Financial Analysis

Note 8Commitments 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 le …

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Note 4Debt The carrying value of the Companys long-term debt consisted of the following: May 10, 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 684 805 Total long-term debt 5,684 5,805 Less unamortized debt discounts and issuance costs 14 17 Less current portion (1) 75 Long-term debt, excluding current portion $ 5,670 $ 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. In March 2026, the Company's Japan subsidiary repaid $69 of its Guaranteed Senior Notes. The fair value of the Company's long-term debt, including the current portion, was approximately $5,259 and $5,370 at May 10, 2026, and August 31, 2025. …

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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 36 Weeks Ended May 10, 2026 May 11, 2025 May 10, 2026 May 11, 2025 Foods and Sundries $ 26,533 $ 25,149 $ 80,625 $ 75,323 Non-Foods 17,529 16,080 54,122 49,777 Fresh Foods 9,673 8,785 28,576 25,839 Warehouse Ancillary and Other Businesses 15,419 11,951 40,051 34,541 Total net sales $ 69,154 $ 61,965 $ 203,374 $ 185,480

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Note 6Stock-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 May 10, 2026, 5,252,000 shares were available to be granted as RSUs, and the following awards were outstanding: 1,908,000 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 third quarter of 2026, as it is currently deemed probable that the targets will be achieved. The following table summarizes RSU transactions during the first thirty-six weeks of 2026: Number of Units (in 000s) Weighted-Average Grant Date Fair Value Outstanding at August …

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Note 3Fair Value Measurement Assets and Liabilities Measured at Fair Value on a Recurring Basis The table below presents information regarding the Companys 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 May 10, 2026 August 31, 2025 Investment in government and agency securities $ 818 $ 786 Forward foreign-exchange contracts, in asset position (1) 1 6 Forward foreign-exchange contracts, in (liability) position (1) (10) (14) Total $ 809 $ 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 May 10, 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 thirty-six weeks 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 thirty-six weeks of 2026 or 2025. …

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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 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.

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Note 9Segment 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 managements 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 uses the metrics outlined in the table below, along with internal management reports, to evaluate performance, monitor actual results versus budget and prior year results, and make strategic and operational resource allocation decisions. The following table provides the revenue, significant expenses, and operating income for the Company's reportable segments: 12 Weeks Ended 36 Weeks Ended May 10, 2026 May 11, 2025 May 10, 2026 May 11, 2025 United States Total revenue $ 51,434 $ 46,318 $ 149,934 $ 137,819 Merchandise costs 44,857 40,239 130,499 119,922 Sellin …

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Note 1Summary 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 May 10, 2026, Costco operated 928 warehouses worldwide: 637 in the United States (U.S.) located in 47 states, Washington, D.C., and Puerto Rico, 115 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 …

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Note 5Equity Dividends A quarterly cash dividend of $1.47 per share was declared on April 15, 2026, and paid on May 15, 2026. The dividend was $1.30 per share in the third 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 May 10, 2026, the remaining amount available under the program was $1,359. The following table summarizes the repurchase activity: Shares Repurchased (000s) Average Price per Share Total Cost Third quarter of 2026 184 $ 997.47 $ 183 First thirty-six weeks of 2026 638 $ 945.46 $ 603 Third quarter of 2025 215 $ 976.71 $ 210 First thirty-six weeks of 2025 658 $ 946.64 $ 623 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. …

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