Costco FY2026 Earnings: $303B of Revenue, and the $5.9B of Membership Fees That Make Half the Profit

Costco sold $297.2 billion of merchandise in the 52 weeks ended August 30, 2026, up 10.1%, and kept 11.09 cents of gross margin on every dollar. After paying for its warehouses, its payroll and its logistics, the merchandise business earned about $5.8 billion — a 1.9% operating margin on a sales base larger than most countries' GDP. Then there is a second line on the income statement that almost nobody talks about in a grocery aisle: $5.9 billion of membership fees, up 11.0%, with essentially no cost of goods attached. Operating income was $11.7 billion. Membership fees alone were 50.6% of it. Net income rose 13.9% to $9.226 billion, or $20.76 per diluted share. We rebuilt Costco's last five fiscal years as a public Beancount ledger, and the ledger makes one thing hard to miss: Costco is a membership club that runs a thin-margin store of enormous scale to keep the members renewing.

The Headline Numbers​

Source: Costco Q4 and FY2026 results release, Form 8-K Exhibit 99.1 (September 24, 2026), consolidated statements of income. Net sales and membership fees are the two separately reported lines that sum to total revenue. FY2026 and FY2025 were both 52-week years.

The shape of this table is the whole Costco model. Revenue and merchandise costs grew in lockstep — +10.1% and +10.2% — so the gross margin percentage barely moved. The profit growth came from two other places. SG&A grew only 8.9%, three-quarters of a point slower than sales, which is operating leverage on a $27 billion cost base. And membership fees grew 11.0%, faster than anything else on the page.

Below operating income, the year was clean. Interest income and other, net was $711 million against $145 million of interest expense — Costco earns more on its cash pile than it pays on its debt. The tax provision was $3,025 million on $12,251 million of pre-tax income, a 24.7% effective rate against 25.1% a year earlier. That lower rate is part of why net income (+13.9%) outran operating income (+12.5%).

The fourth quarter​

Costco's fiscal fourth quarter is 16 weeks long, so it carries almost a third of the year.

The quarter carried a one-off. The release says Q4 "was positively impacted by a non-recurring benefit of $0.15 per diluted share from IEEPA tariff refunds received in the quarter, less partial reinvestment of those refunds in increased member values." The supplemental deck adds that, excluding the benefit, net income grew 12.3% and EPS 12.4% — still a double-digit quarter. Costco did not break the refund out by income-statement line, so the ledger books the quarter as reported and does not guess at a split; the note sits in this post instead.

The number worth circling is the 7.3% membership-fee growth in the quarter, against 11.0% for the full year. We come back to it below.

Revenue Deep Dive: Two Businesses in One Line​

Costco reports no product segments on its income statement — the segments in its 10-K are geographic (U.S., Canada, Other International). What it does report, and what matters most, is the split of revenue into two lines with completely different economics.

Membership fees have no cost-of-goods line; the costs of running the membership program sit inside SG&A with everything else.

Membership fees are under 2% of revenue and about 15% of the gross profit that funds SG&A. Here is the arithmetic that makes the business click: SG&A was $27,190 million. Merchandise gross margin was $32,968 million. Subtract one from the other and the merchandise side of the house earned $5,778 million. Membership fees were $5,907 million. The two are almost exactly the same size.

The volume drivers are in the release and its supplemental deck:

• Comparable sales rose 8.4% for the year and 9.4% in Q4; excluding gasoline prices and foreign exchange, 6.6% and 6.7%.
• In Q4, comparable traffic rose 3.3% and adjusted comparable ticket rose 3.3%. Growth was split evenly between more trips and bigger baskets.
• Digitally-enabled comparable sales grew 20.9% for the year and 19.5% in Q4.
• The warehouse count reached 939, with 25 net openings in FY2026 (914 at the end of FY2025) and an estimated 967 by the end of FY2027.

The membership base, per the Q4 supplemental deck: 84.1 million paid memberships (+3.8%), 150.4 million total cardholders (+3.6%), 42.3 million Executive members, a 92.3% renewal rate in the U.S. and Canada and 89.8% worldwide. Executive members — who pay double the fee in the U.S. and earn a 2% reward — now account for 75.6% of sales, up from 73.6% at the end of FY2025.

Management signal scan. We read the release and the supplemental deck for the seven demand-and-pricing themes our template tracks: demand exceeding supply, an industry upcycle, market expansion ahead of plan, product launches beating expectations, rising selling prices, tight supply and robust demand. None appears. Costco gives no guidance and uses no cycle language. The deck's only pricing statement points the other way: a slide titled "Lowering Everyday Low Prices," listing Kirkland Signature walnuts cut "$13.79 to $9.99" and whole-bean Colombian coffee "From $21.99 to $19.99." The absence is the finding. Costco's growth story is told in counts — traffic, members, renewal rates, warehouses — not in pricing power, and the ledger agrees: gross margin was flat at 11.09% while volume carried the year.

