Costco Wholesale (COST.NE) Q2 2026 Earnings Report

Costco’s QQ2 2026 reported revenue of USD 69.60 billion, delivering a year-over-year rise of 11.98% and a quarterly advance of 3.40%. Net income of USD 2.04 billion translated to an earnings per share (EPS) of −4.51, with diluted EPS at −4.50, creating a notable disconnect from the net income figure and signaling one or more accounting or one-time items impacting reported per-share results. The standout anomaly for the quarter is the gross profit line, which registered a negative USD 8.80 billion and a gross margin of −12.64%, a sharp deviation from Costco’s historical margin profile and from the prior quarter’s positive gross profit. Management commentary (where available) generally emphasizes membership-driven traffic strength and disciplined cost controls, but the gross margin swing warrants close scrutiny for sustainability going forward.

Despite the negative gross profit print, operating income reached USD 2.61 billion with an operating margin of 3.74%, up year-over-year and modestly higher quarter-over-quarter. Total other income contributed USD 0.115 billion, helping lift pretax income to USD 2.72 billion and after-tax income to USD 2.04 billion. Cash generation remained robust: operating cash flow USD 2.996 billion, capital expenditures USD 1.289 billion, and free cash flow USD 1.707 billion. The balance sheet remains exceptionally liquid with USD 17.383 billion of cash and equivalents at period end and net debt of USD −14.906 billion (i.e., net cash). The company repurchased USD 209 million of stock and paid USD 577 million in dividends, underscoring ongoing capital return to shareholders.

Taken together, Costco’s QQ2 2026 results illustrate a company with strong cash generation and a fortress balance sheet, but with an unusual gross margin outcome that could imply temporary pressures on unit economics or accounting treatment in the quarter. The sustainability of the margin dynamics will be a key driver for investors going into the balance of 2026 and into 2027. The investment thesis remains constructive on Costco’s enduring membership-based moat, scale advantages, and cash returns, tempered by the need for margin normalization and continued efficiency in cost structure.