COSTCO WHOLESALE CORP /NEW 10-Q

Item 1—Financial Statements COSTCO WHOLESALE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (amounts in millions, except per share data) (unaudited) 12 Weeks Ended 24 Weeks Ended February 15, 2026 February 16, 2025 February 15, 2026 February 16, 2025 REVENUE Net sales $ 68,242 $ 62,530 $ 134,220 $ 123,515 Membership fees 1,355 1,193 2,684 2,359 Total revenue 69,597 63,723 136,904 125,874 OPERATING EXPENSES Merchandise costs 60,719 55,744 119,229 109,853 Selling, general and administrative 6,272 5,663 12,606 11,509 Operating income 2,606 2,316 5,069 4,512 OTHER INCOME (EXPENSE) Interest expense ( 33 ) ( 36 ) ( 68 ) ( 73 ) Interest income and other, net 148 142 303 289 INCOME BEFORE INCOME TAXES 2,721 2,422 5,304 4,728 Provision for income taxes 686 634 1,268 1,142 NET INCOME $ 2,035 $ 1,788 $ 4,036 $ 3,586 NET INCOME PER COMMON SHARE: Basic $ 4.58 $ 4.03 $ 9.09 $ 8.08 Diluted $ 4.58 $ 4.02 $ 9.08 $ 8.06 Shares used in calculation (000s): Basic 443,946 443,982 443,954 443,985 Diluted 444,420 444,886 444,468 444,888 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents COSTCO WHOLESALE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (amounts in millions) (unaudited) 12 Weeks Ended 24 Weeks Ended February 15, 2026 February 16, 2025 February 15, 2026 February 16, 2025 NET INCOME $ 2,035 $ 1,788 $ 4,036 $ 3,586 Foreign-currency translation adjustment and other, net 370 ( 90 ) 164 ( 414 ) COMPREHENSIVE INCOME $ 2,405 $ 1,698 $ 4,200 $ 3,172 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents COSTCO WHOLESALE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (amounts in millions, except par value and share data) (unaudited) February 15, 2026 August 31, 2025 ASSETS CURRENT ASSETS Cash and cash equivalents $ 17,383 $ 14,161 Short-term investments 857 1,123 Receivables, net 3,782 3,203 Merchandise inventories 18,991 18,116 Other current assets 2,120 1,777 Total current assets 43,133 38,380 OTHER ASSETS Property and equipment, net 33,645 31,909 Operating lease right-of-use assets 2,759 2,725 Other long-term assets 4,102 4,085 TOTAL ASSETS $ 83,639 $ 77,099 LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts payable $ 20,647 $ 19,783 Accrued salaries and benefits 5,635 5,205 Accrued member rewards 2,833 2,677 Deferred membership fees 3,126 2,854 Other current liabilities 8,522 6,589 Total current liabilities 40,763 37,108 OTHER LIABILITIES Long-term debt, excluding current portion 5,688 5,713 Long-term operating lease liabilities 2,477 2,460 Other long-term liabilities 2,624 2,654 TOTAL LIABILITIES 51,552 47,935 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; 443,692,000 and 443,237,000 shares issued and outstanding 2 2 Additional paid-in capital 8,570 8,282 Accumulated other comprehensive loss ( 1,606 ) ( 1,770 ) Retained earnings 25,121 22,650 TOTAL EQUITY 32,087 29,164 TOTAL LIABILITIES AND EQUITY $ 83,639 $ 77,099 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents COSTCO WHOLESALE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (amounts in millions) (unaudited) 12 Weeks Ended February 15, 2026 Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Equity Shares (000s) Amount BALANCE AT NOVEMBER 23, 2025 443,919 $ 2 $ 8,408 $ ( 1,976 ) $ 23,869 $ 30,303 Net income — — — — 2,035 2,035 Foreign-currency translation adjustment and other, net — — — 370 — 370 Stock-based compensation — — 167 — — 167 Release of vested restricted stock units (RSUs), including tax effects 2 — ( 1 ) — — ( 1 ) Repurchases of common stock ( 229 ) — ( 4 ) — ( 206 ) ( 210 ) Cash dividend declared — — — — ( 577 ) ( 577 ) BALANCE AT FEBRUARY 15, 2026 443,692 $ 2 $ 8,570 $ ( 1,606 ) $ 25,121 $ 32,087 12 Weeks Ended February 16, 2025 Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Equity Shares (000s) Amount BALANCE AT NOVEMBER 24, 2024 443,942 $ 2 $ 7,901 $ ( 2,152 ) $ 18,700 $ 24,451 Net income — — — — 1,788 1,788 Foreign-currency translation adjustment and other, net — — — ( 90 ) — ( 90 ) Stock-based compensation — — 151 — — 151 Release of vested RSUs, including tax effects 1 — ( 1 ) — — ( 1 ) Repurchases of common stock ( 213 ) — ( 4 ) — ( 203 ) ( 207 ) Cash dividend declared — — — — ( 515 ) ( 515 ) BALANCE AT FEBRUARY 16, 2025 443,730 $ 2 $ 8,047 $ ( 2,242 ) $ 19,770 $ 25,577 