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.