Costco is about to disclose a major update on member behavior

There’s a joke that Costco members don’t just shop there, they belong there.

They pay for the privilege, renew year after year, and somehow always leave with more than they planned. That loyalty is the entire business model. And right now, it’s working almost too well.

Costco (COST) is set to report third-quarter fiscal 2026 earnings after the market close on Thursday, May 28.

Analysts are expecting $4.98 in earnings per share (EPS) on roughly $69.61 billion in revenue, according to TipRanks data. That would compare to $4.02 EPS in the same quarter last year.

The business looks healthy.

April net sales came in at $23.92 billion, up 13% from a year ago, according to a company press release. Digital sales are surging. Membership renewal rates remain above 89%. And the stock recently touched an all-time high of $1,096 on May 19.

But here’s the uncomfortable truth heading into Thursday. At over 50 times forward earnings, as confirmed by TipRanks, even a good quarter might not be enough.

Why Costco’s April sales data sets a high bar for Q3

The pre-earnings data points are genuinely strong, and that’s precisely what makes the setup tricky.

April comparable sales rose 11.6% overall. Strip out gasoline prices and foreign exchange effects, and the core business still grew 7.8%, according to Costo’s April sales results. Digitally enabled comparable sales surged 18.8% in April and 21.6% over the first 35 weeks of the fiscal year.

Let’s look at the broader fiscal year picture:

Net sales for first 35 weeks: $197.18 billion, up 9.5% YoYQ2 FY2026 net sales: $68.24 billion, up 9.1% YoYQ2 net income: $2.035 billion, or $4.58 per diluted share, up from $4.02 last year
Source: Costco Wholesale Corporation April Sales Results

My review of the data suggests the trajectory is consistent. Costco is not a volatile business. It compounds steadily, quarter after quarter. The question heading into Thursday isn’t whether the company performed well.

The question is whether it performed well enough to justify a stock trading near all-time highs at a historically elevated multiple.

Costco currently operates 928 warehouses across eight countries, including 637 in the United States and Puerto Rico.

Albany Times Union via Getty Images

The membership engine that makes Costco nearly impossible to disrupt

Before getting to valuation risk, it’s worth understanding why Costco earns a premium in the first place.

The warehouse club model is structurally different from traditional retail. Costco makes most of its profit from membership fees, not merchandise margins. 

That means the company is essentially paid upfront to exist, regardless of what shoppers buy. Members then spend freely because they’ve already committed.

Here’s the current membership picture:

Paid memberships up 4.8% YoYRenewal rates above 89%Executive members now drive nearly 75% of total sales
Source: Seeking Alpha

That last figure is significant. Executive members pay more annually and spend more per visit.

As their share of total sales grows, Costco’s revenue becomes stickier and more predictable. That is exactly the kind of business model that justifies a premium valuation in uncertain economic times.

Related: Costco closure decisions to disappoint members

Costco currently operates 928 warehouses across eight countries, including 637 in the United States and Puerto Rico, according to April Sales Results.

International operations span Canada, Mexico, Japan, the United Kingdom, Korea, Australia, Taiwan, China, Spain, France, Sweden, Iceland, and New Zealand — with e-commerce sites in eight of those markets.

The valuation problem that won’t go away before May 28

Here is where the story gets complicated. Costco’s average analyst price target sits at $1,112, according to TipRanks data. COST shares were trading around $998.25 as of May 26, below the recent all-time high of $1,096.

That implies modest upside to the consensus target. But the price-to-earnings (P/E) ratio of 55 times forward earnings is historically elevated for a company growing revenue in the high single-digits to low double-digits annually. 

The stock has already rallied 16.05% year-to-date, according to Yahoo Finance data as of May 26, 2026. The S&P 500 has returned 10.03% over the same period.

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The risk is straightforward: when expectations are already priced in, even strong results can trigger a “sell the news” reaction. Unless Costco blows past the $4.98 EPS estimate meaningfully and management delivers confident commentary on the second-half outlook, the stock may struggle to push convincingly above its recent highs.

The headwinds are real, too. International expansion and digital growth are progressing, but neither has materially accelerated earnings growth yet. Plans for new warehouses signal continued investment, which weighs on near-term margins.

What to watch when Costco reports on May 28

Three numbers will matter most on Thursday, according to analyst consensus data from TipRanks:

EPS vs. $4.98 estimate: Any meaningful beat signals the core business is still acceleratingE-commerce comparable sales: April’s 18.8% growth sets a high bar; investors will want to see if that pace holds through the quarterMembership fee revenue and renewal rates: If renewal rates slip even slightly from 89%, it raises questions about the loyalty flywheel

There’s also the stock split question. With COST approaching $1,000 per share and recently hitting $1,096, speculation about a potential split has grown. Costco has historically been reluctant — but at this price level, accessibility for smaller investors becomes a genuine consideration.

The business is exceptional. The model is durable. The question on Thursday isn’t about Costco’s quality. It will be about whether the price already reflects it.

Related: Costco pays new members to join in rare offer

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