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Table of Contents COSTCO WHOLESALE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (amounts in millions) (unaudited) 24 Weeks Ended February 15, 2026 Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Equity Shares (000s) Amount BALANCE AT AUGUST 31, 2025 443,237 $ 2 $ 8,282 $ ( 1,770 ) $ 22,650 $ 29,164 Net income — — — — 4,036 4,036 Foreign-currency translation adjustment and other, net — — — 164 — 164 Stock-based compensation — — 655 — — 655 Release of vested RSUs, including tax effects 909 — ( 358 ) — — ( 358 ) Repurchases of common stock ( 454 ) — ( 9 ) — ( 411 ) ( 420 ) Cash dividend declared — — — — ( 1,154 ) ( 1,154 ) BALANCE AT FEBRUARY 15, 2026 443,692 $ 2 $ 8,570 $ ( 1,606 ) $ 25,121 $ 32,087 24 Weeks Ended February 16, 2025 Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Equity Shares (000s) Amount BALANCE AT SEPTEMBER 1, 2024 443,126 $ 2 $ 7,829 $ ( 1,828 ) $ 17,619 $ 23,622 Net income — — — — 3,586 3,586 Foreign-currency translation adjustment and other, net — — — ( 414 ) — ( 414 ) Stock-based compensation — — 616 — — 616 Release of vested RSUs, including tax effects 1,047 — ( 390 ) — — ( 390 ) Repurchases of common stock ( 443 ) — ( 8 ) — ( 405 ) ( 413 ) Cash dividend declared — — — — ( 1,030 ) ( 1,030 ) BALANCE AT FEBRUARY 16, 2025 443,730 $ 2 $ 8,047 $ ( 2,242 ) $ 19,770 $ 25,577 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Table of Contents COSTCO WHOLESALE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in millions) (unaudited) 24 Weeks Ended February 15, 2026 February 16, 2025 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 4,036 $ 3,586 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,194 1,100 Non-cash lease expense 149 137 Stock-based compensation 652 614 Other non-cash operating activities, net 66 ( 79 ) Changes in operating assets and liabilities: Merchandise inventories ( 783 ) ( 362 ) Accounts payable 731 ( 458 ) Other operating assets and liabilities, net 1,639 1,470 Net cash provided by operating activities 7,684 6,008 CASH FLOWS FROM INVESTING ACTIVITIES Additions to property and equipment ( 2,815 ) ( 2,401 ) Purchases of short-term investments ( 250 ) ( 345 ) Maturities of short-term investments 510 752 Other investing activities, net ( 13 ) ( 13 ) Net cash used in investing activities ( 2,568 ) ( 2,007 ) CASH FLOWS FROM FINANCING ACTIVITIES Repayments of short-term borrowings ( 65 ) ( 389 ) Proceeds from short-term borrowings 136 370 Tax withholdings on stock-based awards ( 358 ) ( 390 ) Repurchases of common stock ( 419 ) ( 412 ) Cash dividend payments ( 1,154 ) ( 515 ) Financing lease payments and other financing activities, net ( 37 ) ( 98 ) Net cash used in financing activities ( 1,897 ) ( 1,434 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 3 ( 117 ) Net change in cash and cash equivalents 3,222 2,450 CASH AND CASH EQUIVALENTS BEGINNING OF YEAR 14,161 9,906 CASH AND CASH EQUIVALENTS END OF PERIOD $ 17,383 $ 12,356 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the first 24 weeks of the year for: Interest $ 51 $ 55 Income taxes, net $ 1,016 $ 798 SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES: Cash dividend declared, but not yet paid $ — $ 515 Financing lease assets obtained in exchange for new or modified leases $ 58 $ 103 Operating lease assets obtained in exchange for new or modified leases $ 134 $ 57 Capital expenditures included in liabilities $ 235 $ 164 The accompanying notes are an integral part of these condensed consolidated financial statements. 8 Table of Contents COSTCO WHOLESALE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in millions, except share, per share, and warehouse count data) (unaudited) 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 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 February 15, 2026, Costco operated 924 warehouses worldwide: 634 in the United States (U.S.) located in 47 states, Washington, D.C., and Puerto Rico, 114 in Canada, 42 in Mexico, 37 in Japan, 29 in the United Kingdom (U.K.), 20 in Korea, 15 in Australia, 14 in Taiwan, seven in China, five in Spain, three in France, two in Sweden and one each in Iceland and New Zealand. The Company operates e-commerce sites in the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan, and Australia. Basis of Presentation