Costco Crushes Earnings But a Slowing Membership Trend Rattles Investors

Strong Numbers, Muted Reaction

Costco delivered another strong quarter on paper — and Wall Street shrugged anyway. The warehouse retail giant posted its fourth-quarter fiscal 2026 results after the closing bell on September 24, beating estimates on both the top and bottom lines. The company reported quarterly earnings of $6.75 per share, beating the consensus estimate of $6.52 by 3.53%. Quarterly revenue came in at $95.72 billion, topping the Street estimate of $94.86 billion and up sharply from $86.16 billion in the same period last year. Yet despite the headline wins, the stock barely budged.

Costco stock ended Thursday's session down 0.9% at $896.48 and was down 0.2% in Friday premarket trading. The disconnect between strong results and a falling stock price tells a story that goes deeper than any single quarter's numbers — and it's one that investors are increasingly paying attention to.

The Tariff Wildcard and What It Hides

Part of the earnings beat came with an asterisk. The quarter was aided by a non-recurring benefit of $0.15 per diluted share tied to refunds received under IEEPA tariff provisions, net of partial reinvestment of those refunds into lower prices for members. CEO Ron Vachris said on the investor call that Costco reinvested some of the $184 million in tariff refunds into price reductions on everyday staples, produce, meat, beverages, and certain non-food items including home furnishings. That's good news for shoppers, but it means the underlying earnings picture was a bit less impressive than the headline suggested.

Q4 beat both lines with EPS of $6.75 topping the consensus, but $0.15 of that EPS came from non-recurring IEEPA tariff refunds — and investors treated the underlying number as merely in line, leaving the stock essentially flat on the report. A retailer growing earnings in the low teens at 40 times forward earnings needs to do more than beat by two cents to re-rate. That's the cold math of a premium stock in a skeptical market.

The Membership Slowdown That Won't Go Away

The more persistent concern is what's happening with Costco's membership base — the engine that makes the entire business model run. Paid members totaled 84.1 million, missing expectations and marking 3.8% year-over-year growth, extending a multiquarter slowdown from 5.2% growth in the first quarter of fiscal 2026, 4.8% in the second, and 4.1% in the third. That's a clear and consistent deceleration, and analysts have noticed. One analyst on the earnings call pointed out that membership growth has slowed for eight consecutive quarters, asking management what it would take to reverse the declining trend.

There are bright spots within the membership picture, though. Membership fee income hit $1.849 billion in Q4, up 7.3% year over year, with a worldwide renewal rate of 89.8% and executive member penetration at 75.6% of sales. Executive members grew 9.4% to 42.3 million, and the under-40 cohort now represents more than a quarter of the base. Costco also expanded its digital capabilities, including partnerships with Uber Eats and DoorDash, enhancing convenience for a younger member demographic.

A Giant Still Growing — But at What Price?

Zoom out and the full-year picture remains genuinely impressive. For the full fiscal year, net income rose to $9.226 billion, or $20.76 per diluted share, from $8.099 billion a year earlier, while full-year net sales grew 10.1% to $297.2 billion. The company opened 28 new warehouses in fiscal year 2026 and plans to open 33 more in fiscal year 2027, focusing on expansion in the U.S. and international markets. Comparable sales grew by 9.4%, with digitally enabled sales up by 19.5%, driven by strong performance across departments including meat, bakery, electronics, and health and beauty.

The real question heading into fiscal 2027 is whether Costco can reignite membership momentum while justifying its premium valuation. Bernstein analyst Zhihan Ma maintained an Outperform rating but trimmed the price target from $1,144 to $1,143, while Mizuho analyst David Belinger also kept an Outperform but slashed his target from $1,100 to $1,065. The analysts still believe in the long-term story — they're just recalibrating expectations for how fast that story plays out. For a company of Costco's scale and loyalty, that's less a red flag than a reality check.