Executive Summary
Best Buy reported revenue of $9.445 billion for Q3 2025, down 3.19% year over year and up 1.69% quarter over quarter, with a non-GAAP operating income rate of 3.7%. The company delivered a 60 bps YoY gross margin expansion largely driven by membership and services mix, while SG&A remained broadly flat on a revenue decline. Domestic comps declined 2.8-2.9%, notably softer than earlier guidance, amid softer macro demand and election-related distraction; management characterized the demand environment as volatile but improving into the holiday period. The company highlighted strength in domestic computing and tablets (comps +5.2% collectively; laptops up 7% YoY) and robust omni-channel capabilities (Q3 online revenue of $2.7B, 31% of domestic revenue). Management reaffirmed discipline around promotions to balance profitability with sales, while amplifying investments in member experiences, AI-enabled efficiency, and new customer experiences (e.g., AI gifting tools, enhanced delivery tracking, two-hour delivery windows). The Q4 guidance implies a range of flat to down 3% comps and a full-year non-GAAP operating margin of 4.1%-4.2%, with overall revenue of about $41.1-$41.5B and a 23.5% tax rate assumption. Catalysts cited include ongoing services margin expansion, continued ramp in warranty/standalone revenue, marketplace opportunity in the US (targeting mid-2025), and Canada expansion through Best Buy Express. Near-term risks include macro demand volatility, promotional elasticity variability, tariff dynamics, and the execution of store-format pilots. Given these dynamics, the investment thesis rests on margin resilience, ongoing services contributions, and scalable growth initiatives offset by a still uneven macro backdrop and execution risk in new formats and marketplace launches.
Key Performance Indicators
Key Insights
Revenue: $9.445B; YoY change: -3.19%; QoQ: +1.69%
Gross Profit: $2.217B; Gross Margin: 23.47%; YoY margin change: -0.67% (margin expansion driven by services/memberships); QoQ: +1.42%
Operating Income: $0.350B; Operating Margin: 3.71%; YoY margin change: -1.13%; QoQ: -8.62%
Net Income: $0.273B; Net Margin: 2.89%; YoY: +3.80%; QoQ: -6.19%
Earnings Per Share (GAAP): $1.27; Diluted EPS: $1.26; YoY EPS change: +4.96%; QoQ: -5.93%
Cash Flow (Operating): -$0.256B; FCF (Free Cash Flow): -$0.449B for t...
Financial Highlights
Revenue: $9.445B; YoY change: -3.19%; QoQ: +1.69%
Gross Profit: $2.217B; Gross Margin: 23.47%; YoY margin change: -0.67% (margin expansion driven by services/memberships); QoQ: +1.42%
Operating Income: $0.350B; Operating Margin: 3.71%; YoY margin change: -1.13%; QoQ: -8.62%
Net Income: $0.273B; Net Margin: 2.89%; YoY: +3.80%; QoQ: -6.19%
Earnings Per Share (GAAP): $1.27; Diluted EPS: $1.26; YoY EPS change: +4.96%; QoQ: -5.93%
Cash Flow (Operating): -$0.256B; FCF (Free Cash Flow): -$0.449B for the quarter; Net cash provided by operating activities reflects working-capital intensity, with cash at end of period $0.643B and free cash flow negative due to working capital and capex alignment; Balance sheet shows total assets $17.018B, total liabilities $13.936B, total stockholders’ equity $3.082B.
Key profitability and efficiency ratios (Q3 2025): current ratio 1.001; quick ratio 0.216; cash ratio 0.0646; gross margin 23.47%; operating margin 3.71%; net margin 2.89%; return on assets 1.60%; return on equity 8.86%; return on capital employed 4.95%; interest coverage 26.92x; debt to capitalization 56.9%; debt to equity 1.32x; payout ratio 74.0%; free cash flow per share negative; price-to-book 6.34x.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
9.45B |
-3.19% |
1.69% |
| Gross Profit |
2.22B |
-0.67% |
1.42% |
| Operating Income |
350.00M |
-1.13% |
-8.62% |
| Net Income |
273.00M |
3.80% |
-6.19% |
| EPS |
1.27 |
4.96% |
-5.93% |
Key Financial Ratios
operatingProfitMargin
3.71%
operatingCashFlowPerShare
$-1.19
freeCashFlowPerShare
$-2.09
Management Commentary
The third-quarter call underscored earnings resilience amid softer sales. Corie Barry emphasized profitability remained in-line despite lower-than-expected top-line, noting a non-GAAP operating income rate of 3.7% on revenue of $9.4B. Management attributed gross-margin expansion to improvements in membership and services and highlighted disciplined SG&A management. Key themes included: (1) promotional discipline and value-oriented consumer behavior with a shift toward predictable sales moments; (2) strength in domestic computing and tablets with 5.2% comp growth and 7% laptop growth; (3) omni-channel momentum with online sales of $2.7B (31% of domestic revenue) and rapid delivery impact (60% of packages within one day; ~45% of digital orders picked up); (4) ongoing investments in membership, AI-enabled efficiencies, and enhanced customer experiences (e.g., AI gifting, in-home delivery ETA tracking, two-hour delivery windows).
Today, we are reporting an in-line operating income rate for the third quarter on softer-than-expected sales.
— Corie Barry
A longer-term opportunity we are working on is the marketplace. We have an established growing third-party online marketplace in Canada, and we are planning to launch one in the US targeting mid-next year.
— Corie Barry
Forward Guidance
Guidance for Q4 and the full year indicates continued revenue pressure but with profitability stabilizing. Q4 comp outlook: flat to down 3%, reflecting a still-choppy demand environment and calendar shifts; Q4 non-GAAP operating income rate guidance of 4.6%-4.8% (versus 5% in prior year, noting an extra week last year which added ≈$735M revenue and ~40 bps to margin). Full-year guidance: revenue $41.1B-$41.5B; comp down 2.5% to 3.5%; non-GAAP OI margin 4.1%-4.2%; non-GAAP tax rate ~23.5%; non-GAAP diluted EPS $6.10-$6.25. The company expects gross-margin improvement from services/membership tailwinds to persist but at a slower pace as the changes lap; product margins may face more pressure in Q4; SG&A benefits from one fewer week offset by higher advertising and technology spend. Key factors for investors: (i) the pace of services/membership margin expansion relative to expectations, (ii) the durability of promo responsiveness during the holiday period, (iii) the trajectory of AI-enabled offerings and their impact on mix and spend, (iv) the marketplace ramp and profitability profile in the US, (v) tariff and foreign-exchange risk to sourcing. Overall, the outlook is cautiously constructive with emphasis on stabilizing profitability as the core business recovers, supported by new revenue channels and international expansion.