What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-12-05 compared with 2025-09-05 · 119 added, 102 removed, 285 unchanged (44% of the section changed)

19 unchanged sentences

Throughout this MD&A, we refer to comparable sales.

Comparable sales is a metric used by management to evaluate the performance of our existing stores, websites and call centers by measuring the change in net sales for a particular period over the comparable prior period of equivalent length.

Comparable sales includes revenue from stores, websites and call centers operating for at least 14 full months.

Revenue from online sales is included in comparable sales and represents sales initiated on a website or app, regardless of whether customers choose to pick up product in store, curbside, at an alternative pick-up location or take delivery direct to their homes.

Comparable sales is a metric used by management to evaluate the performance of our existing stores and digital offerings by measuring the change in net sales for a particular period over the comparable prior period of equivalent length.

Comparable sales includes revenue from stores operating for at least 14 full months;

sales initiated on a website, app or virtual store;

advertising revenue;

credit card revenue;

commercial sales;

gift card breakage;

marketplace commission revenue;

and sales of merchandise to wholesalers and dealers.

Revenue from acquisitions is included in comparable sales beginning with the first full quarter following the first anniversary of the date of the acquisition.

Comparable sales also includes credit card revenue, gift card breakage, commercial sales and sales of merchandise to wholesalers and dealers, as applicable.

Revenue from stores closed more than 14 days, including but not limited to relocated, remodeled, expanded and downsized stores, or stores impacted by natural disasters, is excluded from comparable sales until at least 14 full months after reopening.

Comparable sales excludes the impact of certain periodic warranty-related profit-share revenue, the effect of fluctuations in foreign currency exchange rates (applicable to our International segment only) and the impact of the 53 rd week (applicable in 53-week fiscal years only).

Comparable sales excludes revenue from stores closed more than 14 days (including but not limited to relocated, remodeled, expanded and downsized stores, or stores impacted by natural disasters) until at least 14 full months after reopening;

the impact of certain periodic warranty-related profit-share revenue;

the effect of fluctuations in foreign currency exchange rates (applicable to our International segment only);

and the impact of the 53 rd week (applicable in 53-week fiscal years only).

Comparable sales is based on our fiscal calendar and is not adjusted to align calendar weeks.

All periods presented apply this methodology consistently.

Comparable online sales is a subset of comparable sales related to our digital offerings and includes sales initiated on a website, app or virtual store;

advertising revenue and marketplace commission revenue.

Consistent with our comparable sales policy, revenue from Best Buy Express locations rebranded as a result of our previously announced collaboration with Bell Canada is excluded from our comparable sales calculation until locations have been operating for at least 14 full months.

We believe comparable sales is a meaningful supplemental metric for investors to evaluate revenue performance resulting from growth in existing stores, websites and call centers versus the portion resulting from opening new stores or closing existing stores.

We believe comparable sales is a meaningful supplemental metric for investors to evaluate revenue performance resulting from growth in existing stores and digital offerings versus the portion resulting from opening new stores or closing existing stores.

The method of calculating comparable sales varies across the retail industry.

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For these reasons, internal management reporting, including budgets, forecasts and financial targets used for short-term incentives are based on non-GAAP financial measures.

Generally, our non-GAAP financial measures include adjustments for items such as restructuring charges, goodwill and acquired intangible asset impairments, price-fixing settlements, gains and losses on disposals of subsidiaries and certain investments, amortization of definite-lived intangible assets associated with acquisitions, certain acquisition-related costs and the tax effect of all such items.

Generally, our non-GAAP financial measures include adjustments for items such as restructuring charges, goodwill and acquired intangible asset impairments, certain long-lived asset impairments, price-fixing settlements, gains and losses on disposals of subsidiaries and certain investments, amortization of definite-lived intangible assets associated with acquisitions, certain acquisition-related costs and the tax effect of all such items.

In addition, certain other items may be excluded from non-GAAP financial measures when we believe doing so provides greater clarity to management and our investors.

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Refer to the Non-GAAP Financial Measures section below for detailed reconciliations of items impacting consolidated adjusted operating income, consolidated adjusted effective tax rate and consolidated adjusted diluted EPS in the presented periods.

We continue to face significant uncertainty regarding the scope, timing and magnitude of tariffs that may affect the products we sell and the consequent financial impact on our business.

