q4 2024, with revenue decreasing by 22.02% QoQ. Gross profit stood at $8.04 billion, yielding a gross margin of 12.94%, while operating income reached $2.20 billion (operating margin ~3.53%) and net income was $1.80 billion (net margin ~2.89%), translating to an EPS of $4.05. The results underscore Costco’s earnings power from membership-driven volumes, but also highlight seasonal and mix-driven variability that can compress margins on a QoQ basis.
From a cash and balance sheet perspective, Costco continues to exhibit strong liquidity and a conservative capital structure. Cash and cash equivalents plus short-term investments totaled approximately $11.83 billion, while long-term debt stood at about $8.03 billion, leaving net debt of roughly -$2.87 billion. Operating cash flow was $3.26 billion for the quarter, with capital expenditures of $1.264 billion and free cash flow around $1.996 billion, yielding meaningful FCF generation to fund dividends and potential buybacks or debt repatriation. The balance sheet remains solid with total assets of $73.39 billion and total stockholders’ equity of $24.45 billion; the company maintains a net cash position, a favorable leverage profile (debt to capital ~24.7%), and robust liquidity to navigate inflationary pressures and investment in international expansion.
Valuation remains elevated relative to many peers, with a price-to-earnings multiple around 59.3x and a price-to-book ratio near 17.5x, suggesting investors are pricing in Costco’s durable earnings model and long-term membership value. While the current quarter shows margin compression on a QoQ basis, the durable cash generation and the membership-based revenue model position Costco to weather near-term macro volatility and fund continued investments in international markets and private-label growth. The absence of an earnings-call transcript in the provided data limits direct quotes from management; nevertheless, the quantitative results align with a strategy focused on disciplined cost control, replenishment efficiency, and maintaining compelling member value.
Key Performance Indicators
QoQ: -20.45% | YoY:10.13%
Key Insights
Revenue: $62.15B, YoY +6.35%, QoQ -22.02%
Gross Profit: $8.042B, YoY +10.13%, QoQ -20.45%
Gross Margin: 12.94%
Operating Income: $2.196B, YoY +6.50%, QoQ -27.81%
Operating Margin: 3.53%
Net Income: $1.798B, YoY +3.16%, QoQ -23.62%
Net Margin: 2.89%
EPS: $4.05, Diluted $4.04
EBITDA: $2.744B, EBITDA Margin: ~4.40%
Cash Flow: Operating Cash Flow $3.26B; CapEx $1.264B; Free Cash Flow $1.996B
Balance Sheet: Cash & Equivalents $10.91B; Short-Term Investments $0.92B; Cash & Short-Term Investmen...
Financial Highlights
Revenue: $62.15B, YoY +6.35%, QoQ -22.02%
Gross Profit: $8.042B, YoY +10.13%, QoQ -20.45%
Gross Margin: 12.94%
Operating Income: $2.196B, YoY +6.50%, QoQ -27.81%
Operating Margin: 3.53%
Net Income: $1.798B, YoY +3.16%, QoQ -23.62%
Net Margin: 2.89%
EPS: $4.05, Diluted $4.04
EBITDA: $2.744B, EBITDA Margin: ~4.40%
Cash Flow: Operating Cash Flow $3.26B; CapEx $1.264B; Free Cash Flow $1.996B
Balance Sheet: Cash & Equivalents $10.91B; Short-Term Investments $0.92B; Cash & Short-Term Investments $11.83B; Inventory $20.98B; Total Current Assets $37.52B; PPE Net $31.88B; Total Assets $73.39B; Total Liabilities $48.94B; Total Equity $24.45B; Net Debt (Cash net of debt) ≈ -$2.87B
Liquidity & Leverage: Current Ratio 0.98x; Quick Ratio 0.43x; Debt to Capitalization 24.7%; Debt to Equity 0.33x; ROE 7.35%; ROA 2.45%
Cash Conversion: DSO 4.29 days; DIO 34.89 days; DPO 36.25 days; CCC 39.19 days
Valuation Metrics (ex-ante): P/E ~59.32x; P/B ~17.45x; P/Sales ~6.86x; P/FCF ~213.75x; Dividend Yield ~0.12%
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
62.15B |
6.35% |
-22.02% |
| Gross Profit |
8.04B |
10.13% |
-20.45% |
| Operating Income |
2.20B |
6.50% |
-27.81% |
| Net Income |
1.80B |
3.16% |
-23.62% |
| EPS |
4.05 |
3.05% |
-23.58% |
Key Financial Ratios
operatingProfitMargin
3.53%
operatingCashFlowPerShare
$7.34
freeCashFlowPerShare
$4.5
dividendPayoutRatio
28.6%
Management Commentary
No earnings call transcript data provided for QQ1 2025. Consequently, no management quotes or verbatim tone analysis can be included. The analysis below integrates the disclosed financial results with typical management commentary themes observed in Costco communications (value-led pricing, membership loyalty, supply chain efficiency, and international expansion) positioned to support the quantitative outcomes.
Forward Guidance
No explicit quarterly guidance was provided in the supplied data. Given Costco’s operating cadence, investors should monitor: (1) member renewal/upgrade trends in international markets (UK, Korea, Taiwan, Japan, etc.) as a driver of same-store sales and membership revenue; (2) commodity and freight cost inflation and their impact on gross margin, given the 12.9% gross margin in QQ1 2025; (3) progression of inventory levels and working capital efficiency (inventory at ~$20.98B with days of inventory outstanding ~34.9) and potential pressure or relief from supply chain dynamics; (4) ongoing capital allocation strategy including capex intensity, potential share repurchases, and dividends. Management commentary, when available, would likely frame these as part of Costco’s durable value proposition and member-first strategy, with the goal of protecting margin through mix optimization and private-label growth while investing in international expansion and online capabilities.