BEST BUY CO INC 10-Q

Item 1. Financial Statements Condensed Consolidated Balance Sheets $ in millions, except per share amounts (unaudited) November 1, 2025 February 1, 2025 November 2, 2024 Assets Current assets Cash and cash equivalents $ 923 $ 1,578 $ 643 Receivables, net 1,017 1,044 932 Merchandise inventories 7,993 5,085 7,806 Other current assets 640 517 574 Total current assets 10,573 8,224 9,955 Property and equipment, net 2,037 2,122 2,196 Operating lease assets 2,838 2,833 2,842 Goodwill 790 908 1,383 Other assets 548 695 642 Total assets $ 16,786 $ 14,782 $ 17,018 Liabilities and equity Current liabilities Accounts payable $ 7,319 $ 4,980 $ 7,145 Unredeemed gift card liabilities 231 253 246 Deferred revenue 853 951 878 Accrued compensation and related expenses 392 464 361 Accrued liabilities 689 741 690 Current portion of operating lease liabilities 619 617 616 Current portion of long-term debt 10 10 12 Total current liabilities 10,113 8,016 9,948 Long-term operating lease liabilities 2,309 2,282 2,293 Long-term debt 1,155 1,144 1,144 Long-term liabilities 556 532 551 Contingencies (Note 10) Equity Best Buy Co., Inc. Shareholders' Equity Preferred stock, $ 1.00 par value: Authorized - 400,000 shares; Issued and outstanding - none - - - Common stock, $ 0.10 par value: Authorized - 1.0 billion shares; Issued and outstanding - 210.0 million, 211.4 million and 213.8 million shares, respectively 22 22 22 Additional paid-in capital 16 - - Retained earnings 2,306 2,486 2,751 Accumulated other comprehensive income 309 300 309 Total equity 2,653 2,808 3,082 Total liabilities and equity $ 16,786 $ 14,782 $ 17,018 NOTE: The Consolidated Balance Sheet as of February 1, 2025, has been condensed from the audited consolidated financial statements. See Notes to Condensed Consolidated Financial Statements. 3 Table of Contents Condensed Consolidated Statements of Earnings $ and shares in millions, except per share amounts (unaudited) 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 Cost of sales 7,424 7,228 21,386 21,113 Gross profit 2,248 2,217 6,491 6,467 Selling, general and administrative expenses 1,884 1,871 5,434 5,418 Restructuring charges ( 5 ) ( 4 ) 218 4 Goodwill and intangible asset impairments 171 - 171 - Operating income 198 350 668 1,045 Other income (expense): Loss on disposal of subsidiaries - - ( 4 ) - Investment income and other 19 19 52 65 Interest expense ( 12 ) ( 13 ) ( 36 ) ( 38 ) Earnings before income tax expense and equity in income (loss) of affiliates 205 356 680 1,072 Income tax expense 64 85 151 266 Equity in income (loss) of affiliates ( 1 ) 2 ( 1 ) 4 Net earnings $ 140 $ 273 $ 528 $ 810 Basic earnings per share $ 0.67 $ 1.27 $ 2.50 $ 3.76 Diluted earnings per share $ 0.66 $ 1.26 $ 2.48 $ 3.73 Weighted-average common shares outstanding: Basic 210.7 214.8 211.4 215.7 Diluted 212.1 216.7 212.7 217.2 See Notes to Condensed Consolidated Financial Statements. 4 Table of Contents Condensed Consolidated Statements of Comprehensive Income $ in millions (unaudited) Three Months Ended Nine Months Ended November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024 Net earnings $ 140 $ 273 $ 528 $ 810 Foreign currency translation adjustments, net of tax ( 4 ) ( 1 ) 9 ( 8 ) Comprehensive income $ 136 $ 272 $ 537 $ 802 See Notes to Condensed Consolidated Financial Statements. 5 Table of Contents Condensed Consolidated Statements of Cash Flows $ in millions (unaudited) Nine Months Ended November 1, 2025 November 2, 2024 Operating activities Net earnings $ 528 $ 810 Adjustments to reconcile net earnings to total cash provided by operating activities: Depreciation and amortization 628 650 Restructuring charges 218 4 Goodwill and intangible asset impairments 171 - Stock-based compensation 106 108 Deferred income taxes 37 1 Loss on disposal of subsidiaries 4 - Long-lived asset impairments 21 2 Other, net 6 - Changes in operating assets and liabilities: Receivables 23 4 Merchandise inventories ( 2,903 ) ( 2,869 ) Other assets 3 ( 16 ) Accounts payable 2,315 2,483 Income taxes ( 133 ) ( 219 ) Other liabilities ( 340 ) ( 397 ) Total cash provided by operating activities 684 561 Investing activities Additions to property and equipment ( 529 ) ( 528 ) Disposal of subsidiary ( 27 ) - Other, net 1 6 Total cash used in investing activities ( 555 ) ( 522 ) Financing activities Repurchase of common stock ( 200 ) ( 285 ) Dividends paid ( 602 ) ( 607 ) Repayments of debt ( 10 ) ( 13 ) Other, net 4 13 Total cash used in financing activities ( 808 ) ( 892 ) Effect of exchange rate changes on cash and cash equivalents 5 ( 2 ) Decrease in cash, cash equivalents and restricted cash ( 674 ) ( 855 ) Cash, cash equivalents and restricted cash at beginning of period 1,868 1,793 Cash, cash equivalents and restricted cash at end of period $ 1,194 $ 938 See Notes to Condensed Consolidated Financial Statements. 