In conjunction with our vendors, we continue to seek to mitigate the impact of tariffs on our business and our customers.

While we directly import approximately 2% to 3% of our overall assortment, the complex global supply chain for consumer electronics is heavily reliant on vendor imports from China, which we estimate make up approximately 30% to 35% of the products we purchase, compared to 55% disclosed within our Annual Report on Form 10-K for the fiscal year ended February 1, 2025.

This is the result of vendors using production capabilities in multiple countries and leveraging their ability to flex sourcing options as the environment evolves.

We estimate approximately 25% of the products we purchase are from the U.S.

and Mexico, with the remaining amount from other countries, including Vietnam, Thailand, South Korea and Malaysia.

Results of Operations

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Selected consolidated financial data was as follows ($ in millions, except per share amounts):

Three Months Ended Six Months Ended

August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024

Three Months Ended Nine Months Ended

November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024

Revenue $ 9,672 $ 9,445 $ 27,877 $ 27,580

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Restructuring charges $ (5) $ (4) $ 218 $ 4

Goodwill and intangible asset impairments $ 171 $ - $ 171 $ -

Operating income $ 198 $ 350 $ 668 $ 1,045

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For additional information regarding costs classified in cost of sales and SG&A, refer to Note 1, Summary of Significant Accounting Policies , of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended February 1, 2025.

In the second quarter and first six months of fiscal 2026, we generated $9.4 billion and $18.2 billion in revenue, respectively, and our comparable sales grew 1.6% and 0.4%, respectively, driven by a mix of new technology innovation, our continued focus on omni-channel customer experience and strong vendor partnerships.

Comparable sales increased in the second quarter of fiscal 2026, primarily from comparable sales growth in gaming, computing and mobile phones, partially offset by comparable sales declines in home theater, appliances, tablets and drones.

Comparable sales increased in the first six months of fiscal 2026, primarily from comparable sales growth in computing, gaming and mobile phones, partially offset by comparable sales declines in home theater and appliances.

Restructuring charges in the second quarter of fiscal 2026 were primarily associated with a labor and store optimization restructuring initiative that commenced in the second quarter of fiscal 2026.

Restructuring charges in the first six months of fiscal 2026 also included charges primarily associated with a restructuring initiative focused on optimizing our Best Buy Health business that commenced in the first quarter of fiscal 2026.

In the third quarter and first nine months of fiscal 2026, we generated $9.7 billion and $27.9 billion in revenue, respectively, and our comparable sales grew 2.7% and 1.2%, respectively, driven by a mix of new technology innovation, our continued focus on omni-channel customer experience and strong vendor partnerships.

Comparable sales changes in the third quarter and first nine months of fiscal 2026 primarily included comparable sales growth in computing, gaming and mobile phones, partially offset by comparable sales declines in home theater, appliances and drones.

Restructuring charges in the first nine months of fiscal 2026 were primarily associated with a labor and store optimization restructuring initiative that commenced in the second quarter of fiscal 2026 and a restructuring initiative focused on optimizing our Best Buy Health business that commenced in the first quarter of fiscal 2026.

Refer to Note 2, Restructuring , of the Notes to Consolidated Financial Statements, for additional information.

Operating income rate decreased in the second quarter and first six months of fiscal 2026, primarily due to higher restructuring charges.

Diluted EPS decreased in the second quarter and first six months of fiscal 2026, primarily due to lower operating income driven by higher restructuring charges.

Revenue and gross profit rate changes in the second quarter of fiscal 2026 were driven by both our Domestic and International segments.

Changes in our SG&A rate and operating income rate in the second quarter of fiscal 2026 were primarily driven by our International segment and Domestic segment, respectively.

Revenue, gross profit rate and SG&A rate changes in the first six months of fiscal 2026 were primarily driven by our International segment.

The change in operating income rate in the first six months of fiscal 2026 was primarily driven by our Domestic segment.

Fo r further discussion of our Domestic and International segments, see Segment Performance Summary , below.

Goodwill and intangible asset impairments in the third quarter and first nine months of fiscal 2026 were related to Best Buy Health.

A change in Best Buy Health’s customer base during the third quarter of fiscal 2026 resulted in an impairment review of all Best Buy Health assets.

The impairments reflect downward revisions of our revenue growth rates and margin rates compared to previous projections, in part due to pressures in the Medicaid and Medicare Advantage markets.