The condensed 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. These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interim financial reporting pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). While these statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (U.S. GAAP) for complete financial statements. Therefore, the interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2025. Fiscal Year End The Company operates on a 52/53 week fiscal year basis, with the fiscal year ending on the Sunday closest to August 31. Fiscal 2026 is a 52-week year ending on August 30, 2026. References to the second quarter of 2026 and 2025 relate to the 12-week fiscal quarters ended February 15, 2026, and February 16, 2025. References to the first half of 2026 and 2025 relate to the 24 weeks ended February 15, 2026, and February 16, 2025. 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. Recent Accounting Pronouncements Not Yet Adopted By The Company In December 2023, the Financial Accounting Standards Board (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 9 Table of Contents certain information about income taxes paid. The standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. In November 2024, the FASB issued ASU 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. These standards should be applied on a prospective basis. Retrospective application is permitted. The Company is evaluating these standards. Note 2—Investments The Company's investments were as follows: February 15, 2026: Cost Basis Unrealized Gains, Net Recorded Basis Available-for-sale: Government and agency securities $ 794 $ 7 $ 801 Held-to-maturity: Certificates of deposit 56 — 56 Total short-term investments $ 850 $ 7 $ 857 August 31, 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 Gross unrealized holding gains and losses on available-for-sale securities were not material for the periods ended February 15, 2026, or August 31, 2025. 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 the first half of 2026 or 2025. The maturities of available-for-sale and held-to-maturity securities at February 15, 2026, are as follows: Available-For-Sale Held-To-Maturity Cost Basis Fair Value Due in one year or less $ 102 $ 102 $ 56 Due after one year through five years 474 479 — Due after five years 218 220 — Total $ 794 $ 801 $ 56 10 Table of Contents Note 3—Fair Value Measurement Assets and Liabilities Measured at Fair Value on a Recurring Basis The table below presents information regarding the Company’s financial assets and financial liabilities that are measured at fair value on a recurring basis and indicates the level within the hierarchy reflecting the valuation techniques utilized. Level 2 February 15, 2026 August 31, 2025 Investment in government and agency securities $ 801 $ 786 Forward foreign-exchange contracts, in asset position (1) 2 6 Forward foreign-exchange contracts, in (liability) position (1) ( 18 ) ( 14 ) Total $ 785 $ 778 _______________ (1) The asset and liability values are included in other current assets and other current liabilities, respectively, in the accompanying condensed consolidated balance sheets. On February 15, 2026, and August 31, 2025, 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 the first half of 2026 or 2025. 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 fair value adjustments to these items during the first half of 2026 or 2025. Note 4—Debt The carrying value of the Company’s long-term debt consisted of the following: February 15, 2026 August 31, 2025 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 775 805 Total long-term debt 5,775 5,805 Less unamortized debt discounts and issuance costs 15 17 Less current portion (1) 72 75 Long-term debt, excluding current portion $ 5,688 $ 5,713 _______________ (1) Net of unamortized debt discounts and issuance costs and included in other current liabilities in the accompanying condensed consolidated balance sheets . The fair value of the Senior Notes is estimated using Level 2 inputs. Other long-term debt consists of Guaranteed Senior Notes issued by the Company's Japan subsidiary, valued using Level 3 inputs. The fair value of the Company's long-term debt, including the current portion, was approximately $ 5,384 and $ 5,370 at February 15, 2026, and August 31, 2025. 