Costco Beats Q3 Estimates with 8.3% Revenue Growth; IMS Trims Stake
Costco reported Q3 FY26 EPS of $4.34, beating estimates by $0.07, while revenue rose 8.3% to $67.31 billion year-over-year. In its latest 13F filing, IMS Investment Management cut its stake by 28.3%, selling 2,053 shares, even as Brighton Jones and Revolve Wealth added positions.
1. Decade-Long Outperformance Driven by P/E Expansion
Over the last ten years, Costco has outpaced the S&P 500 by a wide margin, delivering more than double the benchmark’s total return. Much of this gain stems from an expansion in the stock’s price-to-earnings multiple, which rose from the mid-20s to nearly 47 times trailing earnings. Investors who allocated $1,000 to Costco a decade ago would now be sitting on a position more than three times larger, reflecting both robust earnings growth and a premium valuation supported by the company’s recurring-revenue membership model.
2. Stock Split Prospects in 2026
With the share price once again approaching four‐digit territory, market observers have flagged Costco as a prime candidate for a stock split in 2026. A split would maintain the company’s intrinsic value while lowering the trading price per share, potentially broadening retail participation and boosting trading volume. Rivals such as Walmart executed a 3‐for‐1 split in 2024 at a significantly lower price point, suggesting that Costco’s management may see similar strategic benefits in the year ahead.
3. Q1 FY26 Comparable Sales and Financial Performance
In the first quarter of fiscal 2026, Costco reported 6.4% year-over-year comparable sales growth, driven by strong traffic gains and higher average ticket sizes. Total revenue climbed 8.3% to $67.31 billion, while net income rose to $4.34 in earnings per share, beating consensus estimates by $0.07. Membership fee revenues, which are nearly pure profit, increased by double digits to approximately $5.3 billion, underlining the stickiness of a base that now exceeds 81 million paid households globally.
4. Institutional Activity and Dividend Updates
Institutional investors continue to adjust their stakes, with IMS Investment Management trimming its holding by 28.3% in the third quarter and Brighton Jones LLC boosting its position by 12.3% in the fourth quarter. Costco declared a quarterly dividend of $1.30 per share, representing a 27.85% payout ratio and an annualized yield of roughly 0.6%. The firm’s disciplined capital allocation, combining share repurchases, dividends and strategic reinvestment, reflects management’s confidence in sustaining long-term member engagement and shareholder returns.