Refer to Note 3, Goodwill and Intangible Assets , of the Notes to Consolidated Financial Statements, for additional information

Operating income rate decreased in the third quarter of fiscal 2026, primarily due to goodwill and intangible asset impairments.

Operating income rate decreased in the first nine months of fiscal 2026, primarily due to higher restructuring charges and goodwill and intangible asset impairments.

Diluted EPS decreased in the third quarter of fiscal 2026, primarily due to lower net earnings driven by higher goodwill and intangible asset impairments, partially offset by lower income tax expense.

Diluted EPS decreased in the first nine months of fiscal 2026, primarily due to lower net earnings driven by higher restructuring charges and goodwill and intangible asset impairments, partially offset by lower income tax expense.

Revenue, gross profit rate, SG&A rate and operating income rate changes in the third quarter of fiscal 2026 were primarily driven by our Domestic segment.

Revenue, gross profit rate and operating income rate changes in the first nine months of fiscal 2026 were primarily driven by our Domestic segment, and SG&A rate changes in the first nine months of fiscal 2026 were driven by our International segment.

For further discussion of our Domestic and International segments, see Segment Performance Summary , below.

Store Summary

Stores open by reportable segment were as follows:

August 2, 2025 August 3, 2024

November 1, 2025 November 2, 2024

Best Buy 886 889

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As we approach the expiration of leases, we evaluate various options for each location, including whether a store should remain open.

In fiscal 2026, we currently expect to reduce our traditional Domestic Best Buy store count by approximately 5 to 10 stores in the normal course of operations.

We also plan to close select non-traditional Domestic store locations in conjunction with our restructuring initiative that commenced in the second quarter of fiscal 2026.

In fiscal 2026, we currently expect to reduce our traditional Domestic Best Buy store count by 5 stores in the normal course of operations.

In fiscal 2026, we closed select non-traditional Domestic store locations in conjunction with our restructuring initiative that commenced in the second quarter of fiscal 2026, with additional closures expected in fiscal 2027.

See Note 2, Restructuring , of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for additional information.

Income Tax Expense

Income tax expense decreased to $68 million in the second quarter of fiscal 2026 compared to $101 million in the second quarter of fiscal 2025, primarily due to lower pre-tax income.

Effective tax rate (“ETR”) increased to 26.8% in the second quarter of fiscal 2026 compared to 25.8% in the second quarter of fiscal 2025, primarily due to decreased tax benefits from resolutions of tax matters and stock-based compensation, as well as increased U.S.

taxes from sourcing operations, partially offset by discrete tax impacts of the restructuring charges and associated exit of a component of our Best Buy Health business.

Income tax expense decreased to $87 million in the first six months of fiscal 2026 compared to $181 million in the first six months of fiscal 2025, primarily due to the discrete tax impacts of the restructuring charges and associated exit of a component of our Best Buy Health business, as well as lower pre-tax income.

ETR decreased to 18.3% in the first six months of fiscal 2026 compared to 25.3% in the first six months of fiscal 2025, primarily due to the discrete tax impacts of the restructuring charges and associated exit of a component of our Best Buy Health business, partially offset by decreased tax benefits from resolutions of tax matters and green energy incentives.

Income tax expense decreased to $64 million in the third quarter of fiscal 2026 compared to $85 million in the third quarter of fiscal 2025, primarily due to lower pre-tax income, partially offset by the impact of certain expenses that are not tax deductible.

Effective tax rate (“ETR”) increased to 31.5% in the third quarter of fiscal 2026 compared to 23.9% in the third quarter of fiscal 2025, primarily due to the impact of certain expenses that are not tax deductible and lower pre-tax income, partially offset by increased tax benefits from resolutions of tax matters.

Income tax expense decreased to $151 million in the first nine months of fiscal 2026 compared to $266 million in the first nine months of fiscal 2025, primarily due to lower pre-tax income and the discrete tax impacts of the restructuring charges and associated exit of a component of our Best Buy Health business, partially offset by the impact of certain expenses that are not tax deductible.

ETR decreased to 22.3% in the first nine months of fiscal 2026 compared to 24.8% in the first nine months of fiscal 2025, primarily due to the discrete tax impacts of the restructuring charges and associated exit of a component of our Best Buy Health business, partially offset by the impact of certain expenses that are not tax deductible and lower pre-tax income.