The Margin Story​

Merchandise operating margin = (net sales − merchandise costs − SG&A) / net sales. It is our derived measure, not a Costco-reported figure: it charges all of SG&A to the merchandise side, including the costs of running the membership program. FY2023 was a 53-week year.

Gross margin climbed 61 basis points in four years, from 10.48% to 11.09%. The FY2025 10-K explains where the most recent gains came from: core merchandise categories, "primarily due to fresh foods and our co-branded credit card program," with gasoline as a swing factor — "a higher penetration of gasoline sales will generally lower our gross margin percentage." In FY2026 the needle stopped. The Q4 deck shows why: reported gross margin fell 11 bp, with core merchandise −32 bp and a LIFO charge −11 bp, partly offset by other businesses (+23 bp) and the tariff-refund item (+9 bp). Excluding gasoline, Q4 gross margin rose 20 bp.

The more telling line is SG&A. It fell from 9.25% to 9.15% of net sales in FY2026 — the first decline in the five years we modeled. When net sales grow 10.1% and comparable sales — sales through warehouses open more than a year — grow 8.4%, most of the growth runs through buildings, staff and logistics Costco already pays for, and the fixed cost base gets spread thinner. That 10 bp of leverage is worth about $300 million on a $297 billion sales base, and it is the main reason the merchandise operating margin reached 1.94%, its best level in the series.

Still, look at the scale of what's left. A 1.94% margin is thin by any standard. Costco is not trying to widen it; the deck's own pricing slide says so. The strategy is to hand the savings back as lower prices, which drives traffic and renewals, which drives the fee line.

The One Big Question: How Much of Costco Is the Fee?​

Fees as % of net income compares a pre-tax revenue line with an after-tax profit, so it overstates the fee's after-tax contribution; it is shown because it is the ratio most often quoted.

The popular line that "membership fees are all of Costco's profit" was close to true in the early 2020s and is less true every year. In FY2023, fees were 56.4% of operating income. In FY2026 they were 50.6%. The merchandise business is carrying more of the load — $3.5 billion of merchandise operating profit in FY2023, $5.8 billion in FY2026 — because gross margin rose 52 bp and SG&A stayed tight.

That said, the fee line is still the part of the business an investor pays a premium for. It is recurring, collected in advance and nearly impossible for a competitor to undercut on a single item. The FY2025 10-K is explicit about the mechanics: Costco "increased our annual membership fees in the U.S. and Canada, effective September 1, 2024," and accounts "for membership fee revenue on a deferred basis, recognized ratably over the one-year membership period." In FY2025, "the fee income increase accounted for approximately 40% of membership income growth."

Ratable recognition explains the fourth quarter. A member renewing in August 2025 at the new price is recognized across the next twelve months; by Q4 FY2026, nearly every member has been paying the higher fee for a full year, so the year-over-year comparison no longer contains the price increase. Full-year fee growth was 11.0%; the Q4 run-rate was 7.3%, or 7.7% ex-FX per the deck. That is the fee line growing on member count (+3.8%) and Executive upgrades alone. Expect the full-year figure to converge toward it in FY2027 unless Costco raises the fee again.

How does Costco's model look next to the other big-box retailers in the Open Ledger?

Revenue and net income from each company's Open Ledger annual income-statement transaction. Fiscal years end on different dates.

The net margins look similar. The sources of them do not. Costco earns a 3% net margin while running its merchandise at under 2% operating — the fee line fills the gap. No other ledger in this table has a revenue line that behaves like it.

Tracking a $300B Retailer in Plain Text​

Double-entry forces every dollar to land in an account, and for Costco that discipline shows how the two businesses fit together. Our ledger follows the same chart of accounts as every other Open Ledger company (how we model every company): one Income:Revenue posting equal to total revenue, with the net sales and membership fee split recorded in a comment that cites the filing lines. Keeping a single revenue account lets Costco's ledger compare directly with Walmart's or Kroger's.