6 Table of Contents Condensed Consolidated Statements of Changes in Shareholders' Equity $ and shares in millions, except per share amounts (unaudited) Common Shares Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Balances at August 2, 2025 210.4 $ 22 $ - $ 2,381 $ 313 $ 2,716 Net earnings, three months ended November 1, 2025 - - - 140 - 140 Other comprehensive loss: Foreign currency translation adjustments, net of tax - - - - ( 4 ) ( 4 ) Stock-based compensation - - 31 - - 31 Issuance of common stock 0.1 - 3 - - 3 Common stock dividends, $ 0.95 per share - - 4 ( 203 ) - ( 199 ) Repurchase of common stock ( 0.5 ) - ( 22 ) ( 12 ) - ( 34 ) Balances at November 1, 2025 210.0 $ 22 $ 16 $ 2,306 $ 309 $ 2,653 Balances at February 1, 2025 211.4 $ 22 $ - $ 2,486 $ 300 $ 2,808 Net earnings, nine months ended November 1, 2025 - - - 528 - 528 Other comprehensive income: Foreign currency translation adjustments, net of tax - - - - 9 9 Stock-based compensation - - 106 - - 106 Issuance of common stock 1.6 - 5 - - 5 Common stock dividends, $ 2.85 per share - - 14 ( 616 ) - ( 602 ) Repurchase of common stock ( 3.0 ) - ( 109 ) ( 92 ) - ( 201 ) Balances at November 1, 2025 210.0 $ 22 $ 16 $ 2,306 $ 309 $ 2,653 Balances at August 3, 2024 215.0 $ 22 $ - $ 2,775 $ 310 $ 3,107 Net earnings, three months ended November 2, 2024 - - - 273 - 273 Other comprehensive loss: Foreign currency translation adjustments, net of tax - - - - ( 1 ) ( 1 ) Stock-based compensation - - 34 - - 34 Issuance of common stock 0.2 - 6 - - 6 Common stock dividends, $ 0.94 per share - - 4 ( 206 ) - ( 202 ) Repurchase of common stock ( 1.4 ) - ( 44 ) ( 91 ) - ( 135 ) Balances at November 2, 2024 213.8 $ 22 $ - $ 2,751 $ 309 $ 3,082 Balances at February 3, 2024 215.4 $ 22 $ 31 $ 2,683 $ 317 $ 3,053 Net earnings, nine months ended November 2, 2024 - - - 810 - 810 Other comprehensive loss: Foreign currency translation adjustments, net of tax - - - - ( 8 ) ( 8 ) Stock-based compensation - - 108 - - 108 Issuance of common stock 1.6 - 11 - - 11 Common stock dividends, $ 2.82 per share - - 13 ( 620 ) - ( 607 ) Repurchase of common stock ( 3.2 ) - ( 163 ) ( 122 ) - ( 285 ) Balances at November 2, 2024 213.8 $ 22 $ - $ 2,751 $ 309 $ 3,082 See Notes to Condensed Consolidated Financial Statements. 7 Table of Contents Notes to Condensed Consolidated Financial Statements (unaudited) 1. Basis of Presentation Unless the context otherwise requires, the terms “Best Buy,” “we,” “us,” “our” and the “company” in these Notes to Condensed Consolidated Financial Statements refer to Best Buy Co., Inc. and, as applicable, its consolidated subsidiaries. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary for a fair presentation as prescribed by accounting principles generally accepted in the U.S. (“GAAP”). All adjustments were comprised of normal recurring adjustments, except as noted in these Notes to Condensed Consolidated Financial Statements. A large proportion of our revenue and earnings is generated in the fiscal fourth quarter, which includes the majority of the holiday shopping season. Due to the seasonal nature of our business, interim results are not necessarily indicative of results for the entire fiscal year. The interim financial statements and the related notes included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended February 1, 2025. The first nine months of fiscal 2026 and fiscal 2025 each included 39 weeks. In preparing the accompanying condensed consolidated financial statements, we evaluated the period from November 1, 2025, through the date the financial statements were issued for material subsequent events requiring recognition or disclosure. No such events were identified. Recently Issued Accounting Pronouncements In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which requires disclosure of specific categories meeting a quantitative threshold within the income tax rate reconciliation, as well as disaggregation of income taxes paid by jurisdiction. This ASU, which can be applied either prospectively or retrospectively, is effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of the ASU and expect to include updated income tax disclosures in our fiscal 2026 Form 10-K. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which requires disclosure of specific expense categories in the notes to financial statements. The amendments are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. We are currently evaluating the impact of the ASU and expect to include updated expense disclosures in our fiscal 2028 Form 10-K. Recently Enacted Tax Legislation On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OB3”). The OB3 extends key provisions of the 2017 Tax Cuts and Jobs Act, including, but not limited to, domestic research expensing, 100% bonus depreciation on tangible property and modifications to the international tax framework. The provisions do not have a material impact on our income tax expense. Supply Chain Financing We have a supply chain financing program with an independent financial institution, whereby some of our suppliers have the opportunity to receive accounts payable settlements early, at a discount, facilitated by the financial institution. Our liability associated with the funded participation in the program, which is primarily included in Accounts payable on our Condensed Consolidated Balance Sheets, was $ 1,091 million, $ 398 million and $ 793 million as of November 1, 2025, February 1, 2025, and November 2, 2024, respectively. Total Cash, Cash Equivalents and Restricted Cash Cash, cash equivalents and restricted cash reported on our Condensed Consolidated Balance Sheets are reconciled to the totals shown on our Condensed Consolidated Statements of Cash Flows as follows ($ in millions): November 1, 2025 February 1, 2025 November 2, 2024 Cash and cash equivalents $ 923 $ 1,578 $ 643 Restricted cash included in Other current assets 271 290 295 Total cash, cash equivalents and restricted cash $ 1,194 $ 1,868 $ 938 8 Table of Contents Amounts included in restricted cash are primarily restricted to cover product protection plans provided under our membership offerings and self-insurance liabilities. Reclassification Certain reclassifications of immaterial amounts previously reported have been made to the accompanying Condensed Consolidated Statements of Cash Flows to maintain consistency and comparability between periods presented. 2. Restructuring Restructuring charges were as follows ($ in millions): Three Months Ended Nine Months Ended November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024 Fiscal 2026 Labor and Store Optimization Initiative $ ( 1 ) $ — $ 121 $ — Best Buy Health Optimization and China Sourcing Initiative ( 3 ) — 102 — Fiscal 2024 Restructuring Initiative ( 1 ) ( 4 ) ( 5 ) 6 Fiscal 2023 Resource Optimization Initiative — — — ( 2 ) Total $ ( 5 ) $ ( 4 ) $ 218 $ 4 Fiscal 2026 Labor and Store Optimization Initiative In the second quarter of fiscal 2026, we commenced a restructuring initiative intended to align field resources with changing customer behaviors, close select non-traditional store locations and redirect corporate resources for better alignment with our strategy. We currently do not expect to incur material future restructuring charges related to this initiative. All charges incurred related to this initiative were from continuing operations and presented within Restructuring charges on our Condensed Consolidated Statements of Earnings. The composition of restructuring charges incurred related to this initiative were as follows ($ in millions): Three Months Ended Nine Months Ended November 1, 2025 November 1, 2025 Domestic International Total Domestic International Total Termination benefits $ ( 1 ) $ — $ ( 1 ) $ 77 $ 3 $ 80 Asset impairments (1) — — — 41 — 41 Total $ ( 1 ) $ — $ ( 1 ) $ 118 $ 3 $ 121 (1) Represents asset impairments primarily related to planned store closures, including an impairment related to an indefinite-lived tradename. See Note 3, Goodwill and Intangible Assets , for additional information. The remaining carrying value of net assets approximates fair value and was immaterial as of November 1, 2025. Restructuring accrual activity related to this initiative was as follows ($ in millions): Termination Benefits Domestic International Total Balances at February 1, 2025 $ - $ - $ - Charges 78 3 81 Cash payments ( 17 ) - ( 17 ) Adjustments (1) ( 1 ) - ( 1 ) Balances at November 1, 2025 $ 60 $ 3 $ 63 (1) Represents adjustments primarily related to higher-than-expected employee retention from previously planned organizational changes. Our restructuring accrual liabilities related to termination benefits of $ 63 million as of November 1, 2025, reflect expected future cash payments primarily during fiscal 2027. 