See Note 2, Restructuring , of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for additional information.

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Selected financial data for the Domestic segment was as follows ($ in millions):

Three Months Ended Six Months Ended

August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024

Three Months Ended Nine Months Ended

November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024

Revenue $ 8,878 $ 8,697 $ 25,703 $ 25,523

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(4) Adjusted operating income as a % of revenue is calculated as Domestic segment Adjusted operating income divided by Domestic segment Revenue.

Domestic segment revenue increased in the second quarter of fiscal 2026, primarily driven by comparable sales growth in gaming, computing and mobile phones, partially offset by comparable sales declines in home theater, appliances, tablets and drones.

Online revenue of $2.9 billion in the second quarter of fiscal 2026 increased 5.1% on a comparable basis.

Domestic segment revenue in the first six months of fiscal 2026 remained effectively unchanged from the first six months of fiscal 2025.

Comparable sales growth of 0.2% in the first six months of fiscal 2026 was primarily driven by computing, gaming and mobile phones, mostly offset by comparable sales declines in home theater and appliances.

Online revenue of $5.4 billion in the first six months of fiscal 2026 increased 3.7% on a comparable basis.

Domestic segment revenue increased in the third quarter and first nine months of fiscal 2026, primarily driven by comparable sales growth in computing, gaming and mobile phones, partially offset by comparable sales declines in home theater and appliances.

Online revenue of $2.8 billion and $8.3 billion in the third quarter and first nine months of fiscal 2026 increased 3.5% and 3.6%, respectively, on a comparable basis.

Domestic segment revenue mix percentages and comparable sales percentage changes by revenue category were as follows:

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Three Months Ended Three Months Ended

August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024

November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024

Computing and Mobile Phones 49% 47% 7.6 % 3.8 %

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• Computing and Mobile Phones:

The 3.8% comparable sales growth was driven primarily by computing and mobile phones, partially offset by a comparable sales decline in tablets.

The 7.6% comparable sales growth was driven primarily by computing and mobile phones.

• Consumer Electronics:

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The 14.0% comparable sales growth was driven primarily by gaming, partially offset by a comparable sales decline in drones.

The 1.0% comparable sales decline was driven primarily by Best Buy Health service offerings and delivery and installation services.

Domestic segment gross profit rate decreased in the second quarter of fiscal 2026, primarily due to lower product margin rates, which were partially offset by rate improvement within the services category.

The lower product margin rates were primarily driven by a higher sales mix of lower-margin categories.

Domestic segment gross profit rate remained effectively unchanged in the first six months of fiscal 2026 compared to the first six months of fiscal 2025, primarily driven by lower product margin rates and rate pressure within our Best Buy Health business, mostly offset by rate improvement within the services category, including membership offerings.

Domestic segment adjusted SG&A increased in the second quarter of fiscal 2026, primarily due to higher compensation expense, which included higher medical claims, the lapping of a favorable legal settlement of approximately $10 million in the second quarter of fiscal 2025 and higher technology expense.

These increases were partially offset by lower Best Buy Health expenses.

Domestic segment adjusted SG&A increased in the first six months of fiscal 2026, primarily due to higher compensation expense, the lapping of a favorable legal settlement of approximately $10 million in the second quarter of fiscal 2025 and higher technology expense.

These increases were partially offset by a favorable indirect tax settlement in the first quarter of fiscal 2026 and lower Best Buy Health expenses.

Domestic segment adjusted operating income rate decreased in the second quarter of fiscal 2026, primarily due to an unfavorable gross profit rate.

Domestic segment adjusted operating income rate decreased in the first six months of fiscal 2026, primarily due to an unfavorable adjusted SG&A rate and an unfavorable gross profit rate.

The 1.0% comparable sales decline was driven primarily by Best Buy Health service offerings.

Domestic segment gross profit rate decreased in the third quarter of fiscal 2026, primarily due to lower product margin rates, which were partially offset by rate improvement within the services category.

The lower product margin rates were primarily driven by an unfavorable sales mix and increased personalized promotional offers.

Domestic segment gross profit rate decreased in the first nine months of fiscal 2026, primarily due to lower product margin rates and rate pressure within our Best Buy Health business, which were partially offset by rate improvement within the services category.

Domestic segment adjusted SG&A decreased in the third quarter of fiscal 2026, primarily due to lower Best Buy Health expenses, largely offset by higher incentive compensation expense.