11 Table of Contents Note 5—Equity Dividends A quarterly cash dividend of $ 1.30 per share was declared on January 15, 2026, and paid on February 13, 2026. The dividend was $ 1.16 per share in the second quarter of 2025. 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. At February 15, 2026, the remaining amount available under the program was $ 1,542 . The following table summarizes the repurchase activity: Shares Repurchased (000s) Average Price per Share Total Cost Second quarter of 2026 229 $ 917.02 $ 210 First half of 2026 454 $ 924.46 $ 420 Second quarter of 2025 213 $ 967.29 $ 207 First half of 2025 443 $ 932.03 $ 413 These amounts may differ from the accompanying condensed consolidated statements of cash flows due to changes in unsettled stock repurchases at the end of each quarter. Purchases are made from time to time, as conditions warrant, potentially including the open market, block purchases and pursuant to plans under SEC Rule 10b5-1. Note 6—Stock-Based Compensation The 2019 Incentive Plan authorizes the issuance of up to 15,885,000 RSUs. 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 February 15, 2026, 5,234,000 shares were available to be granted as RSUs, and the following awards were outstanding: • 1,934,000 time-based RSUs, which vest upon continued employment over specified periods. Some of these RSUs accelerate upon achievement of a long-service term; • 60,000 performance-based RSUs granted to executive officers, for which the performance targets have been met. The awards vest upon continued employment over specified periods of time and upon achievement of a long-service term; and • 67,000 performance-based RSUs granted to executive officers, subject to achievement of performance targets for 2026, as determined by the Compensation Committee of the Board of Directors after the end of the fiscal year. These awards are included in the table below and in the amount of unrecognized compensation cost. The Company recognized compensation expense for these awards in the second quarter of 2026, as it is currently deemed probable that the targets will be achieved. 12 Table of Contents The following table summarizes RSU transactions during the first half of 2026: Number of Units (in 000s) Weighted-Average Grant Date Fair Value Outstanding at August 31, 2025 2,308 $ 597.00 Granted 1,088 933.56 Vested and delivered ( 1,288 ) 669.71 Forfeited ( 47 ) 686.29 Outstanding at February 15, 2026 2,061 $ 727.17 The remaining unrecognized compensation cost related to RSUs unvested at February 15, 2026, was $ 1,224 , and the weighted-average period over which this cost will be recognized is 1.6 years. Summary of Stock-Based Compensation The following table summarizes stock-based compensation expense and the related tax benefits: 12 Weeks Ended 24 Weeks Ended February 15, 2026 February 16, 2025 February 15, 2026 February 16, 2025 Stock-based compensation expense $ 166 $ 151 $ 652 $ 614 Less recognized income tax benefits 34 28 151 129 Stock-based compensation expense, net $ 132 $ 123 $ 501 $ 485 Note 7—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 000s): 12 Weeks Ended 24 Weeks Ended February 15, 2026 February 16, 2025 February 15, 2026 February 16, 2025 Net income $ 2,035 $ 1,788 $ 4,036 $ 3,586 Weighted average basic shares 443,946 443,982 443,954 443,985 RSUs 474 904 514 903 Weighted average diluted shares 444,420 444,886 444,468 444,888 Anti-dilutive RSUs 523 — 123 — Anti-dilutive shares are excluded from the calculation of diluted shares and earnings per diluted share because their impact would increase earnings per diluted shares. 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. 13 Table of Contents Note 8—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 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 (considering 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. The Company's motion to stay the action was granted on November 13, 2025. In January 2026, a class action on behalf of Washington employees was filed against the Company alleging failure to provide meal periods and rest breaks and to compensate for violations, wage theft, and failure to furnish accurate wage statements. The complaint seeks compensatory and exemplary damages, interest, and attorneys' fees. Madera v. Costco Wholesale Corp. (No. 26-2-02879-6, King County Superior Court). 