COSTCO WHOLESALE CORP /NEW 10-K

Item 8—Financial Statements and Supplementary Data COSTCO WHOLESALE CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Reports of Independent Registered Public Accounting Firm 34 Consolidated Statements of Income 37 Consolidated Statements of Comprehensive Income 38 Consolidated Balance Sheets 39 Consolidated Statements of Equity 40 Consolidated Statements of Cash Flows 41 Notes to Consolidated Financial Statements 42 33 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors Costco Wholesale Corporation: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Costco Wholesale Corporation and subsidiaries (the Company) as of August 31, 2025 and September 1, 2024, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the fiscal years in the three-year period ended August 31, 2025, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2025 and September 1, 2024, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended August 31, 2025, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of August 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated October 7, 2025 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 34 Table of Contents Sufficiency of audit evidence over United States and Canada revenue As discussed in Note 11 to the consolidated financial statements, the Company generated $200,046 million and $36,923 million of total revenue in the United States (U.S.) and Canada, respectively, for the year ended August 31, 2025, which included revenue from membership fees, merchandise sales, and gasoline sales (U.S. and Canada revenue). The processing and recording of U.S. and Canada revenue is dependent upon the use of multiple information technology (IT) systems. We identified the evaluation of the sufficiency of audit evidence over U.S. and Canada revenue as a critical audit matter. Evaluating the sufficiency of audit evidence required subjective auditor judgment due to the highly automated nature of certain processes to record U.S. and Canada revenue, which involves interfacing significant volumes of data across multiple IT systems. The complexity of the IT environment required the involvement of IT professionals with specialized skills and knowledge. The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over the processing and recording of U.S. and Canada revenue, including the IT systems tested. We involved IT professionals with specialized skills and knowledge, who assisted in evaluating the design and testing the operating effectiveness of certain internal controls over the Company's revenue process, including general IT and application controls related to the IT systems used for the processing and recording of U.S. and Canada revenue. We performed a software-assisted data analysis to test the relationships among certain revenue journal entries. We evaluated the sufficiency of audit evidence obtained over U.S. and Canada revenue by assessing the results of procedures performed, including the appropriateness of nature and extent of such evidence. /s/ KPMG LLP We have served as the Company’s auditor since 2002. Seattle, Washington October 7, 2025 35 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors Costco Wholesale Corporation: Opinion on Internal Control Over Financial Reporting We have audited Costco Wholesale Corporation and subsidiaries ’ (the Company) internal control over financial reporting as of August 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of August 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of August 31, 2025 and September 1, 2024, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the fiscal years in the three-year period ended August 31, 2025, and the related notes (collectively, the consolidated financial statements), and our report dated October 7, 2025 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Seattle, Washington October 7, 2025 36 Table of Contents COSTCO WHOLESALE CORPORATION CONSOLIDATED STATEMENTS OF INCOME (amounts in millions, except per share data) 52 Weeks Ended 52 Weeks Ended 53 Weeks Ended August 31, 2025 September 1, 2024 September 3, 2023 REVENUE Net sales $ 269,912 $ 249,625 $ 237,710 Membership fees 5,323 4,828 4,580 Total revenue 275,235 254,453 242,290 OPERATING EXPENSES Merchandise costs 239,886 222,358 212,586 Selling, general and administrative 24,966 22,810 21,590 Operating income 10,383 9,285 8,114 OTHER INCOME (EXPENSE) Interest expense ( 154 ) ( 169 ) ( 160 ) Interest income and other, net 589 624 533 INCOME BEFORE INCOME TAXES 10,818 9,740 8,487 Provision for income taxes 2,719 2,373 2,195 NET INCOME $ 8,099 $ 7,367 $ 6,292 NET INCOME PER COMMON SHARE: Basic $ 18.24 $ 16.59 $ 14.18 Diluted $ 18.21 $ 16.56 $ 14.16 Shares used in calculation (000’s) Basic 443,985 443,914 443,854 Diluted 444,803 444,759 444,452 The accompanying notes are an integral part of these consolidated financial statements. 37 Table of Contents COSTCO WHOLESALE CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (amounts in millions) 52 Weeks Ended 52 Weeks Ended 53 Weeks Ended August 31, 2025 September 1, 2024 September 3, 2023 NET INCOME $ 8,099 $ 7,367 $ 6,292 Foreign-currency translation adjustment and other, net 58 ( 23 ) 24 COMPREHENSIVE INCOME $ 8,157 $ 7,344 $ 6,316 The accompanying notes are an integral part of these consolidated financial statements. 38 Table of Contents COSTCO WHOLESALE CORPORATION CONSOLIDATED BALANCE SHEETS (amounts in millions, except par value and share data) August 31, 2025 September 1, 2024 ASSETS CURRENT ASSETS Cash and cash equivalents $ 14,161 $ 9,906 Short-term investments 1,123 1,238 Receivables, net 3,203 2,721 Merchandise inventories 18,116 18,647 Other current assets 1,777 1,734 Total current assets 38,380 34,246 OTHER ASSETS Property and equipment, net 31,909 29,032 Operating lease right-of-use assets 2,725 2,617 Other long-term assets 4,085 3,936 TOTAL ASSETS $ 77,099 $ 69,831 LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts payable $ 19,783 $ 19,421 Accrued salaries and benefits 5,205 4,794 Accrued member rewards 2,677 2,435 Deferred membership fees 2,854 2,501 Other current liabilities 6,589 6,313 Total current liabilities 37,108 35,464 OTHER LIABILITIES Long-term debt, excluding current portion 5,713 5,794 Long-term operating lease liabilities 2,460 2,375 Other long-term liabilities 2,654 2,576 TOTAL LIABILITIES 47,935 46,209 COMMITMENTS AND CONTINGENCIES EQUITY Preferred stock $ 0.005 par value; 100,000,000 shares authorized; no shares issued and outstanding — — Common stock $ 0.005 par value; 900,000,000 shares authorized; 443,237,000 and 443,126,000 shares issued and outstanding 2 2 Additional paid-in capital 8,282 7,829 Accumulated other comprehensive loss ( 1,770 ) ( 1,828 ) Retained earnings 22,650 17,619 TOTAL EQUITY 29,164 23,622 TOTAL LIABILITIES AND EQUITY $ 77,099 $ 69,831 The accompanying notes are an integral part of these consolidated financial statements. 39 Table of Contents COSTCO WHOLESALE CORPORATION CONSOLIDATED STATEMENTS OF EQUITY (amounts in millions) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Costco Stockholders’ Equity Noncontrolling Interests Total Equity Shares (000’s) Amount BALANCE AT AUGUST 28, 2022 442,664 $ 2 $ 6,884 $ ( 1,829 ) $ 15,585 $ 20,642 $ 5 $ 20,647 Net income — — — — 6,292 6,292 — 6,292 Foreign-currency translation adjustment and other, net — — — 24 — 24 — 24 Stock-based compensation — — 778 — — 778 — 778 Release of vested restricted stock units (RSUs), including tax effects 1,470 — ( 303 ) — — ( 303 ) — ( 303 ) Repurchases of common stock ( 1,341 ) — ( 24 ) — ( 653 ) ( 677 ) — ( 677 ) Cash dividends declared and other — — 5 — ( 1,703 ) ( 1,698 ) ( 5 ) ( 1,703 ) BALANCE AT SEPTEMBER 3, 2023 442,793 2 7,340 ( 1,805 ) 19,521 25,058 — 25,058 Net income — — — — 7,367 7,367 — 7,367 Foreign-currency translation adjustment and other, net — — — ( 23 ) — ( 23 ) — ( 23 ) Stock-based compensation — — 822 — — 822 — 822 Release of vested RSUs, including tax effects 1,337 — ( 315 ) — — ( 315 ) — ( 315 ) Repurchases of common stock ( 1,004 ) — ( 18 ) — ( 680 ) ( 698 ) — ( 698 ) Cash dividends declared — — — — ( 8,589 ) ( 8,589 ) — ( 8,589 ) BALANCE AT SEPTEMBER 1, 2024 443,126 2 7,829 ( 1,828 ) 17,619 23,622 — 23,622 Net income — — — — 8,099 8,099 — 8,099 Foreign-currency translation adjustment and other, net — — — 58 — 58 — 58 Stock-based compensation — — 864 — — 864 — 864 Release of vested RSUs, including tax effects 1,054 — ( 393 ) — — ( 393 ) — ( 393 ) Repurchases of common stock ( 943 ) — ( 18 ) — ( 885 ) ( 903 ) — ( 903 ) Cash dividends declared — — — — ( 2,183 ) ( 2,183 ) — ( 2,183 ) BALANCE AT AUGUST 31, 2025 443,237 $ 2 $ 8,282 $ ( 1,770 ) $ 22,650 $ 29,164 $ — $ 29,164 The accompanying notes are an integral part of these consolidated financial statements. 40 Table of Contents COSTCO WHOLESALE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in millions) 52 Weeks Ended 52 Weeks Ended 53 Weeks Ended August 31, 2025 September 1, 2024 September 3, 2023 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 8,099 $ 7,367 $ 6,292 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,426 2,237 2,077 Non-cash lease expense 303 315 412 Stock-based compensation 860 818 774 Impairment of assets and other non-cash operating activities, net ( 117 ) ( 9 ) 495 Changes in operating assets and liabilities: Merchandise inventories 559 ( 2,068 ) 1,228 Accounts payable 404 1,938 ( 382 ) Other operating assets and liabilities, net 801 741 172 Net cash provided by operating activities 13,335 11,339 11,068 CASH FLOWS FROM INVESTING ACTIVITIES Additions to property and equipment ( 5,498 ) ( 4,710 ) ( 4,323 ) Purchases of short-term investments ( 1,028 ) ( 1,470 ) ( 1,622 ) Maturities of short-term investments 1,141 1,790 937 Other investing activities, net 74 ( 19 ) 36 Net cash used in investing activities ( 5,311 ) ( 4,409 ) ( 4,972 ) CASH FLOWS FROM FINANCING ACTIVITIES Repayments of short-term borrowings ( 862 ) ( 920 ) ( 935 ) Proceeds from short-term borrowings 816 928 917 Repayments of long-term debt ( 103 ) ( 1,077 ) ( 75 ) Proceeds from issuance of long-term debt — 498 — Tax withholdings on stock-based awards ( 393 ) ( 315 ) ( 303 ) Repurchases of common stock ( 903 ) ( 700 ) ( 676 ) Cash dividend payments ( 2,183 ) ( 9,041 ) ( 1,251 ) Financing lease payments and other financing activities, net ( 147 ) ( 137 ) ( 291 ) Net cash used in financing activities ( 3,775 ) ( 10,764 ) ( 2,614 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 6 40 15 Net change in cash and cash equivalents 4,255 ( 3,794 ) 3,497 CASH AND CASH EQUIVALENTS BEGINNING OF YEAR 9,906 13,700 10,203 CASH AND CASH EQUIVALENTS END OF YEAR $ 14,161 $ 9,906 $ 13,700 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ 106 $ 129 $ 125 Income taxes, net $ 2,917 $ 2,319 $ 2,234 SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES: Cash dividend declared, but not yet paid $ — $ — $ 452 Capital expenditures included in liabilities $ 193 $ 203 $ 170 The accompanying notes are an integral part of these consolidated financial statements. 41 Table of Contents COSTCO WHOLESALE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in millions, except share, per share, and warehouse count data) Note 1—Summary of Significant Accounting Policies Description of Business Costco Wholesale Corporation (Costco or the Company), a Washington corporation, and its subsidiaries operate membership warehouses and e-commerce sites based on the concept that offering members low prices on a limited selection of nationally-branded and private-label products in a wide range of merchandise categories will produce high sales volumes and rapid inventory turnover. At August 31, 2025, Costco operated 914 warehouses worldwide: 629 in the United States (U.S.) located in 47 states, Washington, D.C., and Puerto Rico, 110 in Canada, 42 in Mexico, 37 in Japan, 29 in the U.K., 20 in Korea, 15 in Australia, 14 in Taiwan, seven in China, five in Spain, two in France, two in Sweden, and one each in Iceland and New Zealand. The Company operated e-commerce sites in the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan, and Australia. Basis of Presentation The consolidated financial statements include the accounts of Costco and its wholly-owned subsidiaries. All material inter-company transactions among the Company and its consolidated subsidiaries have been eliminated in consolidation. Fiscal Year End The Company operates on a 52/53-week fiscal year basis with the year ending on the Sunday closest to August 31. References to 2025 and 2024 relate to the 52-week fiscal years ended August 31, 2025, and September 1, 2024. References to 2023 relate to the 53-week fiscal year ended September 3, 2023. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions take into account historical and forward-looking factors that the Company believes are reasonable. Actual results could differ from those estimates and assumptions. Reclassification Reclassifications were made to the 2024 consolidated balance sheet to conform with current year presentation. Cash and Cash Equivalents The Company considers as cash and cash equivalents all cash on deposit, highly liquid investments with a maturity of three months or less at the date of purchase, and proceeds due from credit and debit card transactions with settlement terms of up to four days. Credit and debit card receivables were $ 2,670 and $ 2,519 at the end of 2025 and 2024. Short-Term Investments Short-term investments generally consist of debt securities (U.S. government and agency securities), with maturities at the date of purchase of three months to five years. Investments with maturities beyond five years may be classified, based on the Company’s determination, as short-term based on their highly liquid nature and because they represent the investment of cash that is available for current operations. 42 Table of Contents Short-term investments classified as available-for-sale are recorded at fair value using the specific identification method with the unrealized gains and losses reflected in accumulated other comprehensive income (loss) until realized. Realized gains and losses from the sale of available-for-sale securities, if any, are determined on a specific identification basis and are recorded in interest income and other, net in the consolidated statements of income. These available-for-sale investments have a low level of inherent credit risk given they are issued by the U.S. government and agencies. Changes in their fair value are primarily attributable to changes in interest rates and market liquidity. Short-term investments classified as held-to-maturity are financial instruments that the Company has the intent and ability to hold to maturity and are reported net of any related amortization and are not remeasured to fair value on a recurring basis. The Company periodically evaluates unrealized losses in its investment securities for credit impairment, using both qualitative and quantitative criteria. In the event a security is deemed to be impaired as the result of a credit loss, the Company recognizes the loss in interest income and other, net in the consolidated statements of income. Fair Value of Financial Instruments The Company accounts for certain assets and liabilities at fair value. The carrying value of the Company’s financial instruments, including cash and cash equivalents, receivables and accounts payable, approximate fair value due to their short-term nature or variable interest rates. See Notes 2 , 3 , and 4 for the carrying value and fair value of the Company’s investments, derivative instruments, and fixed-rate debt. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying a fair value hierarchy, which requires maximizing the use of observable inputs when measuring fair value. The three levels of inputs are: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Significant unobservable inputs that are not corroborated by market data. The Company’s valuation techniques used to measure the fair value of money market mutual funds, which are included in cash and cash equivalents, are based on quoted market prices, such as quoted net asset values published by the fund as supported in an active market. Valuation methodologies used to measure the fair value of all other non-derivative financial instruments are based on independent external valuation information. The pricing process uses data from a variety of independent external valuation information providers, including trades, bid price or spread, two-sided markets, quotes, benchmark curves including but not limited to treasury benchmarks, Secured Overnight Financing Rate and swap curves, discount rates, and market data feeds. All are observable in the market or can be derived principally from or corroborated by observable market data. The Company reports transfers in and out of Levels 1, 2, and 3, as applicable, using the fair value of the individual securities as of the beginning of the reporting period in which the transfer(s) occurred. Current financial liabilities have fair values that approximate their carrying values. Long-term financial liabilities include the Company's long-term debt, which are recorded on the balance sheet at issuance price and adjusted for unamortized discounts or premiums and debt issuance costs. Discounts, premiums and debt issuance costs are amortized to interest expense over the term of the loan. The estimated fair value of the Company's long-term debt is based primarily on reported market values, recently completed market transactions, and estimates based upon interest rates, maturities, and credit. 43 Table of Contents Receivables, Net Receivables consist primarily of vendor, credit card incentive, reinsurance, third-party pharmacy, and other receivables. Vendor receivables include discounts, volume rebates, and a variety of other programs. Balances are generally presented on a gross basis, separate from any related payable due. In certain circumstances, these receivables may be settled against the related payable to that vendor, in which case the receivables are presented on a net basis. Reinsurance receivables are held by the Company’s wholly-owned captive insurance subsidiary and primarily represent amounts ceded through reinsurance arrangements gross of the amounts assumed under reinsurance, which are presented within other current liabilities in the consolidated balance sheets. Credit card incentive receivables primarily represent amounts earned under co-branded credit card arrangements. Third-party pharmacy receivables generally relate to amounts due from members’ insurers. Other receivables primarily consist of amounts due from governmental entities, mostly tax-related items. The valuation allowance related to receivables was immaterial to the Company's consolidated financial statements at the end of 2025 and 2024. Merchandise Inventories Merchandise inventories consist of the following: 2025 2024 United States $ 12,868 $ 13,625 Canada 1,907 1,895 Other International 3,341 3,127 Merchandise inventories $ 18,116 $ 18,647 Merchandise inventories are stated at the lower of cost or market. U.S. merchandise inventories are valued by the cost method of accounting, using the last-in, first-out (LIFO) basis. The Company believes the LIFO method more fairly presents the results of operations by more closely matching current costs with current revenues. The Company records an adjustment each quarter, if necessary, for the projected annual effect of inflation or deflation, and these estimates are adjusted to actual results determined at year-end, after actual inflation or deflation rates and inventory levels have been determined. Due to higher merchandise costs in 2025, a $ 142 charge was recorded to merchandise costs to increase the cumulative LIFO valuation on merchandise inventories at August 31, 2025. An immaterial LIFO benefit was recorded in 2024 and an immaterial charge was recorded in 2023. Canadian and Other International merchandise inventories are predominantly valued using the cost and retail inventory methods, respectively, using the first-in, first-out (FIFO) basis. The Company initially provides for estimated inventory losses between physical inventory counts using estimates based on experience. The provision is adjusted to reflect physical inventory counts, which generally occur in the second and fourth fiscal quarters. Inventory cost where appropriate is reduced by estimates of vendor rebates when earned or as the Company progresses towards earning those rebates, provided that they are probable and reasonably estimable. Property and Equipment, Net Property and equipment are stated at cost. Depreciation and amortization expense is computed primarily using the straight-line method over estimated useful lives. Leasehold improvements made after the beginning of the initial lease term are depreciated over the shorter of the estimated useful life of the asset or the remaining term of the initial lease plus any renewals that are reasonably certain at the date of the leasehold improvements. The Company capitalizes certain computer software and costs incurred in developing or obtaining software for internal use. During development, these costs are included in construction in progress. To the 44 Table of Contents extent that the assets become ready for their intended use, these costs are included in equipment and fixtures and amortized on a straight-line basis over estimated useful lives. Repair and maintenance costs are expensed when incurred. Expenditures for remodels, refurbishments and improvements that add to or change asset function or useful life are capitalized. Assets removed during the remodel, refurbishment or improvement are retired. Assets classified as held-for-sale at the end of 2025 and 2024 were immaterial. The following table summarizes the Company's property and equipment balances at the end of 2025 and 2024: Estimated Useful Lives 2025 2024 Land N/A $ 10,323 $ 9,447 Buildings and improvements 5 - 50 years 25,508 23,727 Equipment and fixtures 3 - 20 years 13,127 12,387 Construction in progress N/A 1,882 1,389 50,840 46,950 Accumulated depreciation and amortization ( 18,931 ) ( 17,918 ) Property and equipment, net $ 31,909 $ 29,032 The Company evaluates long-lived assets for impairment on an annual basis, when relocating or closing a facility, or when events or changes in circumstances may indicate that the carrying amount of the asset group, generally an individual warehouse, may not be fully recoverable. For asset groups held and used, including warehouses to be relocated, the carrying value of the asset group is considered recoverable when the estimated future undiscounted cash flows generated from the use and eventual disposition of the asset group exceed the respective carrying value. In the event that the carrying value is not considered recoverable, an impairment loss is recognized for the asset group to be held and used equal to the excess of the carrying value above the estimated fair value of the asset group. For asset groups classified as held-for-sale (disposal group), the carrying value is compared to the disposal group’s fair value less costs to sell. The Company estimates fair value by obtaining market appraisals from third party brokers or using other valuation techniques. Impairment charges recognized in 2025, 2024 and 2023 were immaterial. Leases The Company leases land, buildings, and/or equipment at warehouses and certain other office and distribution facilities. Leases generally contain one or more of the following options, which the Company can exercise at the end of the initial term: (a) renew the lease for a defined number of years at the then-fair market rental rate or rate stipulated in the lease agreement; (b) purchase the property at the then-fair market value or purchase price stated in the agreement; (c) a right of first refusal in the event of a third-party offer; or (d) a right of first offer if the landlord intends to sell. Some leases include free-rent periods and step-rent provisions, which are recognized on a straight-line basis over the original term of the lease and any extension options that the Company is reasonably certain to exercise from the date the Company has control of the property. Certain leases provide for periodic rent increases based on price indices or the greater of minimum guaranteed amounts or sales volume, which are recognized as variable lease payments. The Company's leases do not contain any material residual value guarantees or material restrictive covenants. The Company determines at inception whether a contract is or contains a lease. Non-lease components and the lease components to which they relate are accounted for together as a single lease component for all asset classes. The Company initially records right-of-use (ROU) assets and lease obligations for its finance and operating leases based on the discounted future minimum lease payments over the term. 45 Table of Contents The lease term is defined as the noncancelable period of the lease plus any options to extend when it is reasonably certain that the Company will exercise the option. As the rate implicit in the Company's leases is not easily determinable, the present value of the sum of the lease payments is calculated using the Company's incremental borrowing rate. The rate is determined using a portfolio approach based on the rate of interest the Company would pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. The Company uses quoted interest rates from financial institutions to derive the incremental borrowing rate. Impairment of ROU assets is evaluated in a similar manner as described in Property and Equipment, Net above. During 2023, the Company recognized charges totaling $ 391 , primarily related to the impairment of certain leased assets associated with charter shipping activities. This charge is included in merchandise costs. The Company's asset retirement obligations (ARO) primarily relate to leasehold improvements that must be removed at the end of a lease. These obligations are recorded as a discounted liability, with an offsetting asset, based upon the estimated fair value of the costs to remove the improvements. These liabilities are accreted over time to the projected future value of the obligation. The ARO assets are depreciated using the same depreciation method as the leasehold improvement assets and are included in buildings and improvements. Estimated ARO liabilities associated with these leases are included in other long-term liabilities in the consolidated balance sheet. Goodwill and Acquired Intangible Assets Goodwill represents the excess of acquisition cost over the fair value of the net assets acquired and is not subject to amortization. The Company reviews goodwill annually in the fourth quarter for impairment or when circumstances indicate carrying value may exceed the fair value. This evaluation is performed at the reporting unit level. If a qualitative assessment indicates that it is more likely than not that the fair value is less than carrying value, a quantitative analysis is completed using either the income or market approach, or a combination of both. The income approach estimates fair value based on expected discounted future cash flows, while the market approach uses comparable public companies and transactions to develop metrics to be applied to historical and expected future operating results. Goodwill is included in other long-term assets in the consolidated balance sheets. At the end of 2025, 2024, and 2023 goodwill balances in the Company's U.S., Canadian, and Other International operations were $ 953 , $ 26 , and $ 15 . No impairment charges were recorded in 2025, 2024, or 2023. Definite-lived intangible assets, which are immaterial, are included in other long-term assets on the consolidated balance sheets and are amortized on a straight-line basis over their estimated lives, which approximates the pattern of expected economic benefit. Insurance/Self-insurance Liabilities Claims for employee health-care benefits, workers’ compensation, general liability, property damage, directors’ and officers’ liability, vehicle liability, inventory loss, and other exposures are funded predominantly through self-insurance. Insurance coverage is maintained for certain risks to limit exposures to very large losses. The Company uses various risk management mechanisms, including a wholly-owned captive insurance subsidiary and participates in a reinsurance program. Liabilities associated with the risks that are retained by the Company are not discounted and are estimated using historical claims experience, demographic factors, severity factors, and other actuarial assumptions. The estimated accruals for these liabilities could be significantly affected if future occurrences, claims, or expenses differ from these assumptions and historical trends. At the end of 2025 and 2024, these insurance liabilities were $ 1,878 and $ 1,612 in the aggregate, and were included in accrued salaries and benefits and other current liabilities in the consolidated balance sheets, classified based on their nature. The captive receives direct premiums, which are netted against the Company’s premium costs in SG&A expenses in the consolidated statements of income. The captive participates in a reinsurance program that includes third-party participants. The participant agreements and practices of the reinsurance program are designed to limit a participating members’ individual risk. Income statement adjustments 46 Table of Contents related to the reinsurance program and related impacts to the consolidated balance sheets are recognized as information becomes known. In the event the Company leaves the reinsurance program, the Company retains its primary obligation to the participants for prior activity. Derivatives The Company is exposed to foreign-currency exchange-rate fluctuations in the normal course of business. It manages these fluctuations, in part, through the use of forward foreign-exchange contracts, seeking to economically hedge the impact of fluctuations of foreign-exchange on known future expenditures denominated in a non-functional foreign-currency. The contracts relate primarily to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries with functional currencies other than the U.S. dollar. These contracts either do not qualify for or the Company has not elected derivative hedge accounting. The Company seeks to mitigate risk with the use of these contracts and does not intend to engage in speculative transactions. Some of these contracts contain credit-risk-related contingent features that require settlement of outstanding contracts upon certain triggering events. The aggregate fair value amounts of derivative instruments in a net liability position and the amount needed to settle the instruments immediately if the credit-risk-related contingent features were triggered were immaterial at the end of 2025 and 2024. The aggregate notional amounts of open, unsettled forward foreign-exchange contracts were $ 1,184 and $ 1,212 at the end of 2025 and 2024. See Note 3 for information on the fair value of unsettled forward foreign-exchange contracts at the end of 2025 and 2024. The unrealized gains or losses recognized in interest income and other, net in the consolidated statements of income relating to the net changes in the fair value of unsettled forward foreign-exchange contracts were immaterial in 2025, 2024 and 2023. The Company is exposed to fluctuations in prices for energy, particularly electricity and natural gas, and other commodities used in retail and manufacturing operations, which it seeks to partially mitigate through the use of fixed-price contracts for certain of its warehouses and other facilities, primarily in the U.S. and Canada. The Company also enters into variable-priced contracts for some purchases of natural gas, in addition to fuel for its gas stations, on an index basis. These contracts meet the characteristics of derivative instruments, but generally qualify for the “normal purchases and normal sales” exception under authoritative guidance and require no mark-to-market adjustment. Foreign-Currency The functional currencies of the Company’s international subsidiaries are their local currencies. Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. Translation adjustments are recorded in accumulated other comprehensive loss. Revenues and expenses of the Company’s consolidated foreign operations are translated at average exchange rates prevailing during the year. The Company recognizes foreign-currency transaction gains and losses related to revaluing or settling monetary assets and liabilities denominated in currencies other than the functional currency in interest income and other, net in the consolidated statements of income. Generally, these include the U.S. dollar cash and cash equivalents and the U.S. dollar payables of consolidated subsidiaries revalued to their functional currency. Also included are realized foreign-currency gains or losses from settlements of forward foreign-exchange contracts. These items were immaterial in 2025, 2024, and 2023. Revenue Recognition The Company recognizes sales for the amount of consideration collected from the member, which includes gross shipping fees where applicable, and is net of sales taxes collected and remitted to government agencies and member returns. The Company reserves for estimated returns based on historical trends and reduces sales and merchandise costs accordingly. The Company records on a gross 47 Table of Contents basis a refund liability and an asset for recovery, which are included in other current liabilities and other current assets, respectively, in the consolidated balance sheets. The Company offers merchandise in the following core merchandise categories: foods and sundries, non-foods, and fresh foods. The Company also provides expanded products and services through warehouse ancillary and other businesses. The Company is the principal for the majority of its transactions and recognizes revenue on a gross basis. The Company is the principal when it has control of the merchandise or service before it is transferred to the member. The majority of revenue from merchandise sales is recognized at the point of sale. Revenue generated through e-commerce or special orders is generally recognized upon shipment to the member. For merchandise shipped directly to the member, shipping and handling costs are expensed as incurred as fulfillment costs and included in merchandise costs in the consolidated statements of income. In certain ancillary businesses, revenue is deferred until the member picks up merchandise at the warehouse. Deferred sales are included in other current liabilities in the consolidated balance sheets. The Company accounts for membership fee revenue, net of refunds, on a deferred basis, ratably over the one-year membership period. Deferred membership fees at the end of 2025 and 2024 were $ 2,854 and $ 2,501 . In most countries, the Company's Executive members qualify for a 2% reward on qualified purchases, subject to an annual maximum value, which does not expire and is redeemable at Costco warehouses. The Company accounts for this reward as a reduction in sales, net of the estimated impact of non-redemptions (breakage), with the corresponding liability classified as accrued member rewards in the consolidated balance sheets. Estimated breakage is computed based on redemption data. For 2025, 2024, and 2023, the net reduction in sales was $ 3,007 , $ 2,804 , and $ 2,576 . The Company sells and otherwise provides proprietary shop cards that do not expire and are redeemable at the warehouse or online for merchandise or membership. Revenue from shop cards is recognized upon redemption, and estimated breakage is recognized based on redemption data. The Company accounts for outstanding shop card balances as a liability, net of estimated breakage. Shop card liabilities are included in other current liabilities in the consolidated balance sheets. Citibank, N.A. is the exclusive issuer of co-branded credit cards to U.S. members. The Company receives various forms of consideration from Citibank, including a royalty on purchases made on the card outside of Costco. A portion of the royalty is used to fund the rebate that cardholders receive, after taking into consideration breakage, which is calculated based on rebate redemption data. The rebates are issued in February and expire on December 31. The Company also maintains varying co-branded credit card arrangements in Canada and certain other International subsidiaries. Merchandise Costs Merchandise costs consist of the purchase price or manufacturing costs of inventory sold, inbound and outbound shipping charges and all costs related to the Company’s depot, fulfillment and manufacturing operations, and are reduced by vendor consideration. Merchandise costs also include salaries, benefits, depreciation, and utilities in fresh foods departments and certain ancillary businesses. Vendor Consideration The Company receives funds from vendors for discounts and a variety of other programs. These programs are evidenced by agreements that are reflected in the carrying value of the inventory when earned or as the Company progresses towards earning the rebate or discount, and as a component of merchandise costs as the merchandise is sold. Other vendor consideration is generally recorded as a reduction of merchandise costs upon completion of contractual milestones, agreement terms, or other systematic approaches. 48 Table of Contents Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of salaries, benefits and workers’ compensation costs for warehouse employees (other than fresh foods departments and certain ancillary businesses, which are reflected in merchandise costs), as well as all regional and home office employees, including buying personnel. Selling, general and administrative expenses also include substantially all building and equipment depreciation, stock compensation expense, credit and debit card processing fees, utilities, preopening, as well as other operating costs incurred to support warehouse and e-commerce operations. Retirement Plans The Company's 401(k) retirement plan is available to all U.S. employees over the age of 18 who have completed 90 days of employment. The plan allows participants to make wage deferral contributions, a portion of which the Company matches. In addition, the Company provides each eligible participant an annual discretionary contribution. The Company also has a defined contribution plan for employees in Canada and contributes a percentage of each employee's wages. Certain subsidiaries in the Company's Other International operations have defined benefit and defined contribution plans, which are immaterial. Amounts expensed under all plans were $ 1,061 , $ 963 , and $ 914 for 2025, 2024, and 2023, and are predominantly included in SG&A expenses in the consolidated statements of income. Stock-Based Compensation The Company grants stock-based compensation, primarily to employees and non-employee directors. Grants to executive officers are generally performance-based. Through a series of shareholder approvals, there have been amended and restated plans and new provisions implemented by the Company. Restricted Stock Units (RSUs) granted to employees and to non-employee directors generally vest over five years and three years and are subject to quarterly vesting in the event of retirement or voluntary termination. Employees who attain at least 25 years of service with the Company and non-employee directors with five or more years may receive shares under accelerated vesting provisions. Recipients are not entitled to vote or receive dividends on unvested and undelivered shares. In May 2025, the Compensation Committee approved changes to the vesting schedule applicable only to future grants. Existing participants in the Plan had the option to make a one-time election to remain under the five-year vesting schedule with acceleration for long service or to change to a three-year vesting schedule with no such acceleration. RSUs granted to new participants will vest over the three-year term with no such acceleration. This has no impact on RSUs outstanding or the related disclosures in N ote 7 . Compensation expense for awards is predominantly recognized using the straight-line method over the requisite service period for the entire award and forfeitures are recognized as they occur. Under accelerated vesting provisions, compensation expense is recognized upon achievement of the long-service term. The cumulative amount of compensation cost recognized at any point in time equals at least the portion of the grant-date fair value of the award that is vested at that date. The fair value of RSUs is calculated as the market value of the common stock on the measurement date less the present value of the expected dividends forgone during the vesting period. Stock-based compensation expense is predominantly included in SG&A expenses in the consolidated statements of income. Certain stock-based compensation costs are capitalized or included in the cost of merchandise. See Note 7 for additional information. Income Taxes The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases, credits and loss carry-forwards. Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable 49 Table of Contents income in the years in which those temporary differences and carry-forwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts that are more likely than not expected to be realized. The timing and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions requires significant judgment. The benefits of uncertain tax positions are recorded in the Company’s consolidated financial statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge from tax authorities. When facts and circumstances change, the Company reassesses these probabilities and records changes as appropriate. Net Income per Common Share The computation of basic net income per share uses the weighted average number of shares that were outstanding during the period. The computation of diluted net income per share uses the weighted average number of shares in the basic net income per share calculation plus the number of common shares that would be issued assuming vesting of all potentially dilutive common shares outstanding using the treasury stock method for shares subject to RSUs. Stock Repurchase Programs Repurchased shares of common stock are retired, in accordance with the Washington Business Corporation Act. The par value of repurchased shares is deducted from common stock and the excess repurchase price over par value is deducted by allocation to additional paid-in capital and retained earnings. The amount allocated to additional paid-in capital is the current value of additional paid-in capital per share outstanding and is applied to the number of shares repurchased. Any remaining amount is allocated to retained earnings. See Note 6 for additional information. Recent Accounting Pronouncements Adopted In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, which is intended to improve reportable segment disclosure requirements, primarily about significant segment expenses. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted the ASU for the fiscal year ended August 31, 2025, on a retrospective basis for all prior periods presented in the financial statements. Recent Accounting Pronouncements Not Yet Adopted In December 2023, the FASB issued ASU 2023-09, which requires public business entities on an annual basis to disclose specific categories in the income-tax rate reconciliation, provide information for reconciling items that meet a quantitative threshold, and disclose certain information about income taxes paid. The standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The amendments should be applied on a prospective basis. Retrospective application is permitted. In November 2024, the FASB issued 2024-03, which requires disaggregated disclosures of certain costs and expenses on the income statement on an annual and interim basis. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The amendments should be applied on a prospective basis. Retrospective application is permitted. The Company is evaluating both standards. 50 Table of Contents Note 2—Investments The Company’s investments were as follows: 2025: Cost Basis Unrealized Gains, Net Recorded Basis Available-for-sale: Government and agency securities $ 783 $ 3 $ 786 Held-to-maturity: Certificates of deposit 337 — 337 Total short-term investments $ 1,120 $ 3 $ 1,123 2024: Cost Basis Unrealized Losses, Net Recorded Basis Available-for-sale: Government and agency securities $ 689 $ ( 1 ) $ 688 Held-to-maturity: Certificates of deposit 550 — 550 Total short-term investments $ 1,239 $ ( 1 ) $ 1,238 Gross unrecognized holding gains and losses on available-for-sale securities were not material for the years ended August 31, 2025, and September 1, 2024. At those dates, there were no available-for-sale securities in a material continuous unrealized-loss position. There were no sales of available-for-sale securities during 2025 or 2024. The maturities of available-for-sale and held-to-maturity securities at the end of 2025 are as follows: Available-For-Sale Held-To-Maturity Cost Basis Fair Value Due in one year or less $ 119 $ 119 $ 337 Due after one year through five years 474 477 — Due after five years 190 190 — Total $ 783 $ 786 $ 337 Note 3—Fair Value Measurement Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table presents information regarding the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and indicates the level within the hierarchy reflecting the valuation techniques utilized to determine such fair value: Level 2 2025 2024 Investment in government and agency securities $ 786 $ 688 Forward foreign-exchange contracts, in asset position (1) 6 1 Forward foreign-exchange contracts, in (liability) position (1) ( 14 ) ( 28 ) Total $ 778 $ 661 ____________ (1) The asset and liability values are included in other current assets and other current liabilities, respectively, in the consolidated balance sheets. 51 Table of Contents At August 31, 2025, and September 1, 2024, the Company did not hold any Level 1 or 3 financial assets or liabilities that were measured at fair value on a recurring basis. There were no transfers between levels during 2025 or 2024. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Assets and liabilities recognized and disclosed at fair value on a nonrecurring basis include items such as financial assets measured at amortized cost and long-lived nonfinancial assets. These assets are measured at fair value if determined to be impaired. There were no material fair value adjustments to these items during 2025 and 2024. Please see Note 1 for additional information. Note 4—Debt Short-Term Borrowings The Company maintains various short-term bank credit facilities, with a borrowing capacity of $ 1,220 and $ 1,198 , in 2025 and 2024. Short-term borrowings outstanding were immaterial at the end of 2025 and 2024. Long-Term Debt The Company's long-term debt consists primarily of Senior Notes, described below. The Company at its option may redeem the Senior Notes at any time, in whole or in part, at a redemption price plus accrued interest. The redemption price is equal to the greater of 100 % of the principal amount or the sum of the present value of the remaining scheduled payments of principal and interest to maturity. Additionally, upon certain events, a holder has the right to require a repurchase at a price of 101 % of the principal amount plus accrued and unpaid interest. Interest on all outstanding long-term debt is payable semi-annually. The estimated fair value of Senior Notes is valued using Level 2 inputs. Other long-term debt consists of Guaranteed Senior Notes issued by the Company's Japanese subsidiary, valued using Level 3 inputs. In 2024, the Company’s Japan subsidiary issued four Guaranteed Senior Notes, totaling approximately $ 500 , at fixed interest rates ranging from 1.400 % to 2.120 %. Interest is payable semi-annually, and maturity dates range from November 2033, to November 2043. In 2025, 2024, and 2023 the Japanese subsidiary repaid $ 103 , $ 77 , and $ 75 of its Guaranteed Senior Notes. In 2024, the Company repaid the $ 1,000 outstanding principal balance on its 2.750 % Senior Notes. At the end of 2025 and 2024, the fair value of the Company's long-term debt, including the current portion, was approximately $ 5,370 and $ 5,412 . The carrying value of long-term debt consisted of the following: 2025 2024 3.000 % Senior Notes due May 2027 $ 1,000 $ 1,000 1.375 % Senior Notes due June 2027 1,250 1,250 1.600 % Senior Notes due April 2030 1,750 1,750 1.750 % Senior Notes due April 2032 1,000 1,000 Other long-term debt 805 919 Total long-term debt 5,805 5,919 Less unamortized debt discounts and issuance costs 17 22 Less current portion (1) 75 103 Long-term debt, excluding current portion $ 5,713 $ 5,794 _____________ (1) Net of unamortized debt discounts and issuance costs and included in other current liabilities in the accompanying consolidated balance sheets. 52 Table of Contents Maturities of long-term debt during the next five fiscal years and thereafter are as follows: 2026 $ 75 2027 2,250 2028 — 2029 148 2030 1,750 Thereafter 1,582 Total $ 5,805 Note 5—Leases Information regarding the Company's lease assets and liabilities were as follows: 2025 2024 Assets Operating lease right-of-use assets $ 2,725 $ 2,617 Finance lease assets (1) 1,488 1,433 Total lease assets $ 4,213 $ 4,050 Liabilities Current Operating lease liabilities (2) $ 208 $ 179 Finance lease liabilities (2) 78 147 Long-term Operating lease liabilities 2,460 2,375 Finance lease liabilities (3) 1,401 1,351 Total lease liabilities $ 4,147 $ 4,052 _______________ (1) Included in other long-term assets in the consolidated balance sheets. (2) Included in other current liabilities in the consolidated balance sheets. (3) Included in other long-term liabilities in the consolidated balance sheets. 2025 2024 Weighted-average remaining lease term (years) Operating leases 20 19 Finance leases 25 23 Weighted-average discount rate Operating leases 3.05 % 2.67 % Finance leases 4.63 % 4.59 % 53 Table of Contents The components of lease expense, excluding short-term lease costs and sublease income (which were immaterial), were as follows: 2025 2024 2023 Operating lease costs (1) $ 271 $ 284 $ 309 Finance lease costs: Amortization of lease assets (1) 102 97 169 Interest on lease liabilities (2) 63 58 54 Variable lease costs (1) 182 163 160 Total lease costs $ 618 $ 602 $ 692 _______________ (1) Included in selling, general and administrative expenses and merchandise costs in the consolidated statements of income. (2) Included in interest expense and merchandise costs in the consolidated statements of income. Supplemental cash flow information related to leases were as follows: 2025 2024 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows — operating leases $ 255 $ 274 $ 287 Operating cash flows — finance leases 58 58 54 Financing cash flows — finance leases 147 136 291 Operating lease assets obtained in exchange for new or modified leases 294 125 202 Finance lease assets obtained in exchange for new or modified leases 131 200 100 As of August 31, 2025, future minimum payments during the next five fiscal years and thereafter are as follows: Operating Leases (1) Finance Leases 2026 $ 267 $ 133 2027 250 132 2028 235 135 2029 204 122 2030 184 109 Thereafter 2,451 1,780 Total (2) 3,591 2,411 Less amount representing interest 923 932 Present value of lease liabilities $ 2,668 $ 1,479 _______________ (1) Operating lease payments have not been reduced by expected future sublease income of $ 92 . (2) Excludes $ 1,094 of lease payments for leases that have been signed but not commenced. 54 Table of Contents Note 6—Equity Dividends Cash dividends declared in 2025 totaled $ 2,183 or $ 4.92 per share, as compared to $ 8,589 or $ 19.36 per share in 2024. Dividends in 2024 included a special dividend of $ 15 per share, resulting in a payment of approximately $ 6,655 . The Company's current quarterly dividend rate is $ 1.30 per share. Stock Repurchase Programs The Company's stock repurchase program is conducted under a $ 4,000 authorization by the Board of Directors, which expires in January 2027. As of the end of 2025, the remaining amount available under the authorization was $ 1,962 . The following table summarizes the Company’s stock repurchase activity: Shares Repurchased (000’s) Average Price per Share Total Cost 2025 943 $ 957.66 $ 903 2024 1,004 695.29 698 2023 1,341 504.68 677 These amounts may differ from repurchases of common stock in the consolidated statements of cash flows due to changes in unsettled stock repurchases at the end of each fiscal year. Purchases are made from time to time, as conditions warrant, in the open market or in block purchases and pursuant to plans under SEC Rule 10b5-1. Note 7—Stock-Based Compensation The 2019 Incentive Plan authorizes the issuance of up to 15,885,000 RSUs. The number of RSUs that may be granted under this Plan is subject to adjustments for changes in capital structure. The Company issues new shares of common stock upon vesting and settlement of RSUs. Shares for vested RSUs are generally delivered to participants annually, net of shares withheld for taxes. Summary of Restricted Stock Unit Activity At the end of 2025, 6,275,000 shares were available to be granted as RSUs, and the following awards were outstanding: • 2,187,000 time-based RSUs, which vest upon continued employment or service over specified periods of time; and • 121,000 performance-based RSUs, of which 70,000 were granted to executive officers subject to the determination of the attainment of performance targets for 2025, which occurred in September 2025. At that time, a portion vested as a result of executive officers who met accelerated vesting provisions. The remaining awards vest upon continued employment over specified periods of time. Please refer to Note 1 for accelerated vesting requirements. 55 Table of Contents The following table summarizes RSU transactions during 2025: Number of Units (in 000’s) Weighted-Average Grant Date Fair Value Outstanding at the end of 2024 2,799 $ 463.24 Granted 1,095 883.46 Vested and delivered ( 1,494 ) 558.05 Forfeited ( 92 ) 567.87 Outstanding at the end of 2025 2,308 $ 597.00 The weighted-average grant date fair value of RSUs granted was $ 883.46 , $ 547.26 , and $ 471.47 in 2025, 2024, and 2023. The remaining unrecognized compensation cost related to non-vested RSUs at the end of 2025 was $ 897 and the weighted-average period of time over which this cost will be recognized is 1.6 years. Included in the outstanding balance at the end of 2025 were approximately 766,000 RSUs vested but not yet delivered. Summary of Stock-Based Compensation The following table summarizes stock-based compensation expense and the related tax benefits: 2025 2024 2023 Stock-based compensation expense $ 860 $ 818 $ 774 Less recognized income tax benefit 183 173 163 Stock-based compensation expense, net $ 677 $ 645 $ 611 Note 8—Taxes Income Taxes Income before income taxes is comprised of the following: 2025 2024 2023 Domestic $ 8,324 $ 7,255 $ 6,264 Foreign 2,494 2,485 2,223 Total $ 10,818 $ 9,740 $ 8,487 56 Table of Contents The provisions for income taxes are as follows: 2025 2024 2023 Federal: Current $ 1,395 $ 1,245 $ 1,056 Deferred ( 42 ) 48 33 Total federal 1,353 1,293 1,089 State: Current 449 431 374 Deferred ( 18 ) ( 77 ) 10 Total state 431 354 384 Foreign: Current 955 798 732 Deferred ( 20 ) ( 72 ) ( 10 ) Total foreign 935 726 722 Total provision for income taxes $ 2,719 $ 2,373 $ 2,195 The reconciliation between the statutory tax rate and the effective rate for 2025, 2024, and 2023 is as follows: 2025 2024 2023 Federal taxes at statutory rate $ 2,272 21.0 % $ 2,045 21.0 % $ 1,782 21.0 % State taxes, net 338 3.1 288 3.0 302 3.6 Foreign taxes, net 222 2.1 109 1.1 160 1.9 Employee stock ownership plan (ESOP) ( 28 ) ( 0.3 ) ( 120 ) ( 1.2 ) ( 25 ) ( 0.3 ) Other ( 85 ) ( 0.8 ) 51 0.5 ( 24 ) ( 0.3 ) Total $ 2,719 25.1 % $ 2,373 24.4 % $ 2,195 25.9 % The Company's effective tax rate in 2025, 2024, and 2023 included tax benefits of $ 100 , $ 45 , and $ 54 , related to stock compensation. In 2024, tax benefits also included $ 94 related to the portion of the special dividend payable through the Company's 401(k) plan and a net non-recurring tax benefit of $ 63 related to a transfer pricing settlement and certain true-ups of tax reserves. 57 Table of Contents The components of the deferred tax assets (liabilities) are as follows: 2025 2024 Deferred tax assets: Equity compensation $ 100 $ 96 Deferred income/membership fees 369 313 Foreign tax credit carry forward 390 315 Operating lease liabilities 699 678 Accrued liabilities and reserves 917 873 Total deferred tax assets 2,475 2,275 Valuation allowance ( 554 ) ( 494 ) Total net deferred tax assets 1,921 1,781 Deferred tax liabilities: Property and equipment ( 944 ) ( 948 ) Merchandise inventories ( 305 ) ( 296 ) Operating lease right-of-use assets ( 670 ) ( 652 ) Foreign branch deferreds ( 103 ) ( 105 ) Other ( 31 ) ( 1 ) Total deferred tax liabilities ( 2,053 ) ( 2,002 ) Net deferred tax liabilities $ ( 132 ) $ ( 221 ) The deferred tax accounts at the end of 2025 and 2024 include deferred income tax assets of $ 592 and $ 548 , included in other long-term assets; and deferred income tax liabilities of $ 724 and $ 769 , included in other long-term liabilities. In 2025 and 2024, the Company had valuation allowances of $ 554 and $ 494 , primarily related to foreign tax credits that the Company believes will not be realized due to carry forward limitations. The foreign tax credit carry forwards are set to expire beginning in fiscal 2030. The Company generally no longer considers fiscal year earnings of non-U.S. consolidated subsidiaries (other than China) indefinitely reinvested after 2023, in the case of Taiwan, and after 2017, in the case of all other subsidiaries, and has recorded the estimated incremental foreign withholding taxes (net of available foreign tax credits) and state income taxes payable assuming a hypothetical repatriation to the U.S. The Company considers undistributed earnings of certain non-U.S. consolidated subsidiaries, which totaled $ 3,177 , to be indefinitely reinvested and has not provided for withholding or state taxes. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for 2025 and 2024 is as follows: 2025 2024 Gross unrecognized tax benefit at beginning of year $ 81 $ 16 Gross increases—current year tax positions 9 3 Gross increases—tax positions in prior years 14 64 Gross decreases—tax positions in prior years ( 38 ) — Gross decreases—settlements ( 1 ) — Lapse of statute of limitations — ( 2 ) Gross unrecognized tax benefit at end of year $ 65 $ 81 58 Table of Contents The gross unrecognized tax benefit includes tax positions for which the ultimate deductibility is highly certain but there is uncertainty about the timing of such deductibility. At the end of 2025 and 2024, these amounts were immaterial. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of these tax positions would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority. The total amount of such unrecognized tax benefits that if recognized would favorably affect the effective income tax rate in future periods is $ 65 and $ 79 at the end of 2025 and 2024. Accrued interest and penalties related to income tax matters are classified as a component of income tax expense. Accrued interest and penalties recognized during 2025 and 2024, and accrued at the end of each respective period were immaterial. The Company is currently under audit by several jurisdictions in the U.S. and abroad. Some audits may conclude in the next 12 months, and the unrecognized tax benefits recorded in relation to the audits may differ from actual settlement amounts. It is not practical to estimate the effect, if any, of any amount of such change during the next 12 months to previously recorded uncertain tax positions in connection with the audits. The Company does not anticipate that there will be a material increase or decrease in the total amount of unrecognized tax benefits in the next 12 months. The Company files income tax returns in the U.S., various state and local jurisdictions, in Canada, and in several other foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state or local examination for years before fiscal 2018. The Company is currently subject to examination in California for fiscal years 2013 to present. Other Taxes The Company is subject to multiple examinations for value added, sales-based, payroll, product, import or other non-income taxes in various jurisdictions. In certain cases, the Company has received assessments from the authorities. Possible losses or range of possible losses associated with these matters are either immaterial or an estimate of the possible loss or range of loss cannot be made at this time. If certain matters or a group of matters were to be decided adversely to the Company, it could result in a charge that might be material to the results of an individual fiscal quarter or year. Note 9—Net Income per Common and Common Equivalent Share The following table shows the amounts used in computing net income per share and the weighted average number of shares of basic and of potentially dilutive common shares outstanding (shares in 000’s): 2025 2024 2023 Net income $ 8,099 $ 7,367 $ 6,292 Weighted average basic shares 443,985 443,914 443,854 RSUs 818 845 598 Weighted average diluted shares 444,803 444,759 444,452 Basic earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is calculated based on the dilutive effect of RSUs using the treasury stock method. Note 10—Commitments and Contingencies Legal Proceedings The Company is involved in many claims, proceedings and litigations arising from its business and property ownership. In accordance with accounting guidance, the Company establishes an accrual for legal proceedings if and when those matters present loss contingencies that are both probable and 59 Table of Contents reasonably estimable. There may be actual losses in excess of amounts accrued. The Company monitors those matters for developments that would affect the likelihood of a loss (taking into account where applicable indemnification arrangements concerning suppliers and insurers) and the accrued amount, if any, thereof, and adjusts the amount as appropriate. The Company has recorded an immaterial accrual with respect to some matters described below, in addition to other immaterial accruals for matters not described below. If the loss contingency at issue is not both probable and reasonably estimable, the Company does not establish an accrual, but monitors for developments that make the contingency both probable and reasonably estimable. In each case, there is a reasonable possibility that a loss may be incurred, including a loss in excess of the applicable accrual. For matters where no accrual has been recorded, the possible loss or range of loss (including any loss in excess of the accrual) cannot, in the Company's view, be reasonably estimated because, among other things: the remedies or penalties sought are indeterminate or unspecified; the legal and/or factual theories are not well developed; and/or the matters involve complex or novel legal theories or a large number of parties. In November 2023, a former employee filed a class action against the Company alleging claims under California law for failure to pay minimum wage, failure to pay overtime, failure to provide meal and rest breaks, failure to provide accurate wage statements, failure to reimburse expenses, failure to pay wages when due, and failure to pay sick pay. Martin Reyes v. Costco Wholesale Corporation, Sacramento County Superior Court (No. 23cv011351), removed to federal court, No. 2:24-cv-00300 (E.D. Cal.). A second amended complaint was filed, which the Company has moved to dismiss. In January 2024, the same plaintiff filed a related Private Attorneys General Act (PAGA) representative action, seeking civil penalties and asserting the same alleged underlying Labor Code violations and an additional suitable seating claim. In May 2024, the plaintiff filed an amended PAGA complaint; the Company has denied the material allegations of the complaint and filed a motion to stay the action. The motion was granted on December 18, 2024. In August 2024, an employee filed an action under PAGA against the Company, alleging claims for penalties for various alleged violations of the California Labor Code. Nader v. Costco (No. CV-24-006198; Stanislaus County Superior Court). An amended complaint was filed in November 2024. In February 2025 the court granted the Company’s motion to strike portions of the complaint. The plaintiff filed a further amended complaint; the Company's motion to strike a portion of this complaint was granted on May 13, 2025. Beginning in December 2017, the United States Judicial Panel on Multidistrict Litigation consolidated numerous cases concerning the impacts of opioid abuses filed against various defendants by counties, cities, hospitals, Native American tribes, third-party payors, and others. In re National Prescription Opiate Litigation (MDL No. 2804) (N.D. Ohio). Included are cases filed against the Company by counties and cities in Michigan, New Jersey, Oregon, Virginia and South Carolina, a third-party payor in Ohio, and a hospital in Texas, class actions filed on behalf of infants born with opioid-related medical conditions in 40 states, and class actions and individual actions filed on behalf of individuals seeking to recover alleged increased insurance costs associated with opioid abuse in 43 states and American Samoa. Claims against the Company filed in federal court outside the MDL by one county in Georgia are pending, and claims filed by certain cities and counties in New York are pending in state court, as are claims by certain county district attorneys in Pennsylvania. Claims against the Company in state courts in New Jersey, Oklahoma, Utah, and Arizona have been dismissed. Claims against the Company in federal court in Georgia and Florida have been dismissed. The Company is defending all of the pending matters except for a small number that have been resolved for immaterial amounts. Between September 25 and October 31, 2023, five class action suits were filed against the Company alleging privacy law violations stemming from pixel trackers on Costco.com: Birdwell v. Costco Wholesale Corp., No. C23-02416, Contra Costa County Superior Court; and Scott v. Costco Wholesale Corp., No. 2:23-cv-08808 (C.D. Cal.), now consolidated with R.S. v. Costco Wholesale Corp., No. 2:23-cv-01628 (W.D. Wash.); Groves, et ano., v. Costco Wholesale Corp., No. 2:23-cv-01662 (W.D. Wash.), and Castillo v. Costco Wholesale Corp., under No. 2:34-cv-01548 (W.D. Wash.). The Castillo plaintiffs filed a consolidated complaint on January 26, 2024, which seeks damages, equitable relief and attorneys’ fees 60 Table of Contents under various statutes, including the Washington Consumer Protection Act, Washington Privacy Act, Washington Uniform Health Care Information Act, Electronic Communications Privacy Act, California Invasion of Privacy Act, and California Confidentiality of Medical Information Act. The consolidated complaint also alleges breach of implied contract, invasion of privacy, conversion, and unjust enrichment. The Company filed a motion to dismiss the Castillo complaint on March 11, 2024. In November 2024 the court denied the motion to dismiss in substantial part. On May 16, 2024, the parties stipulated to stay Birdwell pending resolution of Castillo. On January 2, and August 22, 2024, the Company received related civil investigative demands from the Washington Attorney General's Office. On January 3, 2024, the Company received a related pre-litigation letter from the Los Angeles Office of the County Counsel. The Company is in the process of responding to both agencies. On June 20, 2024, a class-action lawsuit was filed against the Company and Nice-Pak Products, Inc., alleging that Kirkland Signature Fragrance Free Baby Wipes contain 3.7 parts per billion of per-and polyfluoroalkyl substances. The complaint alleges that the label claim that the wipes are “made with naturally derived ingredients” thus violates various state consumer protection and false advertising laws. The complaint seeks unspecified damages, including punitive damages, as well as equitable relief and attorneys' fees and costs. The defendants filed a motion to dismiss on August 9, 2024. Bullard, et ano., v. Costco Wholesale Corp., et ano., No. 3:24-cv-03714 (N.D. Cal.). On February 14, 2025, the court granted the motion. An amended complaint was filed; defendants' motion to dismiss this complaint was denied on May 14, 2025. In January 2023 the Company received a Civil Investigative Demand from the U.S. Attorney's Office, Western District of Washington, requesting documents. The government is conducting a False Claims Act investigation concerning whether the Company presented or caused to be presented to the federal government for payment false claims relating to prescription medications. In May 2024 the Company received a Notice of Intent to File Administrative Complaint for Violations of the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) from the U.S. Environmental Protection Agency (EPA). The EPA is seeking administrative fines for importation, sale and distribution of misbranded devices and unregistered products the government asserts are pesticides under FIFRA. An agreement has been reached to settle the matter for an immaterial amount. The Company does not believe that any pending claim, proceeding or litigation, either alone or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or cash flows; it is possible that an unfavorable outcome of some or all of the matters, however unlikely, could result in a charge that might be material to the results of an individual fiscal quarter or year. 61 Table of Contents Note 11—Segment Reporting The Company is principally engaged in the operation of membership warehouses through wholly owned subsidiaries in the U.S., Canada, Mexico, Japan, the U.K., Korea, Australia, Taiwan, China, Spain, France, Sweden, Iceland, and New Zealand. Reportable segments are largely based on management’s organization of the operating segments for operational decisions and assessments of financial performance, which considers geographic locations. The material accounting policies of the segments are as described in Note 1 . Inter-segment net sales and expenses, including royalties, have been eliminated in computing total revenue and operating income. The chief operating decision maker (CODM) is the Company's Chief Executive Officer, President and Director. The CODM utilizes operating income, as reported in the consolidated statement of income, along with internal management reports, in evaluating performance and allocating resources. The following table provides the revenue, significant expenses, and operating income for the Company's reportable segments: 2025 2024 2023 United States Total revenue $ 200,046 $ 184,143 $ 176,630 Merchandise costs 174,021 160,573 154,858 Selling, general and administrative expenses 19,147 17,353 16,380 Operating income $ 6,878 $ 6,217 $ 5,392 Canada Total revenue $ 36,923 $ 34,874 $ 33,056 Merchandise costs 32,204 30,543 29,019 Selling, general and administrative expenses 2,870 2,683 2,589 Operating income $ 1,849 $ 1,648 $ 1,448 Other International Total revenue $ 38,266 $ 35,436 $ 32,604 Merchandise costs 33,661 31,242 28,709 Selling, general and administrative expenses 2,949 2,774 2,621 Operating income $ 1,656 $ 1,420 $ 1,274 Total Total revenue $ 275,235 $ 254,453 $ 242,290 Merchandise costs 239,886 222,358 212,586 Selling, general and administrative expenses 24,966 22,810 21,590 Operating income 10,383 9,285 8,114 Other income (1) 435 455 373 Income before income taxes $ 10,818 $ 9,740 $ 8,487 ____________ (1) Other income consists of interest expense and interest income and other, net. 62 Table of Contents The following table provides depreciation and amortization and other asset related information for the Company's reportable segments: 2025 2024 2023 United States Depreciation and amortization $ 1,895 $ 1,730 $ 1,599 Additions to property and equipment 4,215 3,725 3,288 Property and equipment, net 22,790 20,638 18,760 Total assets 54,862 48,816 49,189 Canada Depreciation and amortization $ 196 $ 192 $ 183 Additions to property and equipment 580 351 281 Property and equipment, net 2,930 2,602 2,443 Total assets 7,304 6,915 6,420 Other International Depreciation and amortization $ 335 $ 315 $ 295 Additions to property and equipment 703 634 754 Property and equipment, net 6,189 5,792 5,481 Total assets 14,933 14,100 13,385 Total Depreciation and amortization $ 2,426 $ 2,237 $ 2,077 Additions to property and equipment 5,498 4,710 4,323 Property and equipment, net 31,909 29,032 26,684 Total assets 77,099 69,831 68,994 Disaggregated Revenue The following table summarizes net sales by merchandise category; sales from e-commerce sites and business centers have been allocated to the applicable merchandise categories: 2025 2024 2023 Foods and Sundries $ 109,564 $ 101,463 $ 96,175 Non-Foods 71,190 63,973 60,865 Fresh Foods 37,988 34,220 31,977 Warehouse Ancillary and Other Businesses 51,170 49,969 48,693 Total net sales $ 269,912 $ 249,625 $ 237,710 63 Table of Contents Item 9—Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.