Domestic segment adjusted SG&A increased in the first nine months of fiscal 2026, primarily due to higher compensation expense, which includes incentive compensation, partially offset by lower Best Buy Health expenses and favorable fiscal 2026 indirect tax resolutions.

Domestic segment adjusted operating income rate increased in the third quarter of fiscal 2026, primarily due to a favorable adjusted SG&A rate driven by sales leverage, partially offset by an unfavorable gross profit rate.

Domestic segment adjusted operating income rate remained effectively unchanged in the first nine months of fiscal 2026 compared to the first nine months of fiscal 2025, primarily due to a favorable adjusted SG&A rate, offset by an unfavorable gross profit rate.

International Segment

Selected financial data for the International segment was as follows ($ in millions):

Three Months Ended Six Months Ended

August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024

Three Months Ended Nine Months Ended

November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024

Revenue $ 794 $ 748 $ 2,174 $ 2,057

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(3) Adjusted operating income as a % of revenue is calculated as International segment Adjusted operating income divided by International segment Revenue.

International segment revenue increased in the second quarter of fiscal 2026, primarily driven by comparable sales growth in gaming, computing and mobile phones, and revenue from Best Buy Express locations that opened in Canada after the second quarter of fiscal 2025.

International segment revenue increased in the first six months of fiscal 2026, primarily driven by revenue from Best Buy Express locations that opened in Canada after the second quarter of fiscal 2025 and comparable sales growth in gaming and computing.

International segment revenue increased in the third quarter of fiscal 2026, primarily driven by comparable sales growth in computing and mobile phones, and revenue from Best Buy Express locations excluded from comparable sales that opened in Canada after the second quarter of fiscal 2025.

These increases were partially offset by the negative impact of foreign exchange rates.

International segment revenue increased in the first nine months of fiscal 2026, primarily driven by comparable sales growth in computing, gaming and mobile phones, and revenue from Best Buy Express locations excluded from comparable sales that opened in Canada after the second quarter of fiscal 2025.

These increases were partially offset by the negative impact of foreign exchange rates.

International segment revenue mix percentages and comparable sales percentage changes by revenue category were as follows:

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Three Months Ended Three Months Ended

August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024

November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024

Computing and Mobile Phones 53% 52% 9.2 % (0.1) %

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• Consumer Electronics:

The 1.3% comparable sales growth was driven primarily by health and fitness and digital imaging, partially offset by a comparable sales decline in home theater.

The 3.6% comparable sales growth was driven primarily by digital imaging.

• Appliances:

The 5.7% comparable sales decline was driven primarily by small appliances.

The 4.1% comparable sales decline was driven primarily by large appliances.

• Entertainment:

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The 3.9% comparable sales growth was driven primarily by growth in our membership programs.

International segment gross profit rate decreased in the second quarter and first six months of fiscal 2026, primarily due to lower product margin rates.

International segment adjusted SG&A in the second quarter of fiscal 2026 remained relatively unchanged from the second quarter of fiscal 2025.

International segment adjusted SG&A decreased in the first six months of fiscal 2026, primarily due to the favorable impact of foreign exchange rates, mostly offset by higher employee compensation expense and expenses associated with Best Buy Express locations that opened after the second quarter of fiscal 2025.

International segment adjusted operating income rate decreased in the second quarter and first six months of fiscal 2026, primarily due to unfavorable gross profit rates, partially offset by increased leverage from higher sales volumes, which resulted in favorable adjusted SG&A rates.

International segment gross profit rate increased in the third quarter of fiscal 2026, primarily due to favorable supply chain costs.

International segment gross profit rate decreased in the first nine months of fiscal 2026, primarily due to lower product margin rates.

International segment adjusted SG&A decreased in the third quarter of fiscal 2026, primarily due to the favorable impact of foreign exchange rates, partially offset by higher employee compensation expense.

International segment adjusted SG&A decreased in the first nine months of fiscal 2026, primarily due to the favorable impact of foreign exchange rates, partially offset by higher credit card processing fees, expenses associated with Best Buy Express locations that opened after the second quarter of fiscal 2025 and higher employee compensation expense.

International segment adjusted operating income rate increased in the third quarter of fiscal 2026, primarily due to increased leverage from higher sales volumes, which resulted in a favorable adjusted SG&A rate.