9 Table of Contents Best Buy Health Optimization and China Sourcing Initiative In the first quarter of fiscal 2026, we commenced a restructuring initiative primarily focused on optimizing our Best Buy Health business by taking actions to maximize value and improve profitability in light of its performance against our original forecasting. These actions included the exit of a component of our Best Buy Health business that was finalized during the second quarter of fiscal 2026. In addition, we also made significant changes to reduce our exposure to tariffs, particularly in China. We currently do not expect to incur material future restructuring charges related to this initiative. All charges incurred related to this initiative were from continuing operations in our Domestic segment and presented within Restructuring charges on our Condensed Consolidated Statements of Earnings. The composition of restructuring charges incurred related to this initiative were as follows ($ in millions): Three Months Ended Nine Months Ended November 1, 2025 November 1, 2025 Asset impairments and other costs (1) $ - $ 70 Termination benefits ( 3 ) 32 Total $ ( 3 ) $ 102 (1) Primarily represents the full impairment of net assets related to a component of our Best Buy Health business and other exit costs. The remaining carrying value of net assets approximates fair value and was immaterial as of November 1, 2025. Restructuring accrual activity related to this initiative was as follows ($ in millions): Termination Benefits Asset Impairments and Other Costs Total Balances at February 1, 2025 $ — $ — $ — Charges 38 28 66 Cash payments ( 17 ) ( 27 ) ( 44 ) Adjustments (1) ( 6 ) ( 1 ) ( 7 ) Balances at November 1, 2025 $ 15 $ — $ 15 (1) Primarily represents adjustments for termination benefits primarily related to higher-than-expected employee retention from previously planned organizational changes. Our restructuring accrual liabilities related to termination benefits of $ 15 million as of November 1, 2025, reflect expected future cash payments primarily during fiscal 2026. Fiscal 2024 Restructuring Initiative During the fourth quarter of fiscal 2024, we commenced an enterprise-wide restructuring initiative intended to align field labor resources with where customers want to shop and to optimize the customer experience, redirect corporate resources for better alignment with our strategy and right-size resources to better align with our revenue outlook for fiscal 2025. We do not expect to incur material future restructuring charges related to this initiative. All charges incurred related to this initiative were comprised of employee termination benefits from continuing operations and were presented within Restructuring charges on our Condensed Consolidated Statements of Earnings as follows ($ in millions): Three Months Ended Nine Months Ended Cumulative Amount as of November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024 November 1, 2025 Domestic $ ( 1 ) $ ( 4 ) $ ( 5 ) $ 6 $ 161 International - - - - 8 Total $ ( 1 ) $ ( 4 ) $ ( 5 ) $ 6 $ 169 10 Table of Contents Restructuring accrual activity related to this initiative was as follows ($ in millions): Termination Benefits Domestic International Total Balances at February 1, 2025 $ 80 $ 5 $ 85 Cash payments ( 21 ) ( 3 ) ( 24 ) Adjustments (1) ( 5 ) - ( 5 ) Balances at November 1, 2025 $ 54 $ 2 $ 56 (1) Represents adjustments primarily related to higher-than-expected employee retention from previously planned organizational changes. Our restructuring accrual liabilities related to termination benefits of $ 56 million as of November 1, 2025, reflect expected future cash payments primarily during fiscal 2027. 3. Goodwill and Intangible Assets Goodwill Goodwill balances by segment were as follows ($ in millions): November 1, 2025 February 1, 2025 November 2, 2024 Gross Carrying Amount Cumulative Impairment Gross Carrying Amount Cumulative Impairment Gross Carrying Amount Cumulative Impairment Domestic $ 1,450 $ ( 660 ) $ 1,450 $ ( 542 ) $ 1,450 $ ( 67 ) International 608 ( 608 ) 608 ( 608 ) 608 ( 608 ) Total $ 2,058 $ ( 1,268 ) $ 2,058 $ ( 1,150 ) $ 2,058 $ ( 675 ) In the third quarter of fiscal 2026, we recorded a goodwill impairment of $ 118 million within the Domestic segment for the Best Buy Health reporting unit. The carrying value of the Best Buy Health reporting unit as of November 1, 2025, was $ 298 million. A change in Best Buy Health’s customer base during the quarter resulted in an impairment review of all Best Buy Health assets. The fair value of Best Buy Health was estimated primarily based on discounted cash flow analysis. The impairment reflects 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. In addition, definite-lived intangible asset impairments and long-lived asset impairments were also recorded. Refer to Note 4, Fair Value Measurements , for additional information. Indefinite-Lived Intangible Assets In the second quarter of fiscal 2026, we recorded a full impairment of $ 16 million related to our only remaining indefinite-lived intangible asset as a result of restructuring activity that commenced in the second quarter of fiscal 2026. Refer to Note 2, Restructuring , for additional information. Definite-Lived Intangible Assets We have definite-lived intangible assets recorded within Other assets on our Condensed Consolidated Balance Sheets as follows ($ in millions): November 1, 2025 February 1, 2025 November 2, 2024 Weighted-Average Useful Life Remaining as of November 1, 2025 (in years) Gross Carrying Amount (1) Accumulated Amortization (1) Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Customer relationships (2) $ 339 $ 339 $ 360 $ 285 $ 360 $ 283 - Tradenames 87 80 92 79 92 77 0.9 Developed technology 56 56 64 61 64 60 - Total $ 482 $ 475 $ 516 $ 425 $ 516 $ 420 0.9 (1) Gross carrying amount and accumulated amortization as of November 1, 2025, excludes $ 34 million and $ 16 million, respectively, of definite-lived intangible assets related to the exit of a component of our Best Buy Health business in the second quarter of fiscal 2026. See Note 2, Restructuring , for additional information. (2) Accumulated amortization as of November 1, 2025, includes $ 53 million of impairments related to Best Buy Health included in Goodwill and intangible asset impairments on our Condensed Consolidated Statements of Earnings. 11 Table of Contents Amortization expense, included in Selling, general and administrative expenses ("SG&A") on our Condensed Consolidated Statements of Earnings, was as follows ($ in millions): Three Months Ended Nine Months Ended November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024 Amortization expense $ 3 $ 5 $ 12 $ 16 Amortization expense expected to be recognized in future periods is as follows ($ in millions): Amortization Expense Remainder of fiscal 2026 $ 2 Fiscal 2027 5 4. Fair Value Measurements Fair value measurements are reported in one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data). Recurring Fair Value Measurements Financial assets and liabilities accounted for at fair value were as follows ($ in millions): Fair Value as of Balance Sheet Location (1) Fair Value Hierarchy November 1, 2025 February 1, 2025 November 2, 2024 Assets Money market funds (2) Cash and cash equivalents Level 1 $ 29 $ 439 $ 40 Time deposits (3) Cash and cash equivalents Level 2 134 150 5 Money market funds (2) Other current assets Level 1 122 140 139 Time deposits (3) Other current assets Level 2 40 50 50 Marketable securities that fund deferred compensation (4) Other assets Level 1 41 39 38 Liabilities Interest rate swap derivative instruments (5) Long-term liabilities Level 2 7 14 16 (1) Balance sheet location is determined by the length to maturity at date of purchase and whether the assets are restricted for particular use. (2) Valued at quoted market prices in active markets at period end. (3) Valued at face value plus accrued interest at period end, which approximates fair value. (4) Valued using the performance of mutual funds that trade with sufficient frequency and volume to obtain pricing information on an ongoing basis. (5) Valued using readily observable market inputs. These instruments are custom, over-the-counter contracts with various bank counterparties that are not traded on an active market. See Note 5, Derivative Instruments , for additional information. Nonrecurring Fair Value Measurements In the first six months of fiscal 2026, we recorded asset impairments and other costs as a result of restructuring initiatives that commenced in the first and second quarters of fiscal 2026. Refer to Note 2, Restructuring , for additional information. In the third quarter of fiscal 2026, we recorded goodwill and definite-lived intangible asset impairments related to Best Buy Health. Refer to Note 3, Goodwill and Intangible Assets , for additional information. In addition, we recorded $ 21 million of long-lived asset impairments related to Best Buy Health, included in SG&A on our Condensed Consolidated Statements of Earnings. The remaining carrying value of net long-lived assets subject to impairment approximates fair value and was immaterial as of November 1, 2025. All nonrecurring fair value remeasurements mentioned above were based on significant unobservable inputs (Level 3). 12 Table of Contents Fair Value of Financial Instruments The fair values of cash, certain restricted cash, receivables, accounts payable and other payables approximated their carrying values because of the short-term nature of these instruments. If these instruments were measured at fair value in the financial statements, they would be classified as Level 1 in the fair value hierarchy. Fair values for other investments held at cost are not readily available, but we estimate that the carrying values for these investments approximate their fair values. Long-term debt is presented at carrying value on our Condensed Consolidated Balance Sheets. If our long-term debt were recorded at fair value, it would be classified as Level 2 in the fair value hierarchy. Long-term debt balances were as follows ($ in millions): November 1, 2025 February 1, 2025 November 2, 2024 Fair Value Carrying Value Fair Value Carrying Value Fair Value Carrying Value Long-term debt (1) $ 1,076 $ 1,143 $ 1,031 $ 1,136 $ 1,028 $ 1,134 (1) Excludes debt discounts, issuance costs and finance lease obligations. 5. Derivative Instruments We manage our economic and transaction exposure to certain risks by using foreign exchange forward contracts to hedge against the effect of Canadian dollar exchange rate fluctuations on a portion of our net investment in our Canadian operations and by using interest rate swaps to mitigate interest rate risk on our $ 500 million of principal amount of notes due October 1, 2028. In addition, we use foreign currency forward contracts not designated as hedging instruments to manage the impact of fluctuations in foreign currency exchange rates relative to recognized receivable and payable balances denominated in non-functional currencies. Our derivative instruments designated as net investment hedges and fair value hedges are recorded on our Condensed Consolidated Balance Sheets at fair value. See Note 4, Fair Value Measurements , for gross fair values of our outstanding derivative instruments and corresponding fair value classifications. Notional amounts of our derivative instruments were as follows ($ in millions): November 1, 2025 February 1, 2025 November 2, 2024 Derivatives designated as net investment hedges $ 119 $ 119 $ 119 Derivatives designated as fair value hedges (interest rate swaps) 500 500 500 No hedge designation (foreign exchange contracts) 75 42 129 Total $ 694 $ 661 $ 748 Effects of our fair value hedges included in Interest expense on our Condensed Consolidated Statements of Earnings were as follows ($ in millions): Gain (Loss) Recognized Three Months Ended Nine Months Ended November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024 Interest rate swaps $ ( 8 ) $ ( 14 ) $ 7 $ ( 5 ) Adjustments to carrying value of long-term debt 8 14 ( 7 ) 5 Total $ - $ - $ - $ - 6. Debt Short-Term Debt U.S. Revolving Credit Facility On April 18, 2025, we entered into a $ 1.25 billion five-year senior unsecured revolving credit facility agreement (the “Five-Year Facility Agreement”) with a syndicate of banks. The Five-Year Facility Agreement replaced the previous $ 1.25 billion senior unsecured revolving credit facility (the “Previous Facility”) with a syndicate of banks, which was entered into April 2023 and scheduled to expire April 2028, but was terminated on April 18, 2025. 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 November 1, 2025, or the Previous Facility as of February 1, 2025, or November 2, 2024. 13 Table of Contents Long-Term Debt Long-term debt consisted of the following ($ in millions): November 1, 2025 February 1, 2025 November 2, 2024 Notes, 4.45 %, due October 1, 2028 ("2028 Notes") $ 500 $ 500 $ 500 Notes, 1.95 %, due October 1, 2030 ("2030 Notes") 650 650 650 Interest rate swap valuation adjustments ( 7 ) ( 14 ) ( 16 ) Subtotal 1,143 1,136 1,134 Debt discounts and issuance costs ( 6 ) ( 7 ) ( 7 ) Finance lease obligations 28 25 29 Total long-term debt 1,165 1,154 1,156 Less current portion 10 10 12 Total long-term debt, less current portion $ 1,155 $ 1,144 $ 1,144 Fair Value and Future Maturities See Note 4, Fair Value Measurements , for the fair value of long-term debt. The 2028 Notes mature in fiscal 2029 and the 2030 Notes mature in fiscal 2031. 7. Revenue We generate substantially all of our revenue from contracts with customers from the sale of products and services. Contract balances primarily relate to unfulfilled membership benefits and services not yet completed, product merchandise not yet delivered to customers, unredeemed gift cards and deferred revenue from our private label and co-branded credit card arrangement. Contract balances were as follows ($ in millions): November 1, 2025 February 1, 2025 November 2, 2024 Receivables, net (1) $ 605 $ 504 $ 471 Short-term contract liabilities included in: Unredeemed gift card liabilities 231 253 246 Deferred revenue 853 951 878 Accrued liabilities 67 50 58 Long-term contract liabilities included in: Long-term liabilities 209 229 237 (1) Receivables are recorded net of allowances for expected credit losses of $ 15 million, $ 20 million and $ 16 million as of November 1, 2025, February 1, 2025, and November 2, 2024, respectively. During the first nine months of fiscal 2026 and fiscal 2025, $ 1,003 million and $ 1,054 million of revenue was recognized, respectively, that was included in the contract liabilities at the beginning of the respective periods. Estimated revenue from our contract liability balances expected to be recognized in future periods if the performance of the contract is expected to have an initial duration of more than one year is as follows ($ in millions): Fiscal Year Amount Remainder of fiscal 2026 $ 9 Fiscal 2027 35 Fiscal 2028 31 Fiscal 2029 27 Fiscal 2030 27 Fiscal 2031 27 Thereafter 89 See Note 11, Segments , for information on our revenue by reportable segment and product category. 14 Table of Contents 8. Earnings per Share We compute our basic earnings per share based on the weighted-average number of common shares outstanding and our diluted earnings per share based on the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued as calculated using the treasury stock method. Reconciliations of the numerators and denominators of basic and diluted earnings per share were as follows ($ and shares in millions, except per share amounts): Three Months Ended Nine Months Ended November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024 Numerator Net earnings $ 140 $ 273 $ 528 $ 810 Denominator Weighted-average common shares outstanding 210.7 214.8 211.4 215.7 Dilutive effect of stock compensation plan awards 1.4 1.9 1.3 1.5 Weighted-average common shares outstanding, assuming dilution 212.1 216.7 212.7 217.2 Potential shares which were anti-dilutive and excluded from weighted-average share computations - - 0.1 - Basic earnings per share $ 0.67 $ 1.27 $ 2.50 $ 3.76 Diluted earnings per share $ 0.66 $ 1.26 $ 2.48 $ 3.73 9. Repurchase of Common Stock On February 28, 2022, our Board of Directors approved a $ 5.0 billion share repurchase program. The program had $ 3.1 billion remaining available for repurchases as of November 1, 2025. There is no expiration date governing the period over which we can repurchase shares under this authorization. Information regarding the shares we repurchased and retired was as follows ($ and shares in millions, except per share amounts): 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 Average price per share $ 74.03 $ 95.43 $ 67.28 $ 87.19 Number of shares repurchased and retired 0.5 1.4 3.0 3.2 10. Contingencies We are involved in a number of legal proceedings. Where appropriate, we have made accruals with respect to these matters, which are reflected on our Condensed Consolidated Financial Statements. However, there are cases where liability is not probable or the amount cannot be reasonably estimated and, therefore, accruals have not been made. We provide disclosure of matters where we believe it is reasonably possible the impact may be material to our Condensed Consolidated Financial Statements. 15 Table of Contents 11. Segments Segment and category revenue information was as follows ($ in millions): Three Months Ended Nine Months Ended November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024 Domestic: Computing and Mobile Phones $ 4,368 $ 4,065 $ 12,090 $ 11,445 Consumer Electronics 2,351 2,425 6,939 7,267 Appliances 965 1,057 3,040 3,324 Entertainment 543 479 1,673 1,497 Services 591 601 1,751 1,769 Other 60 70 210 221 Total Domestic revenue $ 8,878 $ 8,697 $ 25,703 $ 25,523 International: Computing and Mobile Phones $ 420 $ 386 $ 1,090 $ 1,012 Consumer Electronics 202 194 573 553 Appliances 64 67 201 213 Entertainment 54 47 164 132 Services 47 47 123 124 Other 7 7 23 23 Total International revenue 794 748 2,174 2,057 Total revenue $ 9,672 $ 9,445 $ 27,877 $ 27,580 Adjusted operating income by segment and the reconciliation to consolidated earnings before income tax expense and equity in income (loss) of affiliates were as follows ($ in millions): Three Months Ended November 1, 2025 November 2, 2024 Domestic (1) International Total Domestic (1) International Total Revenue $ 8,878 $ 794 $ 9,672 $ 8,697 $ 748 $ 9,445 Cost of sales 6,811 613 7,424 6,648 580 7,228 Adjusted SG&A (2) 1,707 153 1,860 1,711 155 1,866 Adjusted operating income $ 360 $ 28 388 $ 338 $ 13 351 Restructuring charges ( 5 ) ( 4 ) Goodwill and intangible asset impairments 171 - Intangible asset amortization 3 5 Long-lived asset impairment 21 - Operating income 198 350 Other income (expense): Investment income and other 19 19 Interest expense ( 12 ) ( 13 ) Earnings before income tax expense and equity in income (loss) of affiliates $ 205 $ 356 (1) Domestic segment adjusted operating income includes certain operations that are based in foreign tax jurisdictions and primarily relate to sourcing products into the U.S. (2) Adjusted SG&A excludes amortization of definite-lived intangible assets associated with acquisitions and non-cash impairments of certain long-lived assets. 16 Table of Contents Nine Months Ended November 1, 2025 November 2, 2024 Domestic (1) International Total Domestic (1) International Total Revenue $ 25,703 $ 2,174 $ 27,877 $ 25,523 $ 2,057 $ 27,580 Cost of sales 19,695 1,691 21,386 19,530 1,583 21,113 Adjusted SG&A (2) 4,968 433 5,401 4,966 436 5,402 Adjusted operating income $ 1,040 $ 50 1,090 $ 1,027 $ 38 1,065 Restructuring charges 218 4 Goodwill and intangible asset impairments 171 - Intangible asset amortization 12 16 Long-lived asset impairment 21 - Operating income 668 1,045 Other income (expense): Loss on disposal of subsidiaries ( 4 ) - Investment income and other 52 65 Interest expense ( 36 ) ( 38 ) Earnings before income tax expense and equity in income (loss) of affiliates $ 680 $ 1,072 (1) Domestic segment adjusted operating income includes certain operations that are based in foreign tax jurisdictions and primarily relate to sourcing products into the U.S. (2) Adjusted SG&A excludes amortization of definite-lived intangible assets associated with acquisitions and non-cash impairments of certain long-lived assets. Other expense and cash flow information by segment was as follows ($ in millions): Three Months Ended Nine Months Ended November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024 Capital expenditures Domestic $ 158 $ 174 $ 469 $ 472 International 30 19 60 56 Total capital expenditures $ 188 $ 193 $ 529 $ 528 Depreciation and amortization Domestic $ 196 $ 202 $ 598 $ 619 International 10 11 30 31 Total depreciation and amortization $ 206 $ 213 $ 628 $ 650 Asset information by segment was as follows ($ in millions): November 1, 2025 February 1, 2025 November 2, 2024 Domestic $ 15,219 $ 13,567 $ 15,551 International 1,567 1,215 1,467 Total assets $ 16,786 $ 14,782 $ 17,018 17 Table of Contents