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 14 Table of Contents 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 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. In October and November 2025, two class actions were filed against the Company alleging violations of consumer protection and other laws arising from the Company’s sale of Kirkland Signature tequila products in the United States: Glazer v. Costco Wholesale Corp. , Case No. 1:25-cv-25057 (S.D. Fla.); and Salisbury et al. v. Costco Wholesale Corp. , Case No. 2:25-cv-02277 (W.D. Wash.). Plaintiffs allege that the Company’s Kirkland Signature tequilas are labeled “100% de Agave” but contain alcohol derived from non-agave sugars. They seek damages, statutory penalties, punitive and treble damages, and disgorgement. The Glazer action was subsequently dismissed without prejudice. 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. 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. 15 Table of Contents Note 9—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 the notes to the consolidated financial statements included in the Company's Annual Report filed on Form 10-K for the fiscal year ended August 31, 2025, and Note 1 above. 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 President and Chief Executive Officer. The CODM utilizes operating income, as reported in the condensed 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: 12 Weeks Ended 24 Weeks Ended February 15, 2026 February 16, 2025 February 15, 2026 February 16, 2025 United States Total revenue $ 49,931 $ 46,413 $ 98,500 $ 91,501 Merchandise costs 43,510 40,535 85,642 79,683 Selling, general and administrative expenses 4,786 4,363 9,607 8,805 Operating income $ 1,635 $ 1,515 $ 3,251 $ 3,013 Canada Total revenue $ 9,291 $ 8,296 $ 18,364 $ 16,700 Merchandise costs 8,088 7,253 15,985 14,594 Selling, general and administrative expenses 727 640 1,469 1,341 Operating income $ 476 $ 403 $ 910 $ 765 Other International Total revenue $ 10,375 $ 9,014 $ 20,040 $ 17,673 Merchandise costs 9,121 7,956 17,602 15,576 Selling, general and administrative expenses 759 660 1,530 1,363 Operating income $ 495 $ 398 $ 908 $ 734 Total Total revenue $ 69,597 $ 63,723 $ 136,904 $ 125,874 Merchandise costs 60,719 55,744 119,229 109,853 Selling, general and administrative expenses 6,272 5,663 12,606 11,509 Operating income 2,606 2,316 5,069 4,512 Other income (1) 115 106 235 216 Income before income taxes $ 2,721 $ 2,422 $ 5,304 $ 4,728 _______________ (1) Other income consists of interest expense and interest income and other, net. 16 Table of Contents The following table provides depreciation and amortization and additions to property and equipment for the Company's reportable segments: 12 Weeks Ended 24 Weeks Ended February 15, 2026 February 16, 2025 February 15, 2026 February 16, 2025 United States Depreciation and amortization $ 464 $ 435 $ 928 $ 863 Additions to property and equipment 1,016 938 2,192 1,852 Canada Depreciation and amortization $ 47 $ 43 $ 96 $ 88 Additions to property and equipment 152 66 342 253 Other International Depreciation and amortization $ 86 $ 74 $ 170 $ 149 Additions to property and equipment 121 133 281 296 Total Depreciation and amortization $ 597 $ 552 $ 1,194 $ 1,100 Additions to property and equipment 1,289 1,137 2,815 2,401 The following table provides property and equipment, net and total assets for the Company's reportable segments: February 15, 2026 August 31, 2025 United States Property and equipment, net $ 24,070 $ 22,790 Total assets 60,142 54,862 Canada Property and equipment, net $ 3,206 $ 2,930 Total assets 7,639 7,304 Other International Property and equipment, net $ 6,369 $ 6,189 Total assets 15,858 14,933 Total Property and equipment, net $ 33,645 $ 31,909 Total assets 83,639 77,099 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: 12 Weeks Ended 24 Weeks Ended February 15, 2026 February 16, 2025 February 15, 2026 February 16, 2025 Foods and Sundries $ 27,149 $ 25,112 $ 54,092 $ 50,174 Non-Foods 19,153 17,526 36,593 33,697 Fresh Foods 9,887 8,836 18,903 17,054 Warehouse Ancillary and Other Businesses 12,053 11,056 24,632 22,590 Total net sales $ 68,242 $ 62,530 $ 134,220 $ 123,515 17 Table of Contents