International segment adjusted operating income rate increased in the first nine months of fiscal 2026, primarily due to increased leverage from higher sales volumes, which resulted in a favorable adjusted SG&A rate, partially offset by an unfavorable gross profit rate.

Consolidated Non-GAAP Financial Measures

Reconciliations of consolidated operating income, effective tax rate and diluted EPS (GAAP financial measures) to consolidated adjusted operating income, adjusted effective tax rate and adjusted diluted EPS (non-GAAP financial measures), respectively, were as follows ($ in millions, except per share amounts):

Three Months Ended Six Months Ended

August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024

Three Months Ended Nine Months Ended

November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024

Operating income $ 198 $ 350 $ 668 $ 1,045

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Intangible asset amortization (1)

Long-lived asset impairment (2)

Restructuring charges (3)

(5) (4) 218 4

Goodwill and intangible asset impairments (2)

Adjusted operating income $ 388 $ 351 $ 1,090 $ 1,065

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(0.3) % (0.1) % 0.1 % — %

Long-lived asset impairment (2)

(1.4) % — % 0.2 % — %

Restructuring charges (3)

(1.5) % — % 3.2 % — %

Goodwill and intangible asset impairments (2)

(3.7) % — % 0.5 % — %

Loss on disposal of subsidiaries (4)

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0.02 0.02 0.06 0.07

Long-lived asset impairment (2)

0.10 - 0.10 -

Restructuring charges (3)

(0.03) (0.02) 1.02 0.02

Loss on disposal of subsidiaries (3)

Goodwill and intangible asset impairments (2)

0.81 - 0.80 -

Loss on disposal of subsidiaries (4)

Income tax impact of non-GAAP adjustments (5)

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Adjusted diluted EPS $ 1.40 $ 1.26 $ 3.82 $ 3.80

For additional information regarding the nature of charges discussed below, refer to Note 2, Restructuring , and Note 3, Goodwill and Intangible Assets , of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q.

For additional information regarding the nature of charges discussed below, refer to Note 2, Restructuring ;

Note 3, Goodwill and Intangible Assets ;

and Note 4, Fair Value Measurements , of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q.

(1) Represents the non-cash amortization of definite-lived intangible assets associated with acquisitions, including customer relationships, tradenames and developed technology assets.

(2) Represents charges for the three and six months ended August 2, 2025, primarily related to a labor and store optimization initiative that commenced in the second quarter of fiscal 2026, and charges and subsequent adjustments related to a restructuring initiative within our Best Buy Health business that commenced in the first quarter of fiscal 2026.

Charges and subsequent adjustments for the three and six months ended August 3, 2024, primarily related to an enterprise-wide restructuring initiative that commenced in the fourth quarter of fiscal 2024.

(2) Represents charges incurred related to Best Buy Health, comprised of non-cash impairments of goodwill, intangible assets and certain long-lived assets.

(3) Represents charges and subsequent adjustments for the three and nine months ended November 1, 2025, primarily related to a labor and store optimization initiative that commenced in the second quarter of fiscal 2026, and a restructuring initiative within our Best Buy Health business that commenced in the first quarter of fiscal 2026.

Charges and subsequent adjustments for the three and nine months ended November 2, 2024, primarily related to an enterprise-wide restructuring initiative that commenced in the fourth quarter of fiscal 2024.

(4) Primarily represents the loss on disposal of a component of our Best Buy Health business.

(5) The non-GAAP adjustments primarily relate to the U.S.

As such, the income tax charge on the U.S.

As such, the forecasted annual income tax on a portion of the U.S.

non-GAAP adjustments is calculated using the statutory tax rate of 24.5%, adjusted for tax benefits discrete to the period.

Adjusted operating income rate decreased in the second quarter of fiscal 2026, primarily due to an unfavorable gross profit rate.

Adjusted operating income rate in the first six months of fiscal 2026 remained effectively unchanged from the first six months of fiscal 2025.

Adjusted effective tax rate increased in the second quarter of fiscal 2026, primarily due to decreased tax benefits from resolutions of tax matters and increased U.S.

taxes from sourcing operations.

Adjusted effective tax rate increased in the first six months of fiscal 2026, primarily due to decreased tax benefits from resolutions of tax matters and green energy incentives, as well as increased U.S.