Here is the FY2026 income statement as it sits in the ledger. In Beancount, income is recorded as a negative number (a credit) and expenses as positives (debits), so the transaction sums to zero, with Equity:Adjustments absorbing net income:

; FY2026 Income Statement — 52 weeks ended August 30, 2026
; Total revenue 303,154 = net sales 297,247 + membership fees 5,907 (split kept in comments; the ledger posts one Income:Revenue).
; Other income, net 566 = interest income and other 711 − interest expense 145.
; Check: -303154 + 264279 + 27190 + -566 + 3025 + 9226 = 0 ✓
2026-08-30 * "Costco Wholesale Corporation" "FY2026 Income Statement"
  Income:Revenue                         -303154 MUSD  ; total revenue: net sales 297,247 + membership fees 5,907
  Expenses:CostOfRevenue                  264279 MUSD  ; merchandise costs
  Expenses:SellingGeneralAdministrative   27190 MUSD
  Income:OtherNet                        -566 MUSD  ; interest income and other 711 less interest expense 145
  Expenses:IncomeTax                      3025 MUSD  ; provision for income taxes
  Equity:Adjustments                      9226 MUSD  ; net income offset (RE set by balance assertion)

The balance sheet tells the rest of the story in three lines:

2026-08-30 balance Assets:Current:Inventories               19324 MUSD        ; merchandise inventories
2026-08-30 balance Liabilities:Current:AccountsPayable      -22591 MUSD
2026-08-30 balance Liabilities:Current:DeferredRevenue      -3006 MUSD        ; deferred membership fees

Accounts payable of $22.6 billion against inventory of $19.3 billion means suppliers finance 116.9% of everything on Costco's shelves — up from 99.7% at the end of FY2022. Costco typically sells the goods before it pays for them. Deferred membership fees are the other half of the float: $3.0 billion that members have paid in advance for months of membership Costco has not yet delivered. Together they explain the $20.2 billion cash balance, up from $14.2 billion a year earlier, against total debt of about $6.2 billion.

The Multi-Year Arc​

FY2022 net income is net income attributable to Costco ($5,915M consolidated, less $71M attributable to noncontrolling interests). FY2023 was a 53-week year.

Over four years, net sales compounded at 7.5% a year, membership fees at 8.7% and net income at 12.1%. That gap — profit growing about five points a year faster than sales — came from three sources the ledger separates cleanly: 61 bp of gross-margin expansion, a fee line growing faster than sales, and interest income on a growing cash balance. Property and equipment rose from $24.6 billion to $35.6 billion, funded without net new debt: long-term debt including the current portion fell from $6.6 billion to $6.2 billion.

The dividend history is also in the equity accounts. Retained earnings fell from $19.5 billion to $17.6 billion in FY2024 despite $7.4 billion of net income, because Costco declared $8.6 billion of dividends that year, including a $15-per-share special dividend (about $6.7 billion paid). In FY2026 retained earnings grew by $5.9 billion to $28.6 billion, with cash dividend payments of $2.5 billion and no special.

The Verdict: Bull vs. Bear​

Bull Case

• Net income compounded at 12.1% a year from FY2022 to FY2026 on sales growth of 7.5%, and the drivers — fees, SG&A leverage, interest income — are structural rather than one-off.
• The member base keeps growing: 84.1 million paid memberships (+3.8%), a 92.3% U.S./Canada renewal rate, and Executive penetration up to 75.6% of sales.
• SG&A fell 10 bp as a share of net sales in FY2026, and the deck estimates 28 net new warehouses in FY2027 (939 to 967), so the fixed-cost base keeps spreading.
• Suppliers fund 116.9% of inventory, and cash of $20.2 billion exceeds total debt by a wide margin — growth pays for itself.
• Traffic, not price, drives the comps: +3.3% Q4 traffic with the deck actively cutting prices. That is demand Costco earns rather than inflation it passes through.

Bear Case

• Membership-fee growth slowed to 7.3% in Q4 from 11.0% for the year as the September 2024 fee increase lapped. Without another increase, the highest-margin line grows at member count plus upgrades.
• Gross margin stalled at 11.09% after three years of expansion, with core merchandise down 32 bp in Q4. The fresh-foods and co-brand-card gains that lifted FY2025 did not repeat.
• None of the seven demand-and-pricing signals appears in the release or the deck; Costco gives no guidance, so investors are buying a record, not a forecast.
• Renewal rates were flat year over year (92.3% U.S./Canada, 89.8% worldwide), so fee growth now depends more on new sign-ups — and the FY2025 10-K notes that members who join online "renew at a slightly lower rate on average."
• Q4's 14.9% net income growth included a non-recurring tariff-refund benefit of $0.15 per share; the underlying quarter grew 12.3%.

Our Take

Costco is a better business than the "fees are all the profit" slogan suggests, and that is the part the ledger makes visible. The merchandise side now earns $5.8 billion on its own, up two-thirds in three years, because Costco keeps getting more efficient at running a 1.9%-margin store. The fee line is still what makes the stock a compounder, and the Q4 slowdown to 7.3% is the number to watch. If membership income holds above 7% in FY2027 without a price increase — driven by members and Executive upgrades — the model is intact. If it slips toward the 3.8% member-growth rate, Costco will have to choose between raising the fee and reinvesting less in price. At the moment it doesn't have to make that choice.