There is no forecasted annual income tax for a portion of the U.S.

non-GAAP adjustments, as there is no forecasted annual tax benefit on the expenses in the calculation of GAAP income tax expense.

Adjusted operating income rate increased in the third quarter of fiscal 2026, primarily due to a favorable SG&A rate, partially offset by an unfavorable gross profit rate.

Adjusted operating income rate in the first nine months of fiscal 2026 remained effectively unchanged from the first nine months of fiscal 2025.

Adjusted effective tax rate increased in the third quarter of fiscal 2026, primarily due to decreased tax benefits from green energy incentives and increased U.S.

taxes from sourcing operations, partially offset by increased tax benefits from resolutions of tax matters.

Adjusted effective tax rate increased in the first nine months of fiscal 2026, primarily due to decreased tax benefits from green energy incentives and resolutions of tax matters, as well as increased U.S.

taxes from sourcing operations.

Adjusted diluted EPS decreased in the second quarter of fiscal 2026, primarily due to the decrease in adjusted earnings driven by lower adjusted operating income.

Adjusted diluted EPS decreased in the first six months of fiscal 2026, primarily due to the decrease in adjusted earnings driven by lower investment income and lower adjusted operating income.

The decreases in adjusted diluted EPS in the second quarter and first six months of fiscal 2026 were partially offset by lower diluted weighted-average common shares outstanding.

Adjusted diluted EPS increased in the third quarter of fiscal 2026, primarily due to higher adjusted operating income.

Adjusted diluted EPS increased in the first nine months of fiscal 2026, primarily due to higher adjusted operating income and lower diluted weighted-average common shares outstanding, partially offset by the impact of the higher adjusted effective tax rate and lower investment income.

Liquidity and Capital Resources

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Cash and cash equivalents were as follows ($ in millions):

August 2, 2025 February 1, 2025 August 3, 2024

November 1, 2025 February 1, 2025 November 2, 2024

Cash and cash equivalents $ 923 $ 1,578 $ 643

The decrease in cash and cash equivalents from February 1, 2025, was primarily due to dividend payments, capital expenditures and share repurchases, partially offset by positive cash flows from operations, primarily driven by earnings.

The increase in cash and cash equivalents from August 3, 2024, was primarily due to positive cash flows from operations, primarily driven by earnings, partially offset by dividend payments, capital expenditures and share repurchases.

The decrease in cash and cash equivalents from February 1, 2025, was primarily due to dividend payments, the timing and volume of inventory purchases and payments, capital expenditures and share repurchases, partially offset by cash flows related to earnings.

The increase in cash and cash equivalents from November 2, 2024, was primarily due to positive cash flows from operations, primarily driven by earnings, partially offset by dividend payments, capital expenditures and share repurchases.

Cash flows were as follows ($ in millions):

Six Months Ended

August 2, 2025 August 3, 2024

Nine Months Ended

November 1, 2025 November 2, 2024

Total cash provided by (used in):

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Operating Activities

The decrease in cash provided by operating activities in the first six months of fiscal 2026 was primarily driven by the timing and volume of inventory purchases and payments and lower net earnings, partially offset by the timing of vendor funding receivables.

The increase in cash provided by operating activities in the first nine months of fiscal 2026 was primarily driven by an increase in net earnings adjusted for non-cash items, partially offset by the timing and volume of inventory purchases and payments.

Investing Activities

The increase in cash used in investing activities in the first six months of fiscal 2026 was primarily due to the disposal of a component of our Best Buy Health business.

The increase in cash used in investing activities in the first nine months of fiscal 2026 was primarily due to the disposal of a component of our Best Buy Health business.

Financing Activities

The increase in cash used in financing activities in the first six months of fiscal 2026 was primarily driven by higher share repurchases.

The decrease in cash used in financing activities in the first nine months of fiscal 2026 was primarily driven by lower share repurchases.

Sources of Liquidity

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The Five-Year Facility Agreement permits borrowings of up to $1.25 billion and expires in April 2030.

There were no borrowings outstanding under the Five-Year Facility Agreement as of August 2, 2025, or the Previous Facility as of February 1, 2025, or August 3, 2024.

There were no borrowings outstanding under the Five-Year Facility Agreement as of November 1, 2025, or the Previous Facility as of February 1, 2025, or November 2, 2024.

Restricted Cash

Our liquidity is also affected by restricted cash balances that are primarily restricted to cover product protection plans provided under our membership offerings and self-insurance liabilities.

Restricted cash, which is included in Other current assets on our Condensed Consolidated Balance Sheets, was $257 million, $290 million and $311 million as of August 2, 2025, February 1, 2025, and August 3, 2024, respectively.

The decrease in restricted cash from February 1, 2025, was primarily due to releases of product protection reserves based on claims and purchasing behaviors of customers participating in our membership offerings.

The decrease in restricted cash from August 3, 2024, was primarily due to a decrease in cash for self-insurance liabilities and releases of product protection reserves.

Restricted cash, which is included in Other current assets on our Condensed Consolidated Balance Sheets, was $271 million, $290 million and $295 million as of November 1, 2025, February 1, 2025, and November 2, 2024, respectively.

The decreases in restricted cash from February 1, 2025, and November 2, 2024 were primarily due to releases of product protection reserves based on claims and purchasing behaviors of customers participating in our membership offerings.

Debt and Capital

As of August 2, 2025, we had $500 million of principal amount of notes due October 1, 2028, and $650 million of principal amount of notes due October 1, 2030.

As of November 1, 2025, we had $500 million of principal amount of notes due October 1, 2028, and $650 million of principal amount of notes due October 1, 2030.

Refer to Note 6, Debt , of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q, and Note 8, Debt , of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended February 1, 2025, for additional information about our outstanding debt.

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Share repurchase and dividend activity were as follows ($ and shares in millions, except per share amounts):

Three Months Ended Six Months Ended

August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024

Three Months Ended Nine Months Ended

November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024

Total cost of shares repurchased $ 34 $ 135 $ 201 $ 285

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Cash dividends declared and paid $ 199 $ 202 $ 602 $ 607

The total cost of shares repurchased decreased in the second quarter of fiscal 2026, due to a decrease in the average price per share and a decrease in the volume of repurchases.

The total cost of shares repurchased increased in the first six months of fiscal 2026, due to an increase in the volume of repurchases, partially offset by a decrease in the average price per share.

Cash dividends declared and paid decreased during the second quarter and first six months of fiscal 2026, due to fewer shares outstanding, partially offset by increases in the regular quarterly cash dividend per share.

The total cost of shares repurchased decreased in the third quarter of fiscal 2026, due to decreases in the volume of repurchases and the average price per share.

The total cost of shares repurchased decreased in the first nine months of fiscal 2026, due to decreases in the average price per share and the volume of repurchases .

Cash dividends declared and paid decreased in the third quarter and first nine months of fiscal 2026, due to fewer shares outstanding, partially offset by increases in the regular quarterly cash dividend per share.

Off-Balance-Sheet Arrangements and Contractual Obligations

Our liquidity is not dependent on the use of off-balance-sheet financing arrangements other than in connection with our $1.25 billion in undrawn capacity on our Five-Year Facility Agreement as of August 2, 2025, which, if drawn upon, would be included in either short-term or long-term debt on our Condensed Consolidated Balance Sheets.

Our liquidity is not dependent on the use of off-balance-sheet financing arrangements other than in connection with our $1.25 billion in undrawn capacity on our Five-Year Facility Agreement as of November 1, 2025, which, if drawn upon, would be included in either short-term or long-term debt on our Condensed Consolidated Balance Sheets.

There has been no material change in our contractual obligations other than in the ordinary course of business since the end of fiscal 2025.

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We describe our significant accounting policies in Note 1, Summary of Significant Accounting Policies , of the Notes to Consolidated Financial Statements, and our critical accounting estimates in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , in our Annual Report on Form 10-K for the fiscal year ended February 1, 2025.

There have been no significant changes in our significant accounting policies or critical accounting estimates since the end of fiscal 2025.

Other than the goodwill impairment recorded in the third quarter of fiscal 2026 for the Best Buy Health reporting unit, there have been no significant changes in our significant accounting policies or critical accounting estimates since the end of fiscal 2025.

See Note 3, Goodwill and Intangible Assets , of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q.

New or Recently Issued Accounting Pronouncements

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and failure to meet financial-performance guidance or other forward-looking statements.

We caution that the foregoing list of important factors is not complete.

We caution that the foregoing list of important factors is not

Any forward-looking statements speak only as of the date they are made and we assume no obligation to update any forward-looking statement that we may make.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis