Costco Wholesale Corp /new
Management Discussion synthesis.

Gross margin$7,635 $6,969 $22,626$20,631 Gross margin percentage 11.04 %11.25 %11.13 %11.12 % Quarterly Results Gross margin as a percentage of net sales decreased by 21 basis points. Excluding the impact of gasoline price inflation on net sales, gross margin percentage was 11.26%, an increase of one basis point. The increase was positively impacted by 14 basis points in our warehouse ancillary and other businesses, primarily pharmacy and e-commerce. A smaller LIFO charge in the third quarter of 2026 compared to the third quarter of 2025 positively impacted gross margin by 14 basis points. The absence of a charge this quarter related to a one-time expense for increased employee vacation positively impacted gross margin by two basis points. Gross margin percentage was negatively impacted by 29 basis points in our core merchandise categories, primarily due to foods and sundries and fresh foods, partially offset by our co-branded credit card program and non-foods. Changes in foreign currencies relative to the U.S. dollar positively impacted gross margin by approximately $69, compared to the third quarter of 2025, attributable to our Other International and Canadian operations. 22 The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), decreased nine basis points. The decrease was primarily due to fresh foods and foods and sundries, partially offset by non-foods. This measure eliminates the impact of changes in sales penetration and gross margin from our warehouse ancillary and other businesses. Gross margin percentage on a segment basis, when expressed as a percentage of the segment's own sales and excluding the impact of changes in gasoline prices on net sales (segment gross margin percentage), decreased in our U.S. segment. The decrease was primarily due to a negative impact from core merchandise categories, partially offset by increases in warehouse ancillary and other businesses, a smaller LIFO charge and the absence of a charge related to a one-time expense for increased employee vacation. Our Canadian segment gross margin percentage increased, primarily due to increases in warehouse ancillary and other businesses, partially offset by decreases in core merchandise categories. Gross margin increased in our Other International segment, primarily due to increases in core merchandise categories.

Cash Flows from Operating Activities Our cash flow provided by operations is primarily from net sales and membership fees. Cash flow used in operations generally consists of payments to suppliers, warehouse operating costs, including wages and employee benefits, utilities, credit and debit card processing fees, and operating leases. Cash used in operations also includes payments for income taxes. Changes in our net investment in merchandise inventories (the difference between merchandise inventories and accounts payable) is impacted by several factors, including inventory levels and turnover, payment terms with suppliers, and early payments to obtain discounts. Net cash provided by operating activities totaled $11,133 in the first thirty-six weeks of 2026, compared to $9,468 in the first thirty-six weeks of 2025. The increase was primarily due to higher cash flow provided from operating income, as well as reduced net investment in merchandise inventories. The latter was a result of faster inventory turns and improved payment terms with suppliers.

Cash Flows from Financing Activities Net cash used in financing activities totaled $2,175 in the first thirty-six weeks of 2026, compared to $2,182 in the first thirty-six weeks of 2025. Cash flow used in financing activities during the first thirty-six weeks of 2026 was primarily related to the payment of dividends, repurchases of common stock, repayments of short-term borrowings, withholding taxes on stock-based awards, and repayments of long-term debt. Cash flow provided by financing activities included proceeds from short-term borrowings.

Highlights for the third quarter of 2026 versus 2025 include: •We opened four new warehouses: three in the U.S. and one in Canada, compared to nine new warehouses, including one relocation; •Net sales increased 12% to $69,154, driven by an increase in comparable sales and sales at 23 net new warehouses opened since the end of the third quarter of 2025; •Higher gasoline prices positively impacted net sales by $1,367, or 221 basis points, and changes in foreign currencies positively impacted net sales by approximately $643, or 104 basis points; 20 •Membership fee revenue increased 11% to $1,373, primarily driven by new member sign-ups, membership fee increases, and upgrades to Executive Membership; •Gross margin as a percentage of net sales and excluding the impact of gasoline price inflation increased one basis point; •SG&A expenses as a percentage of net sales and excluding the impact of gasoline price inflation decreased two basis points; •The effective tax rate was 25.4%, compared to 26.2%;

Total cardholders (000s)148,500 142,800 - - Membership fee revenue increased 11% and 13% in the third quarter and first thirty-six weeks of 2026, driven by new member sign-ups, membership fee increases and upgrades to Executive Membership. At the end of the third quarter of 2026, our renewal rates were 92.2% in the U.S. and Canada and 89.7% worldwide. Renewal rates were negatively impacted by a higher number of memberships sold online, including through digital promotions, entering the renewal rate calculation. These memberships renew at a slightly lower rate on average. As previously reported, we increased our annual membership fees in the U.S. and Canada, effective September 1, 2024. We account for membership fee revenue on a deferred basis, recognized ratably over the one-year membership period. The fee income increase accounted for approximately 25% and 35% of membership income growth during the third quarter and first thirty-six weeks of 2026.

SG&A expenses as a percentage of net sales8.96 %9.16 %9.24 %9.27 % Quarterly Results SG&A expenses as a percentage of net sales decreased by 20 basis points. SG&A expenses as a percentage of net sales excluding the impact of gasoline price inflation was 9.14%, a decrease of two basis points. Compared to last year, results were favorably impacted by five basis points attributable to the absence of a charge related to a one-time expense for increased employee vacation and one basis point from central operating costs. SG&A was negatively impacted by three basis points attributable to warehouse operations and other businesses. Stock compensation was higher by one basis point. Changes in foreign currencies relative to the U.S. dollar increased SG&A expenses by approximately $48 23 compared to the third quarter of 2025, attributable to our Other International and Canadian operations. SG&A expenses as a percentage of net sales was lower in our U.S. segment and higher in our Canadian and Other International segments.

Interest Expense 12 Weeks Ended36 Weeks Ended May 10,2026May 11,2025May 10,2026May 11,2025 Interest expense$32 $35 $100 $108 Interest expense is primarily related to Senior Notes and financing leases.

17 (17)38 49 Other, net8 7 28 25 Interest income and other, net$155 $85 $458 $374 The increase in interest income in the third quarter and first thirty-six weeks of 2026 was due to higher cash balances, partially offset by lower interest rates. Foreign-currency transaction gains (losses), net, include revaluation or settlement of monetary assets and liabilities by our Canadian and Other International operations and mark-to-market adjustments for forward foreign-exchange contracts. See Derivatives and Foreign Currency sections in Item 8, Note 1 of our Annual Report on Form 10-K, for the fiscal year ended August 31, 2025.

Effective tax rate25.4 %26.2 %24.4 %24.9 % The effective tax rate for the first thirty-six weeks of 2026 and 2025 was favorably impacted by discrete tax benefits of $72 and $100 related to stock compensation. 24

LIQUIDITY AND CAPITAL RESOURCES The following table summarizes our significant sources and uses of cash and cash equivalents: 36 Weeks Ended May 10,2026May 11,2025

Net cash provided by operating activities$11,133 $9,468 Net cash used in investing activities(4,160)(3,343) Net cash used in financing activities(2,175)(2,182) Our primary sources of liquidity are cash flows from operations, cash and cash equivalents, and short-term investments. Cash and cash equivalents and short-term investments were $19,996 and $15,284 at May 10, 2026, and August 31, 2025. Of these balances, unsettled credit and debit card receivables represented approximately $3,078 and $2,670 at May 10, 2026, and August 31, 2025. These receivables generally settle within four days. Material contractual obligations arising in the normal course of business primarily consist of purchase obligations, long-term debt and related interest payments, leases, and construction and land purchase obligations. Purchase obligations consist of contracts primarily related to merchandise, equipment, and third-party services, the majority of which are due in the next 12 months. Construction and land-purchase obligations consist of contracts primarily related to the development and opening of new and relocated warehouses, the majority of which (other than leases) are due in the next 12 months. We believe that our cash and investment positions and operating cash flow, with capacity under existing and available credit agreements, will be sufficient to meet our liquidity and capital requirements for the foreseeable future and that our U.S. current and projected asset position is sufficient to meet our U.S. liquidity requirements.

Cash Flows from Investing Activities Net cash used in investing activities totaled $4,160 in the first thirty-six weeks of 2026, compared to $3,343 in the first thirty-six weeks of 2025, and is primarily related to capital expenditures. Net cash from investing activities also includes purchases and maturities of short-term investments.

Capital Expenditure Plans Our primary requirements for capital are acquiring land, buildings, and equipment for new and remodeled warehouses, information systems, and manufacturing and distribution facilities. In the first thirty-six weeks of 2026, we spent $4,228 on capital expenditures, and it is our current intention to spend approximately $6,500 during fiscal 2026, as we continue to invest in new warehouse openings, remodel existing locations, expand our depot network, and further develop our digitally-enabled businesses. These expenditures are expected to be financed with cash from operations, cash and cash equivalents, and 25 short-term investments. We opened 16 new warehouses, including two relocations, in the first thirty-six weeks of 2026, and plan to open 13 additional new warehouses, including one relocation, in the remainder of fiscal 2026. There can be no assurance that current expectations will be realized, and plans are subject to change upon further review of our capital expenditure needs and the economic environment.

Share Repurchase Program On January 19, 2023, the Board of Directors authorized a share repurchase program in the amount of $4,000, which expires in January 2027. During the first thirty-six weeks of 2026 and 2025, we repurchased 638,000 and 658,000 shares of common stock, at an average price per share of $945.46 and $946.64, totaling approximately $603 and $623. These amounts may differ from the accompanying condensed consolidated statements of cash flows due to changes in unsettled repurchases at the end of a 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. Repurchased shares are retired, in accordance with the Washington Business Corporation Act. The remaining amount available to be purchased under our approved plan was $1,359 at the end of the third quarter.

Bank Credit Facilities and Commercial Paper Programs We maintain bank credit facilities for working capital and general corporate purposes. At May 10, 2026, we had borrowing capacity under these facilities of $1,531. Our Canadian and Other International operations maintain $1,028 of this capacity under bank credit facilities, of which $338 is guaranteed by the Company. Short-term borrowings outstanding under the bank credit facilities, which are included in other current liabilities on the condensed consolidated balance sheets, were $96 at the end of the third quarter of 2026 and immaterial at the end of 2025. We have letter of credit facilities, for commercial and standby letters of credit, totaling $242. The outstanding commitments under these facilities at the end of the third quarter of 2026 totaled $205, most of which were standby letters of credit that do not expire or have expiration dates within one year. The bank credit facilities have various expiration dates, most within one year, and we generally intend to renew these facilities. The amount of borrowings available at any time under our bank credit facilities is reduced by the amount of standby and commercial letters of credit outstanding.

•Net income increased to $2,192, $4.93 per diluted share, compared to $1,903, $4.28 per diluted share; and •A quarterly cash dividend of $1.47 per share was declared on April 15, 2026, and paid on May 15, 2026.

Increases in net sales: U.S.11 %9 %9 %9 % Canada13 %4 %11 %5 % Other International 13 %6 %13 %6 % Total Company12 %8 %10 %8 % Increases in comparable sales:

U.S.9 %7 %7 %7 % Canada11 %3 %9 %4 % Other International11 %3 %11 %3 % Total Company10 %6 %8 %6 % Increases in comparable sales excluding the impact of changes in foreign currency and gasoline prices:

U.S.7 %8 %6 %8 % Canada6 %8 %8 %8 % Other International6 %9 %7 %9 % Total Company7 %8 %7 %8 % Net sales increased $7,189 or 12%, and $17,894 or 10% during the third quarter and first thirty-six weeks of 2026. The improvement was primarily attributable to an increase in comparable sales of $6,055 or 10% and $14,553 or 8% during the third quarter and thirty-six weeks of 2026. Comparable sales were positively impacted by increases of approximately 7% and 5% in average ticket and 2% and 3% in shopping frequency in the third quarter and first thirty-six weeks of 2026. The remaining increase was driven by sales at the 23 net new warehouses opened since the end of the third quarter of 2025. Digitally-enabled comparable sales increased 21% and 22% during the third quarter and first thirty-six weeks of 2026 and increased 21% for each period excluding the impact of changes in foreign currencies. Sales increased $3,721 or 7% and $12,384 or 8% in core merchandise categories during the third quarter and first thirty-six weeks of 2026, increasing in all categories. Sales increased $3,468 or 29% and $5,510 or 16% in warehouse ancillary and other businesses during the third quarter and first thirty-six weeks of 2026, led by gasoline and pharmacy. 21 The volume of gasoline sold increased approximately 10% and 6%, positively impacting net sales by $662, or 107 basis points and $1,105 or 60 basis points during the third quarter and first thirty-six weeks of 2026. Higher gasoline prices positively impacted net sales by $1,367, or 221 basis points, and $936, or 50 basis points during the third quarter and first thirty-six weeks of 2026, with a 20% and 5% increase in the average price per gallon. Changes in foreign currencies relative to the U.S. dollar attributable to our Other International and Canadian operations positively impacted net sales by approximately $643, or 104 basis points, and approximately $1,578, or 85 basis points, during the third quarter and first thirty-six weeks of 2026.

Interest Expense 12 Weeks Ended24 Weeks Ended February 15,2026February 16,2025February 15,2026February 16,2025 Interest expense$33 $36 $68 $73 Interest expense is primarily related to Senior Notes and financing leases.

Foreign-currency transaction gains (losses), net (4)23 21 66 Other, net12 10 20 18 Interest income and other, net$148 $142 $303 $289 The increase in interest income in the second quarter and first half of 2026 was due to higher cash balances, partially offset by lower interest rates. Foreign-currency transaction gains (losses), net, include revaluation or settlement of monetary assets and liabilities by our Canadian and Other International operations and mark-to-market adjustments for forward foreign-exchange contracts. See Derivatives and Foreign Currency sections in Item 8, Note 1 of our Annual Report on Form 10-K, for the fiscal year ended August 31, 2025.

Net cash provided by operating activities$7,684 $6,008 Net cash used in investing activities(2,568)(2,007) Net cash used in financing activities(1,897)(1,434) Our primary sources of liquidity are cash flows from operations, cash and cash equivalents, and short-term investments. Cash and cash equivalents and short-term investments were $18,240 and $15,284 at February 15, 2026, and August 31, 2025. Of these balances, unsettled credit and debit card receivables represented approximately $2,872 and $2,670 at February 15, 2026, and August 31, 2025. These receivables generally settle within four days. Material contractual obligations arising in the normal course of business primarily consist of purchase obligations, long-term debt and related interest payments, leases, and construction and land purchase obligations. Purchase obligations consist of contracts primarily related to merchandise, equipment, and third-party services, the majority of which are due in the next 12 months. Construction and land-purchase obligations consist of contracts primarily related to the development and opening of new and relocated warehouses, the majority of which (other than leases) are due in the next 12 months. We believe that our cash and investment positions and operating cash flow, with capacity under existing and available credit agreements, will be sufficient to meet our liquidity and capital requirements for the foreseeable future and that our U.S. current and projected asset position is sufficient to meet our U.S. liquidity requirements.

Capital Expenditure Plans Our primary requirements for capital are acquiring land, buildings, and equipment for new and remodeled warehouses, information systems, and manufacturing and distribution facilities. In the first half of 2026, we spent $2,815 on capital expenditures, and it is our current intention to spend approximately $6,500 during fiscal 2026, as we continue to invest in new warehouse openings, remodel existing locations, expand our depot network, and further develop our digitally-enabled businesses. These expenditures are expected to be financed with cash from operations, cash and cash equivalents, and short-term investments. We opened 12 new warehouses, including two relocations, in the first half of 2026, and plan to open 21 additional new warehouses, including three relocations, in the remainder of fiscal 2026. There 25 can be no assurance that current expectations will be realized, and plans are subject to change upon further review of our capital expenditure needs and the economic environment.

U.S.6 %8 %6 %7 % Canada10 %5 %8 %5 % Other International13 %2 %11 %3 % Total Company7 %7 %7 %6 % Increases in comparable sales excluding the impact of changes in foreign-currency and gasoline prices:

Total paid members (000s)82,100 78,400 - - Total cardholders (000s)147,200 140,600 - - Membership fee revenue increased 14% in the second quarter and first half of 2026, driven by new member sign-ups and membership fee increases. At the end of the second quarter of 2026, our renewal rates were 92.1% in the U.S. and Canada and 89.7% worldwide. Renewal rates were negatively impacted by a higher number of memberships sold online, including through digital promotions, entering the renewal rate calculation. These memberships renew at a slightly lower rate on average. As previously reported, we increased our annual membership fees in the U.S. and Canada, effective September 1, 2024. We account for membership fee revenue on a deferred basis, recognized ratably over the one-year membership period. The fee income increase accounted for approximately 35% and 40% of membership income growth during the second quarter and first half of 2026.

We believe our gasoline business enhances traffic in our warehouses; it generally has a lower gross margin percentage and lower SG&A expense relative to our non-gasoline businesses. A higher penetration of gasoline sales will generally lower our gross margin percentage. Generally, rising gasoline prices benefit net sales growth which, given the higher sales base, negatively impacts our gross margin percentage but decreases our SG&A expenses as a percentage of net sales. A decline in gasoline prices has the inverse effect. We also achieve net sales growth by opening new warehouses. As our warehouse base grows and available and desirable sites become more difficult to secure, square footage growth becomes a comparatively less substantial component of growth. Negative aspects of such growth include lower initial 19 operating profitability relative to existing warehouses and cannibalization of sales at existing warehouses when openings occur in existing markets. Our rate of square footage growth is generally higher in many of our foreign markets, due to the smaller base in those markets, and we expect that to continue. The membership format is integral to our business and profitability. This format is designed to reinforce member loyalty and provide continuing fee revenue. The extent to which we achieve growth in our membership base, increase the penetration of Executive memberships, and sustain high renewal rates materially influences our profitability. Our renewal rate, which excludes affiliates of Business members, is a trailing calculation that captures renewals during the period seven to eighteen months prior to the reporting date. Our paid-membership growth rate may be adversely impacted when warehouse openings occur in existing markets as compared to new markets. Our worldwide renewal rate is adversely impacted by membership growth in newer international markets and a higher penetration of memberships sold online, including through digital membership promotions, which renew at a slightly lower rate on average. Our financial performance depends heavily on controlling costs. While we believe that we have achieved successes in this area, some significant costs are partially outside our control, particularly health care and utility expenses. With respect to the compensation of our employees, our philosophy is not to seek to minimize their wages and benefits. Rather, we believe that achieving our longer-term objectives of reducing employee turnover, increasing productivity and enhancing employee satisfaction requires maintaining compensation levels that are better than the industry average for much of our workforce. This may cause us, for example, to absorb costs that other employers might seek to pass through to their workforces. Because our business operates on very low margins, modest changes in various items in the consolidated statements of income, particularly merchandise costs and SG&A expenses, can have substantial impacts on net income. Our operating models are generally the same across our U.S., Canadian, and Other International operating segments (see Note 9 to the condensed consolidated financial statements included in Part I, Item 1, of this Report). Certain operations in the Other International segment have relatively higher rates of square footage growth, lower wage and benefit costs as a percentage of sales, less or no direct membership warehouse competition, or lack e-commerce or business delivery. In discussions of our consolidated operating results, we refer to the impact of changes in foreign currencies relative to the U.S. dollar, which are differences between the foreign-exchange rates we use to convert the financial results of our international operations from local currencies into U.S. dollars. This impact is calculated based on the difference between the current and prior period's exchange rates. The impact of changes in gasoline prices on net sales is calculated based on the difference between the current and prior period's average price per gallon. Results expressed excluding the impacts of foreign-exchange and gasoline prices are intended as supplemental information and are not a substitute for net sales presented in accordance with U.S. GAAP and should be reviewed in conjunction with results reported in accordance with U.S. GAAP. Our fiscal year ends on the Sunday closest to August 31. 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. Certain percentages presented are calculated using actual results prior to rounding.

LIQUIDITY AND CAPITAL RESOURCES The following table summarizes our significant sources and uses of cash and cash equivalents: 24 Weeks Ended February 15,2026February 16,2025

Cash Flows from Operating Activities Net cash provided by operating activities totaled $7,684 in the first half of 2026, compared to $6,008 in the first half of 2025. Our cash flow provided by operations is primarily from net sales and membership fees. Cash flow used in operations generally consists of payments to suppliers, warehouse operating costs, including wages and employee benefits, utilities, credit and debit card processing fees, and operating leases. Cash used in operations also includes payments for income taxes. Changes in our net investment in merchandise inventories (the difference between merchandise inventories and accounts payable) is impacted by several factors, including inventory levels and turnover, payment terms with suppliers, and early payments to obtain discounts.

Cash Flows from Investing Activities Net cash used in investing activities totaled $2,568 in the first half of 2026, compared to $2,007 in the first half of 2025, and is primarily related to capital expenditures. Net cash from investing activities also includes purchases and maturities of short-term investments.

Cash Flows from Financing Activities Net cash used in financing activities totaled $1,897 in the first half of 2026, compared to $1,434 in the first half of 2025. Cash flow used in financing activities during the first half of 2026 was primarily related to the payment of dividends, repurchases of common stock, and withholding taxes on stock-based awards.

Dividends A quarterly cash dividend of $1.30 per share was declared on January 15, 2026, and paid on February 13, 2026. Share Repurchase Program On January 19, 2023, the Board of Directors authorized a share repurchase program in the amount of $4,000, which expires in January 2027. During the first half of 2026 and 2025, we repurchased 454,000 and 443,000 shares of common stock, at an average price per share of $924.46 and $932.03, totaling approximately $420 and $413. These amounts may differ from the accompanying condensed consolidated statements of cash flows due to changes in unsettled repurchases at the end of a 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. Repurchased shares are retired, in accordance with the Washington Business Corporation Act. The remaining amount available to be purchased under our approved plan was $1,542 at the end of the second quarter.

Highlights for the second quarter of 2026 versus 2025 include: •We opened four new warehouses, including one relocation, for a total of three net new warehouses: one in the U.S. and two in our Canadian segment, compared to one new warehouse in the U.S.; •Net sales increased 9% to $68,242, driven by an increase in comparable sales and sales at 27 net new warehouses opened since the end of the second quarter of 2025; •Membership fee revenue increased 14% to $1,355, primarily driven by new member sign-ups and membership fee increases; 20 •Gross margin as a percentage of net sales and excluding the impact of gasoline price deflation increased 11 basis points; •SG&A expenses as a percentage of net sales and excluding the impact of gasoline price deflation increased eight basis points; •The effective tax rate was 25.2%, compared to 26.2%;

Bank Credit Facilities and Commercial Paper Programs We maintain bank credit facilities for working capital and general corporate purposes. At February 15, 2026, we had borrowing capacity under these facilities of $1,447. Our Canadian and Other International operations maintain $946 of this capacity under bank credit facilities, of which $293 is guaranteed by the Company. Short-term borrowings outstanding under the bank credit facilities, which are included in other current liabilities on the condensed consolidated balance sheets, were $98 at the end of the second quarter of 2026 and immaterial at the end of 2025. We have letter of credit facilities, for commercial and standby letters of credit, totaling $236. The outstanding commitments under these facilities at the end of the second quarter of 2026 totaled $204, most of which were standby letters of credit that do not expire or have expiration dates within one year. The bank credit facilities have various expiration dates, most within one year, and we generally intend to renew these facilities. The amount of borrowings available at any time under our bank credit facilities is reduced by the amount of standby and commercial letters of credit outstanding.

•Net income increased to $2,035, $4.58 per diluted share, compared to $1,788, $4.02 per diluted share; and •A quarterly cash dividend of $1.30 per share was declared on January 15, 2026, and paid on February 13, 2026.

We believe our gasoline business enhances traffic in our warehouses; it generally has a lower gross margin percentage and lower SG&A expense relative to our non-gasoline businesses. A higher penetration of gasoline sales will generally lower our gross margin percentage. Generally, rising gasoline prices benefit net sales growth which, given the higher sales base, negatively impacts our gross margin percentage but decreases our SG&A expenses as a percentage of net sales. A decline in gasoline prices has the inverse effect. We also achieve net sales growth by opening new warehouses. As our warehouse base grows and available and desirable sites become more difficult to secure, square footage growth becomes a comparatively less substantial component of growth. Negative aspects of such growth include lower initial operating profitability relative to existing warehouses and cannibalization of sales at existing warehouses when openings occur in existing markets. Our rate of square footage growth is generally higher in many of our foreign markets, due to the smaller base in those markets, and we expect that to continue. The membership format is integral to our business and profitability. This format is designed to reinforce member loyalty and provide continuing fee revenue. The extent to which we achieve growth in our 18 membership base, increase the penetration of Executive memberships, and sustain high renewal rates materially influences our profitability. Our renewal rate, which excludes affiliates of Business members, is a trailing calculation that captures renewals during the period seven to eighteen months prior to the reporting date. Our paid-membership growth rate may be adversely impacted when warehouse openings occur in existing markets as compared to new markets. Our worldwide renewal rate is adversely impacted by membership growth in newer international markets and a higher penetration of memberships sold online, including through digital membership promotions, which renew at a slightly lower rate on average. Our financial performance depends heavily on controlling costs. While we believe that we have achieved successes in this area, some significant costs are partially outside our control, particularly health care and utility expenses. With respect to the compensation of our employees, our philosophy is not to seek to minimize their wages and benefits. Rather, we believe that achieving our longer-term objectives of reducing employee turnover, increasing productivity and enhancing employee satisfaction requires maintaining compensation levels that are better than the industry average for much of our workforce. This may cause us, for example, to absorb costs that other employers might seek to pass through to their workforces. Because our business operates on very low margins, modest changes in various items in the consolidated statements of income, particularly merchandise costs and SG&A expenses, can have substantial impacts on net income. Our operating models are generally the same across our U.S., Canadian, and Other International operating segments (see Note 9 to the condensed consolidated financial statements included in Part I, Item 1, of this Report). Certain operations in the Other International segment have relatively higher rates of square footage growth, lower wage and benefit costs as a percentage of sales, less or no direct membership warehouse competition, or lack e-commerce or business delivery. In discussions of our consolidated operating results, we refer to the impact of changes in foreign currencies relative to the U.S. dollar, which are differences between the foreign-exchange rates we use to convert the financial results of our international operations from local currencies into U.S. dollars. This impact is calculated based on the difference between the current and prior period's exchange rates. The impact of changes in gasoline prices on net sales is calculated based on the difference between the current and prior period's average price per gallon. Results expressed excluding the impacts of foreign-exchange and gasoline prices are intended as supplemental information and are not a substitute for net sales presented in accordance with U.S. GAAP and should be reviewed in conjunction with results reported in accordance with U.S. GAAP. Our fiscal year ends on the Sunday closest to August 31. References to the first quarter of 2026 and 2025 relate to the 12-week fiscal quarters ended November 23, 2025, and November 24, 2024. Certain percentages presented are calculated using actual results prior to rounding.

Cash Flows from Financing Activities Net cash used in financing activities totaled $3,775 in 2025, compared to $10,764 in 2024. Cash flow used in financing activities primarily related to the payment of dividends, repayments of long-term debt and short-term borrowings, repurchases of common stock, and withholding taxes on stock-based awards. Cash flow provided by financing activities included proceeds from short-term borrowings and issuance of long-term debt.

Highlights for 2025 include: •We opened 27 new warehouses, including three relocations, for a total of 24 net new warehouses: 15 in the U.S., two in our Canadian segment, and seven in our Other International segment, compared to 30 new warehouses, including one relocation, in 2024; •Net sales increased 8% to $269,912, driven by an increase in comparable sales and sales at new warehouses; •Membership fee revenue increased 10% to $5,323, driven by new member sign-ups and membership fee increases; •Gross margin percentage increased 20 basis points; 11 basis points excluding the impact of gasoline price deflation on net sales; •SG&A expenses as a percentage of net sales increased 11 basis points; three basis points excluding the impact of gasoline price deflation; •The effective tax rate in 2025 was 25.1%, compared to 24.4% in 2024; •Net income increased 10% to $8,099, or $18.21 per diluted share compared to $7,367, or $16.56 per diluted share in 2024. Foreign-exchange rates had a negative impact on net income of $97, $0.22 per diluted share; and

Table of Contents Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations (amounts in millions, except per share, share, percentages and warehouse count data)

OVERVIEW Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to promote understanding of the results of operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q), as well as our consolidated financial statements, the accompanying Notes to Financial Statements, and the related MD&A in our fiscal year 2025 Form 10-K, which was filed with the Securities and Exchange Commission on October 8, 2025. We operate membership warehouses and e-commerce sites based on the concept that offering low prices on a limited selection of nationally-branded and private-label products in a wide range of categories will produce high sales volumes and rapid inventory turnover. When combined with the operating efficiencies achieved by volume purchasing, efficient distribution and reduced handling of merchandise in no-frills, self-service warehouse facilities, these volumes and turnover enable us to operate profitably at significantly lower gross margins (net sales less merchandise costs) than most other retailers. We often sell inventory before we are required to pay for it, even while taking advantage of early payment discounts. We believe that the most important driver of our profitability is increasing net sales, particularly comparable sales. Net sales includes our core merchandise categories (foods and sundries, non-foods, and fresh foods), warehouse ancillary (gasoline, pharmacy, optical, food court, hearing aids, and tire installation) and other businesses (e-commerce, business centers, travel, and other). E-commerce and business center sales are allocated to the appropriate merchandise categories in the Net Sales discussion. The 2% reward associated with Executive membership reduces net sales and is allocated to the category in which the reward is generated (core merchandise categories, warehouse ancillary, and other businesses). Comparable sales is defined as net sales from warehouses open for more than one year, including remodels, relocations and expansions, and digitally-enabled businesses operating for more than one year. Starting this quarter, we changed our e-commerce comparable sales metric to digitally-enabled comparable sales. This metric represents sales delivered to members that are initiated through a digital device, whether fulfilled through a warehouse or a distribution center, as well as Costco Travel. The measure is intended as supplemental information and is not a substitute for net sales presented in accordance with U.S. GAAP and should be reviewed in conjunction with results reported in accordance with U.S. GAAP. Comparable sales growth is achieved through increasing shopping frequency from new and existing members and the amount they spend on each visit (average ticket). Sales comparisons can also be particularly influenced by certain factors that are beyond our control: fluctuations in currency exchange rates (with respect to our international operations) and inflation or deflation in the cost of gasoline and associated competitive conditions. The higher our comparable sales exclusive of these items, the more we can leverage our selling, general and administrative (SG&A) expenses, reducing them as a percentage of sales and enhancing profitability. Generating comparable sales growth is foremost a question of making available the right merchandise at the right prices, a skill that we believe we have repeatedly demonstrated over the long-term. Another substantial factor in net sales growth is the health of the economies in which we do business, including the effects of inflation or deflation, especially the United States. Net sales growth and gross margins are also impacted by competition, which is vigorous and widespread, across a wide range of global, national and regional wholesalers and retailers, including those with e-commerce operations. While we cannot control or reliably predict general economic health or changes in competition, we believe that we have been successful historically in adapting our business to these changes, such as through adjustments to our pricing and merchandise mix, including increasing the penetration of our private-label items, and through online offerings. Our philosophy is to provide our members with quality goods and services at competitive prices. We do not focus in the short-term on maximizing prices charged, but instead seek to maintain what we believe is a perception among our members of our "pricing authority" - consistently providing the most competitive values. Our net sales and gross margin are influenced in part by our merchandising and pricing strategies in response to cost increases. Those strategies can include, but are not limited to, working with our suppliers to share in absorbing cost increases, earlier-than-usual purchasing and in greater volumes, sourcing in the countries and regions where items are sold, as well as passing cost increases on to our members. Our investments in merchandise pricing may include reducing prices on merchandise to drive sales or meet competition and holding prices steady despite cost increases instead of passing the increases on to our members, negatively impacting gross margin and gross margin as a percentage of net sales (gross margin percentage) in the near term. Our e-commerce business, domestically and internationally, has a lower gross-margin percentage than our warehouse operations. Government actions in various countries relating to tariffs affect the costs of some of our merchandise. The degree of our exposure is dependent on (among other things) the type of goods, rates imposed, and timing of the tariffs. Higher tariffs are more likely to adversely impact rather than improve our results.

Cash Flows from Operating Activities Net cash provided by operating activities totaled $4,688 in the first quarter of 2026, compared to $3,260 in the first quarter of 2025. Our cash flow provided by operations is primarily from net sales and membership fees. Cash flow used in operations generally consists of payments to suppliers, warehouse operating costs, including wages and employee benefits, utilities, credit and debit card processing fees, and operating leases. Cash used in operations also includes payments for income taxes. Changes in our net investment in merchandise inventories (the difference between merchandise inventories and accounts payable) is impacted by several factors, including inventory levels and turnover, payment terms with suppliers, and early payments to obtain discounts.

Cash Flows from Investing Activities Net cash used in investing activities totaled $1,398 in the first quarter of 2026, compared to $985 in the first quarter of 2025, and is primarily related to capital expenditures. Net cash from investing activities also includes purchases and maturities of short-term investments.

Capital Expenditure Plans Our primary requirements for capital are acquiring land, buildings, and equipment for new and remodeled warehouses, information systems, and manufacturing and distribution facilities. In the first quarter of 2026, we spent $1,526 on capital expenditures, and it is our current intention to spend approximately $6,500 during fiscal 2026. These expenditures are expected to be financed with cash from operations, cash and cash equivalents, and short-term investments. We opened eight new warehouses, including one relocation, in the first quarter of 2026, and plan to open 25 additional new warehouses, including four relocations, in the remainder of fiscal 2026. There can be no assurance that current expectations will be realized, and plans are subject to change upon further review of our capital expenditure needs and the economic environment.

Dividends A quarterly cash dividend of $1.30 per share was declared on October 15, 2025, and paid on November 14, 2025. 23 Share Repurchase Program On January 19, 2023, the Board of Directors authorized a share repurchase program in the amount of $4,000, which expires in January 2027. During the first quarter of 2026 and 2025, we repurchased 225,000 and 230,000 shares of common stock, at an average price per share of $932.02 and $899.23, totaling approximately $210 and $206. These amounts may differ from the accompanying condensed consolidated statements of cash flows due to changes in unsettled repurchases at the end of a quarter. Purchases are made from time to time, as conditions warrant, in the open market or in block purchases, pursuant to plans under SEC Rule 10b5-1. Repurchased shares are retired, in accordance with the Washington Business Corporation Act. The remaining amount available to be purchased under our approved plan was $1,752 at the end of the first quarter.

Bank Credit Facilities and Commercial Paper Programs We maintain bank credit facilities for working capital and general corporate purposes. At November 23, 2025, we had borrowing capacity under these facilities of $1,320. Our international operations maintain $821 of this capacity under bank credit facilities, of which $188 is guaranteed by the Company. Short-term borrowings outstanding under the bank credit facilities, which are included in other current liabilities on the condensed consolidated balance sheets, were immaterial at the end of the first quarter of 2026 and at the end of 2025. We have letter of credit facilities, for commercial and standby letters of credit, totaling $227. The outstanding commitments under these facilities at the end of the first quarter of 2026 totaled $193, most of which were standby letters of credit that do not expire or have expiration dates within one year. The bank credit facilities have various expiration dates, most within one year, and we generally intend to renew these facilities. The amount of borrowings available at any time under our bank credit facilities is reduced by the amount of standby and commercial letters of credit outstanding.

Recent Accounting Pronouncements See discussion of Recent Accounting Pronouncements in Note 1 to the condensed consolidated financial statements included in Part I, Item 1 of this Report.

Capital Expenditure Plans Our primary requirements for capital are acquiring land, buildings, and equipment for new and remodeled warehouses, information systems and manufacturing and distribution facilities. In the first thirty-six weeks of 2025, we spent $3,532 on capital expenditures, and it is our current intention to spend slightly over $5,000 during fiscal 2025. These expenditures are expected to be financed with cash from operations, cash and cash equivalents, and short-term investments. We opened 17 new warehouses, including two relocations, in the first thirty-six weeks of 2025 and plan to open ten additional new warehouses, including one relocation, in the remainder of fiscal 2025. There can be no assurance that current expectations will be realized, and plans are subject to change upon further review of our capital expenditure needs and the economic environment.

Highlights for the third quarter of 2025 versus 2024 include: •Net sales increased 8% to $61,965, driven by an increase in comparable sales and sales at 29 net new warehouses opened since the end of the third quarter of 2024; •Membership fee revenue increased 10% to $1,240, primarily driven by new member sign-ups and membership fee increases; •Gross margin percentage increased 41 basis points; 29 basis points excluding the impact of gasoline price deflation on net sales; •SG&A expenses as a percentage of net sales increased 20 basis points; 11 basis points excluding the impact of gasoline price deflation; •Net income increased to $1,903, $4.28 per diluted share, compared to $1,681, $3.78 per diluted share in 2024. Foreign-exchange rates had a negative impact on net income of $35, $0.08 per diluted share; and

Dividends A quarterly cash dividend of $1.30 per share was declared on April 16, 2025, and paid on May 16, 2025. 24 Share Repurchase Program On January 19, 2023, the Board of Directors authorized a share repurchase program in the amount of $4,000, which expires in January 2027. During the first thirty-six weeks of 2025 and 2024, we repurchased 658,000 and 749,000 shares of common stock, at an average price per share of $946.64 and $646.07, totaling approximately $623 and $484. These amounts may differ from the accompanying condensed consolidated statements of cash flows due to changes in unsettled repurchases at the end of a quarter. Purchases are made from time to time, as conditions warrant, in the open market or in block purchases, pursuant to plans under SEC Rule 10b5-1. Repurchased shares are retired, in accordance with the Washington Business Corporation Act. The remaining amount available to be purchased under our approved plan was $2,242 at the end of the third quarter.

U.S.8 %4 %7 %3 % Canada5 %9 %5 %8 % Other International2 %9 %3 %10 % Total Company7 %6 %6 %5 % E-commerce21 %18 %17 %12 % Increases in comparable sales excluding the impact of changes in foreign-currency and gasoline prices(1):

Comparable Sales Comparable sales increased 6% in the third quarter and first thirty-six weeks of 2025 and were positively impacted by increased shopping frequency of 5% and an average ticket increase of less than 1%.

Total paid members (000s)79,600 74,500 - - Total cardholders (000s)142,800 133,900 - - Membership fee revenue increased 10% and 9% in the third quarter and first thirty-six weeks of 2025, primarily driven by new member sign-ups and membership fee increases. At the end of the third quarter of 2025, our renewal rates were 92.7% in the U.S. and Canada and 90.2% worldwide. Our renewal rates were negatively impacted by sign-ups from a digital promotion in the fall of 2023 entering the renewal calculation this quarter and higher penetration of online sign-ups in recent years. Our renewal rate, which excludes affiliates of Business members, is a trailing calculation that captures renewals during the period seven to eighteen months prior to the reporting date. As previously reported, we increased our annual membership fees in the U.S. and Canada, effective September 1, 2024. We account for membership fee revenue on a deferred basis, recognized ratably over the one-year membership period. The fee increase contributed approximately 4% of membership fee revenue during the third quarter of 2025.

Gross margin$6,969 $6,219 $20,631$18,670 Gross margin percentage 11.25 %10.84 %11.12 %10.89 % Quarterly Results Gross margin percentage increased 41 basis points. Excluding the impact of gasoline price deflation on net sales, gross margin percentage increased to 11.13%, 29 basis points. This increase was positively impacted by 27 basis points in our core merchandise categories, primarily in fresh foods and foods and sundries and 27 basis points in warehouse ancillary and other businesses, primarily gasoline and e-commerce. Gross margin was negatively impacted by 23 basis points due to a LIFO charge for higher merchandise costs and two basis points for a one-time expense for increased employee vacation. Changes in foreign currencies relative to the U.S. dollar negatively impacted gross margin by approximately $80, compared to the third quarter of 2024, attributable to our Other International and Canadian operations. The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), increased 36 basis points. The increase was across all categories, most significantly fresh foods which benefited from sales leverage, higher productivity, and lower prices for certain commodities. This measure eliminates the impact of changes in sales penetration and gross margin from our warehouse ancillary and other businesses. 21 Gross margin percentage on a segment basis, when expressed as a percentage of the segment's own sales and excluding the impact of changes in gasoline prices on net sales (segment gross margin percentage), increased in our U.S. segment, which performed similarly to the consolidated results above. Our Canadian segment gross margin percentage increased, primarily due to increases in core merchandise categories and warehouse ancillary and other businesses. Gross margin increased in our Other International segment, primarily due to increases in warehouse ancillary and other businesses.

Interest Expense 12 Weeks Ended36 Weeks Ended May 11,2025May 12,2024May 11,2025May 12,2024 Interest expense$35 $41 $108 $120 Interest expense is primarily related to Senior Notes and financing leases. The decrease in interest expense for the third quarter and first thirty-six weeks of 2025 was primarily due to repayment of the 2.750% Senior Notes in May 2024.

OVERVIEW Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to promote understanding of the results of operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q), as well as our consolidated financial statements, the accompanying Notes to Financial Statements, and the related MD&A in our fiscal year 2024 Form 10-K, filed with the Securities and Exchange Commission on October 9, 2024. We operate membership warehouses and e-commerce sites based on the concept that offering our members low prices on a limited selection of nationally-branded and private-label products in a wide range of categories will produce high sales volumes and rapid inventory turnover. When combined with the operating efficiencies achieved by volume purchasing, efficient distribution and reduced handling of merchandise in no-frills, self-service warehouse facilities, these volumes and turnover enable us to operate profitably at significantly lower gross margins (net sales less merchandise costs) than most other retailers. We often sell inventory before we are required to pay for it, even while taking advantage of early payment discounts. We believe that the most important driver of our profitability is increasing net sales, particularly comparable sales. Net sales includes our core merchandise categories (foods and sundries, non-foods, and fresh foods), warehouse ancillary (gasoline, pharmacy, optical, food court, hearing aids, and tire installation) and other businesses (e-commerce, business centers, travel, and other). E-commerce and business center sales are allocated to the appropriate merchandise categories in the Net Sales discussion. The 2% reward associated with Executive membership is allocated to the category in which the reward is generated (core merchandise categories, warehouse ancillary, and other businesses). Comparable sales is defined as net sales from warehouses open for more than one year, including remodels, relocations and expansions, and sales related to e-commerce sites operating for more than one year. The measure is intended as supplemental information and is not a substitute for net sales presented in accordance with U.S. GAAP and should be reviewed in conjunction with results reported in accordance with U.S. GAAP. Comparable sales growth is achieved through increasing shopping frequency from new and existing members and the amount they spend on each visit (average ticket). Sales comparisons can also be particularly influenced by certain factors that are beyond our control: fluctuations in currency exchange rates (with respect to our international operations) and inflation or deflation in the cost of gasoline and associated competitive conditions. The higher our comparable sales exclusive of these items, the more we can leverage our selling, general and administrative (SG&A) expenses, reducing them as a percentage of sales and enhancing profitability. Generating comparable sales growth is foremost a question of making available the right merchandise at the right prices, a skill that we believe we have repeatedly demonstrated over the long-term. Another substantial factor in net sales growth is the health of the economies in which we do business, including the effects of inflation or deflation, especially the United States. Net sales growth and gross margins are also impacted by our competition, which is vigorous and widespread, across a wide range of global, national and regional wholesalers and retailers, including those with e-commerce operations. While we cannot control or reliably predict general economic health or changes in competition, we believe that we have been successful historically in adapting our business to these changes, such as through adjustments to our pricing and merchandise mix, including increasing the penetration of our private-label items, and through online offerings. Our philosophy is to provide our members with quality goods and services at competitive prices. We do not focus in the short-term on maximizing prices charged, but instead seek to maintain what we believe is a perception among our members of our "pricing authority" - consistently providing the most competitive values. Our net sales and gross margin are influenced in part by our merchandising and pricing strategies in response to cost increases. Those strategies can include, but are not limited to, working with our suppliers to share in absorbing cost increases, earlier-than-usual purchasing and in greater volumes, sourcing in the countries and regions where items are sold, as well as passing cost increases on to our members. Our investments in merchandise pricing may include reducing prices on merchandise to drive sales or meet competition and holding prices steady despite cost increases instead of passing the increases on to our members, negatively impacting gross margin and gross margin as a percentage of net sales (gross margin percentage) in the near term. Our e-commerce business, domestically and internationally, has a lower gross-margin percentage than our warehouse operations. Government actions in various countries relating to tariffs affect the costs of some of our merchandise. The degree of our exposure is dependent on (among other things) the type of goods, rates imposed, and timing of the tariffs. Higher tariffs are more likely to adversely impact rather than improve our results.

Other, net7 14 25 55 Interest income and other, net$85 $128 $374 $504 The decrease in interest income in the first thirty-six weeks of 2025 was due to lower interest rates, partially offset by higher cash balances. Foreign-currency transaction gains (losses), net, include mark-to-market adjustments for forward foreign-exchange contracts and revaluation or settlement of monetary assets and liabilities by our Canadian and Other International operations. See Derivatives and Foreign Currency sections in Item 8, Note 1 of our Annual Report on Form 10-K, for the fiscal year ended September 1, 2024.

Effective tax rate26.2 %26.4 %24.9 %24.4 % The effective tax rate for the first thirty-six weeks of 2025 was favorably impacted by discrete tax benefits of $100 related to stock compensation. The effective tax rate for the first thirty-six weeks of 2024 was favorably impacted by discrete tax benefits of $94 related to the portion of the special cash dividend payable through our 401(k) plan and $44 related to stock compensation.

LIQUIDITY AND CAPITAL RESOURCES The following table summarizes our significant sources and uses of cash and cash equivalents: 36 Weeks Ended May 11,2025May 12,2024

Net cash provided by operating activities$9,468 $8,381 Net cash used in investing activities(3,343)(2,706) Net cash used in financing activities(2,182)(8,948) Our primary sources of liquidity are cash flows from operations, cash and cash equivalents, and short-term investments. Cash and cash equivalents and short-term investments were $14,850 and $11,144 at 23 May 11, 2025, and September 1, 2024. Of these balances, unsettled credit and debit card receivables represented approximately $2,587 and $2,519 at May 11, 2025, and September 1, 2024. These receivables generally settle within four days. Material contractual obligations arising in the normal course of business primarily consist of purchase obligations, long-term debt and related interest payments, leases, and construction and land purchase obligations. Purchase obligations consist of contracts primarily related to merchandise, equipment, and third-party services, the majority of which are due in the next 12 months. Construction and land-purchase obligations consist of contracts primarily related to the development and opening of new and relocated warehouses, the majority of which (other than leases) are due in the next 12 months. We believe that our cash and investment position and operating cash flow, with capacity under existing and available credit agreements, will be sufficient to meet our liquidity and capital requirements for the foreseeable future and that our U.S. current and projected asset position is sufficient to meet our U.S. liquidity requirements.

Cash Flows from Operating Activities Net cash provided by operating activities totaled $9,468 in the first thirty-six weeks of 2025, compared to $8,381 in the first thirty-six weeks of 2024. Our cash flow provided by operations is primarily from net sales and membership fees. Cash flow used in operations generally consists of payments to merchandise suppliers, warehouse operating costs, including wages and employee benefits, utilities, credit and debit card processing fees, and operating leases. Cash used in operations also includes payments for income taxes. Changes in our net investment in merchandise inventories (the difference between merchandise inventories and accounts payable) is impacted by several factors, including inventory levels and turnover, payment terms with suppliers, and early payments to obtain discounts.

Cash Flows from Investing Activities Net cash used in investing activities totaled $3,343 in the first thirty-six weeks of 2025, compared to $2,706 in the first thirty-six weeks of 2024, and is primarily related to capital expenditures. Net cash from investing activities also includes purchases and maturities of short-term investments.

Cash Flows from Financing Activities Net cash used in financing activities totaled $2,182 in the first thirty-six weeks of 2025, compared to $8,948 in the first thirty-six weeks of 2024. Cash flow used in financing activities during the first thirty-six weeks of 2025 was primarily related to the payment of dividends, repayments of short-term borrowings, repurchases of common stock, and withholding taxes on stock-based awards. Cash flow provided by financing activities included proceeds from short-term borrowings. In the first thirty-six weeks of 2024, cash flow used in financing was primarily due to the payment of a special dividend.

Bank Credit Facilities and Commercial Paper Programs We maintain bank credit facilities for working capital and general corporate purposes. At May 11, 2025, we had borrowing capacity under these facilities of $1,176. Our international operations maintain $681 of this capacity under bank credit facilities, of which $164 is guaranteed by the Company. Short-term borrowings outstanding under the bank credit facilities, which are included in other current liabilities on the consolidated balance sheets, were immaterial at the end of the third quarter of 2025 and at the end of 2024. We have letter of credit facilities, for commercial and standby letters of credit, totaling $228. The outstanding commitments under these facilities at the end of the third quarter of 2025 totaled $205, most of which were standby letters of credit that do not expire or have expiration dates within one year. The bank credit facilities have various expiration dates, most within one year, and we generally intend to renew these facilities. The amount of borrowings available at any time under our bank credit facilities is reduced by the amount of standby and commercial letters of credit outstanding.

U.S.8 %6 %8 %4 % Canada8 %7 %8 %8 % Other International9 %8 %9 %8 % Total Company8 %7 %8 %5 % E-commerce16 %21 %17 %15 % _______________ (1) Comparable sales for the third quarter and first thirty-six weeks of 2024 were calculated using comparable retail weeks.

Membership fees increase7 %8 %8 %8 % Total paid members (000s)78,400 73,400 - - Total cardholders (000s)140,600 132,000 - - Membership fee revenue increased 7% and 8% in the second quarter and first half of 2025, primarily driven by new member sign-ups and the fee increase (discussed below). Changes in foreign currencies relative to the U.S. dollar negatively impacted membership fees by $22 and $23 in the second quarter and first half of 2025. At the end of the second quarter of 2025, our renewal rates were 93.0% in the U.S. and Canada and 90.5% worldwide. Our renewal rate, which excludes affiliates of Business members, is a trailing calculation that captures renewals during the period seven to eighteen months prior to the reporting date. As previously reported, we increased our annual membership fees in the U.S. and Canada, effective September 1, 2024. We account for membership fee revenue on a deferred basis, recognized ratably over the one-year membership period. The recent membership fee increase contributed approximately 3% of membership fee revenue during the second quarter of 2025.

Less merchandise costs55,744 51,140 109,853101,597 Gross margin$6,786 $6,191 $13,662$12,451 Gross margin percentage 10.85 %10.80 %11.06 %10.92 % Quarterly Results Gross margin percentage increased five basis points. Excluding the impact of gasoline price deflation on net sales, gross margin percentage was 10.84%, an increase of four basis points. Gross margin percentage from warehouse ancillary and other businesses was flat, primarily due to an increase in e-commerce, partially offset by a decrease in our gasoline business. The LIFO impact was flat quarter over quarter. Changes in foreign currencies relative to the U.S. dollar negatively impacted gross margin by approximately $135, compared to the second quarter of 2024, attributable to our Other International and Canadian operations. The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), decreased eight basis points. The decrease was primarily due to increased supply chain costs to support higher inventory levels and certain mix changes in our non-food categories. This measure eliminates the impact of changes in sales penetration and gross margin from our warehouse ancillary and other businesses. Gross margin percentage on a segment basis, when expressed as a percentage of the segment's own sales and excluding the impact of changes in gasoline prices on net sales (segment gross margin 22 percentage), increased in our U.S. segment, which performed similarly to the consolidated results above. Our Canadian segment gross margin percentage decreased, primarily due to decreases in core merchandise categories, partially offset by warehouse ancillary and other businesses. Gross margin decreased in our Other International segment, primarily due to decreases in core merchandise categories.

Foreign-currency transaction gains, net23 31 66 34 Other, net10 38 18 41 Interest income and other, net$142 $216 $289 $376 The decrease in interest income in the second quarter and first half of 2025 was due to lower average cash and investment balances, following the special dividend in January 2024, and lower interest rates. Foreign-currency transaction gains, net, include mark-to-market adjustments for forward foreign-exchange contracts and revaluation or settlement of monetary assets and liabilities by our Canadian and Other International operations. See Derivatives and Foreign Currency sections in Item 8, Note 1 of our Annual Report on Form 10-K, for the fiscal year ended September 1, 2024.

realized, and plans are subject to change upon further review of our capital expenditure needs and the economic environment. Cash Flows from Financing Activities Net cash used in financing activities totaled $1,434 in the first half of 2025, compared to $8,250 in the first half of 2024. Cash flow used in financing activities during the first half of 2025 was primarily related to the payment of dividends, repurchases of common stock, withholding taxes on stock-based awards, and repayments of short-term borrowings. Cash flow provided by financing activities included proceeds from short-term borrowings.

U.S.8 %4 %7 %3 % Canada5 %9 %5 %8 % Other International2 %9 %3 %10 % Total Company7 %6 %6 %5 % E-commerce21 %18 %17 %12 % Increases in comparable sales excluding the impact of changes in foreign-currency and gasoline prices(1):

U.S.9 %5 %8 %4 % Canada10 %9 %9 %9 % Other International10 %8 %9 %8 % Total Company9 %6 %8 %5 % E-commerce22 %18 %18 %12 % _______________ (1) Comparable sales for the second quarter and first half of 2024 were calculated using comparable retail weeks.

Net Sales Net sales increased $5,199 or 9%, and $9,467 or 8% during the second quarter and first half of 2025. The improvement was attributable to an increase in comparable sales and sales at the 23 net new warehouses opened since the end of the second quarter of 2024. Sales increased $4,786 or 10% and $9,119, or 10% in core merchandise categories during the second quarter and first half of 2025, increasing in all categories. Sales in warehouse ancillary and other businesses increased $413 or 4%, and $348, or 2% during the second quarter and first half of 2025, led by pharmacy, partially offset by lower gasoline prices. During the second quarter of 2025, lower gasoline prices negatively impacted net sales by $56, 10 basis points, compared to 2024, with a 3% decrease in the average price per gallon. The volume of gasoline sold increased approximately 1%, positively impacting net sales by $51, or nine basis points. Changes in foreign currencies relative to the U.S. dollar negatively impacted net sales by approximately $1,244, or 217 basis points, attributable to our Other International and Canadian operations. During the first half of 2025, lower gasoline prices negatively impacted net sales by $964, 85 basis points, compared to 2024, with an 8% decrease in the average price per gallon. The volume of gasoline sold increased approximately 1%, positively impacting net sales by $132, or 12 basis points. Changes in foreign currencies relative to the U.S. dollar negatively impacted net sales by approximately $1,408, or 123 basis points, attributable to our Other International and Canadian operations. 21

Cash Flows from Operating Activities Net cash provided by operating activities totaled $3,260 in the first quarter of 2025, compared to $4,651 in the first quarter of 2024. The decrease in net cash provided by operating activities was due to an increase in our net investment in merchandise inventories. Our cash flow provided by operations is primarily from net sales and membership fees. Cash flow used in operations generally consists of payments to merchandise suppliers, warehouse operating costs, including wages and employee benefits, utilities, credit and debit card processing fees, and operating leases. Cash used in operations also includes payments for income taxes. Changes in our net investment in merchandise inventories (the difference between merchandise inventories and accounts payable) is impacted by several factors, including inventory levels and turnover, payment terms with suppliers, early payments to obtain discounts, and the shift in timing of the seasonal holiday to the second quarter of 2025.

Highlights for the first quarter of 2025 versus 2024 include: •Net sales increased 8% to $60,985, driven by an increase in comparable sales and sales at 26 net new warehouses opened since the end of the first quarter of 2024; •Membership fee revenue increased 8% to $1,166, driven by new member sign-ups and upgrades to Executive Membership; •Gross margin percentage increased 24 basis points; seven basis points excluding the impact of gasoline price deflation on net sales; •SG&A expenses as a percentage of net sales increased 14 basis points and was flat excluding the impact of gasoline price deflation; •The provision for income taxes was positively impacted by a benefit related to stock compensation of $100, $0.22 per diluted share, compared to $44, $0.10 per diluted share, in 2024;

Comparable Sales Comparable sales increased 7% and 6% in the second quarter and first half of 2025 and were positively impacted by increased shopping frequency and a slightly higher average ticket.

OVERVIEW Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to promote understanding of the results of operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q), as well as our consolidated financial statements, the accompanying Notes to Financial Statements, and the related Management's Discussion and Analysis of Financial Condition and Results of Operations in our fiscal year 2024 Form 10-K, filed with the United States Securities and Exchange Commission on October 9, 2024. We operate membership warehouses and e-commerce sites based on the concept that offering our members low prices on a limited selection of nationally-branded and private-label products in a wide range of categories will produce high sales volumes and rapid inventory turnover. When combined with the operating efficiencies achieved by volume purchasing, efficient distribution and reduced handling of merchandise in no-frills, self-service warehouse facilities, these volumes and turnover enable us to operate profitably at significantly lower gross margins (net sales less merchandise costs) than most other retailers. We often sell inventory before we are required to pay for it, even while taking advantage of early payment discounts. We believe that the most important driver of our profitability is increasing net sales, particularly comparable sales. Net sales includes our core merchandise categories (foods and sundries, non-foods, and fresh foods), warehouse ancillary (gasoline, pharmacy, optical, food court, hearing aids, and tire installation) and other businesses (e-commerce, business centers, travel, and other). E-commerce and business center sales are allocated to the appropriate merchandise categories in the Net Sales discussion. The 2% reward associated with Executive membership is allocated to the category in which the reward is generated (core merchandise categories, warehouse ancillary, and other businesses). Comparable sales is defined as net sales from warehouses open for more than one year, including remodels, relocations and expansions, and sales related to e-commerce sites operating for more than one year. The measure is intended as supplemental information and is not a substitute for net sales presented in accordance with U.S. GAAP and should be reviewed in conjunction with results reported in accordance with U.S. GAAP. Comparable sales growth is achieved through increasing shopping frequency from new and existing members and the amount they spend on each visit (average ticket). Sales comparisons can also be particularly influenced by certain factors that are beyond our control: fluctuations in currency exchange rates (with respect to our international operations) and inflation or deflation in the cost of gasoline and associated competitive conditions. The higher our comparable sales exclusive of these items, the more we can leverage our selling, general and administrative (SG&A) expenses, reducing them as a percentage of sales and enhancing profitability. Generating comparable sales growth is foremost a question of making available the right merchandise at the right prices, a skill that we believe we have repeatedly demonstrated over the long-term. Another substantial factor in net sales growth is the health of the economies in which we do business, including the effects of inflation or deflation, especially the United States. Net sales growth and gross margins are also impacted by our competition, which is vigorous and widespread, across a wide range of global, national and regional wholesalers and retailers, including those with e-commerce operations. While we cannot control or reliably predict general economic health or changes in competition, we believe that we have been successful historically in adapting our business to these changes, such as through adjustments to our pricing and merchandise mix, including increasing the penetration of our private-label items, and through online offerings. Our philosophy is to provide our members with quality goods and services at competitive prices. We do not focus in the short-term on maximizing prices charged, but instead seek to maintain what we believe is a perception among our members of our "pricing authority" - consistently providing the most competitive values. Our net sales and gross margin are influenced in part by our merchandising and pricing strategies in response to cost increases. Those strategies can include, but are not limited to, working with our suppliers to share in absorbing cost increases, earlier-than-usual purchasing and in greater volumes, as well as passing cost increases on to our members. Our investments in merchandise pricing may include reducing prices on merchandise to drive sales or meet competition and holding prices steady despite cost increases instead of passing the increases on to our members, negatively impacting gross margin and gross margin as a percentage of net sales (gross margin percentage) in the near term. Our e-commerce business, domestically and internationally, has a lower gross-margin percentage than our warehouse operations. We believe our gasoline business enhances traffic in our warehouses; it generally has a lower gross margin percentage and lower SG&A expense relative to our non-gasoline businesses. A higher penetration of gasoline sales will generally lower our gross margin percentage. Generally, rising gasoline prices benefit net sales growth which, given the higher sales base, negatively impacts our gross margin percentage but decreases our SG&A expenses as a percentage of net sales. A decline in gasoline prices has the inverse effect.

LIQUIDITY AND CAPITAL RESOURCES The following table summarizes our significant sources and uses of cash and cash equivalents: 24 Weeks Ended February 16,2025February 18,2024

Net cash provided by operating activities$6,008 $5,382 Net cash used in investing activities(2,007)(1,752) Net cash used in financing activities(1,434)(8,250) Our primary sources of liquidity are cash flows from operations, cash and cash equivalents, and short-term investments. Cash and cash equivalents and short-term investments were $13,158 and $11,144 at February 16, 2025, and September 1, 2024. Of these balances, unsettled credit and debit card receivables represented approximately $2,292 and $2,519 at February 16, 2025, and September 1, 2024. These receivables generally settle within four days. Material contractual obligations arising in the normal course of business primarily consist of purchase obligations, long-term debt and related interest payments, leases, and construction and land purchase obligations. Purchase obligations consist of contracts primarily related to merchandise, equipment, and third-party services, the majority of which are due in the next 12 months. Construction and land-purchase obligations consist of contracts primarily related to the development and opening of new and relocated warehouses, the majority of which (other than leases) are due in the next 12 months. We believe that our cash and investment position and operating cash flow, with capacity under existing and available credit agreements, will be sufficient to meet our liquidity and capital requirements for the foreseeable future and our U.S. current and projected asset position is sufficient to meet our U.S. liquidity requirements.

Cash Flows from Investing Activities Net cash used in investing activities totaled $2,007 in the first half of 2025, compared to $1,752 in the first half of 2024, and is primarily related to capital expenditures. Net cash from investing activities also includes purchases and maturities of short-term investments.

Capital Expenditure Plans Our primary requirements for capital are acquiring land, buildings, and equipment for new and remodeled warehouses, information systems and manufacturing and distribution facilities. In the first half of 2025, we spent $2,401 on capital expenditures, and it is our current intention to spend a total of approximately $5,000 during fiscal 2025. These expenditures are expected to be financed with cash from operations, cash and cash equivalents, and short-term investments. We opened eight new warehouses, including one relocation, in the first half of 2025 and plan to open 20 additional new warehouses, including two relocations, in the remainder of fiscal 2025. There can be no assurance that current expectations will be 25

Share Repurchase Program On January 19, 2023, the Board of Directors authorized a share repurchase program in the amount of $4,000, which expires in January 2027. During the first half of 2025 and 2024, we repurchased 443,000 and 528,000 shares of common stock, at an average price per share of $932.03 and $609.51, totaling approximately $413 and $322. These amounts may differ from the accompanying condensed consolidated statements of cash flows due to changes in unsettled repurchases at the end of a quarter. Purchases are made from time to time, as conditions warrant, in the open market or in block purchases, pursuant to plans under SEC Rule 10b5-1. Repurchased shares are retired, in accordance with the Washington Business Corporation Act. The remaining amount available to be purchased under our approved plan was $2,452 at the end of the second quarter.

Bank Credit Facilities and Commercial Paper Programs We maintain bank credit facilities for working capital and general corporate purposes. At February 16, 2025, we had borrowing capacity under these facilities of $1,176. Our international operations maintain $680 of this capacity under bank credit facilities, of which $159 is guaranteed by the Company. Short-term borrowings outstanding under the bank credit facilities, which are included in other current liabilities on the consolidated balance sheets, were immaterial at the end of the second quarter of 2025 and at the end of 2024. We have letter of credit facilities, for commercial and standby letters of credit, totaling $220. The outstanding commitments under these facilities at the end of the second quarter of 2025 totaled $198, most of which were standby letters of credit that do not expire or have expiration dates within one year. The bank credit facilities have various expiration dates, most within one year, and we generally intend to renew these facilities. The amount of borrowings available at any time under our bank credit facilities is reduced by the amount of standby and commercial letters of credit outstanding.

•Net income was $1,788, $4.02 per diluted share, compared to $1,743, $3.92 per diluted share in 2024; and •A quarterly cash dividend of $1.16 per share was declared on January 23, 2025, and paid on February 21, 2025. 20

Cash Flows from Operating Activities Net cash provided by operating activities totaled $3,260 in the first quarter of 2025, compared to $4,651 in the first quarter of 2024. The decrease in net cash provided by operating activities was due to an increase in our net investment in merchandise inventories. Our cash flow provided by operations is primarily from net sales and membership fees. Cash flow used in operations generally consists of payments to merchandise suppliers, warehouse operating costs, including wages and employee benefits, utilities, credit and debit card processing fees, and operating leases. Cash used in operations also includes payments for income taxes. Changes in our net investment in merchandise inventories (the difference between merchandise inventories and accounts payable) is impacted by several factors, including inventory levels and turnover, payment terms with suppliers, early payments to obtain discounts, and the shift in timing of the seasonal holiday to the second quarter of 2025.

Dividends A quarterly cash dividend of $1.16 per share was declared on October 16, 2024, and paid on November 15, 2024. Share Repurchase Program On January 19, 2023, the Board of Directors authorized a share repurchase program in the amount of $4,000, which expires in January 2027. During the first quarter of 2025 and 2024, we repurchased 230,000 and 288,000 shares of common stock, at an average price per share of $899.23 and $564.06, totaling approximately $206 and $162. These amounts may differ from the accompanying condensed consolidated statements of cash flows due to changes in unsettled repurchases at the end of a quarter. Purchases are made from time to time, as conditions warrant, in the open market or in block purchases, pursuant to plans under SEC Rule 10b5-1. Repurchased shares are retired, in accordance with the Washington Business Corporation Act. The remaining amount available to be purchased under our approved plan was $2,659 at the end of the first quarter.

Membership Fees 202420232022 Membership fees$4,828$4,580$4,224 Membership fees increase5 %8 %9 % Membership fee revenue increased 5% in 2024, driven by new member sign-ups and upgrades to Executive Membership. These increases were partially offset by one less week of membership fee income in 2024. At the end of 2024, our member renewal rates were 92.9% in the U.S. and Canada and 90.5% worldwide. Renewal rates benefited from higher penetration of Executive members. Our renewal rate, which excludes affiliates of Business members, is a trailing calculation that captures renewals during the period seven to eighteen months prior to the reporting date. Effective September 1, 2024, we increased our membership fees in the U.S. and Canada for Gold Star (individual), Business, and Business affiliates to $65 per year. The Executive membership fee increased from $120 to $130 (membership fee of $65, plus Executive upgrade of $65), and the maximum annual 2% reward associated with the Executive Membership increased from $1,000 to $1,250. We account for membership fee revenue on a deferred basis, recognized ratably over one year. We expect these fee changes to increase revenues approximately $370 over the next two years, $190 of which will benefit fiscal 2025, primarily in the latter half of the year.

Gross Margin 202420232022 Net sales$249,625$237,710$222,730 Less merchandise costs222,358212,586199,382 Gross margin$27,267$25,124$23,348 Gross margin percentage10.92 %10.57 %10.48 % Gross margin percentage increased 35 basis points. Excluding the impact of gasoline price deflation on net sales, gross margin percentage was 10.88%, an increase of 31 basis points. This increase was positively impacted by: 19 basis points due to warehouse ancillary and other businesses, primarily e-commerce and gasoline; 16 basis points due to the absence of charges related to the discontinuation of our charter shipping activities that were recorded in the first and third quarters of 2023; and three basis points due to a LIFO benefit. This increase was partially offset by four basis points in our core merchandise categories and three basis points due to increased 2% rewards. The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), increased 11 basis points. The increase was primarily due to non-foods, partially offset by fresh foods and foods and sundries. This measure eliminates the impact of changes in sales penetration and gross margins from our warehouse ancillary and other businesses. Gross margin on a segment basis, when expressed as a percentage of the segment's own sales and excluding the impact of changes in gasoline prices on net sales (segment gross margin percentage), increased in our U.S. and Canadian segments. Our U.S. segment performed similarly to the consolidated results above. Our Canadian segment gross margin percentage increased, primarily due to increases in core merchandise categories and warehouse ancillary and other businesses, partially offset by increased 2% rewards. Gross margin percentage decreased in our Other International segment, primarily due to increased 2% rewards and a decrease in core merchandise categories. 26

Cash Flows from Financing Activities Net cash used in financing activities totaled $10,764 in 2024, compared to $2,614 in 2023. Cash flow used in financing activities primarily related to the payment of dividends, repayments of long-term debt and short-term borrowings, repurchases of common stock, and withholding taxes on stock-based awards. On May 18, 2024, we paid the $1,000 outstanding principal balance on the 2.750% Senior Notes, using cash and cash equivalents and short-term investments. Cash flow provided by financing activities included proceeds from short-term borrowings and four Guaranteed Senior Notes totaling approximately $500, at fixed interest rates ranging from 1.400% to 2.120%, issued by our Japan subsidiary.

Comparable Sales Comparable sales increased 5% in the first quarter of 2025 and were positively impacted by increased shopping frequency and a slightly higher average ticket. 19

Net cash provided by operating activities$3,260 $4,651 Net cash used in investing activities(985)(366) Net cash used in financing activities(1,193)(974) Our primary sources of liquidity are cash flows from operations, cash and cash equivalents, and short-term investments. Cash and cash equivalents and short-term investments were $11,827 and $11,144 at November 24, 2024, and September 1, 2024. Of these balances, unsettled credit and debit card receivables represented approximately $2,789 and $2,519 at November 24, 2024, and September 1, 2024. These receivables generally settle within four days. Material contractual obligations arising in the normal course of business primarily consist of purchase obligations, long-term debt and related interest payments, leases, and construction and land purchase obligations. Purchase obligations consist of contracts primarily related to merchandise, equipment, and third-party services, the majority of which are due in the next 12 months. Construction and land-purchase obligations consist of contracts primarily related to the development and opening of new and relocated warehouses, the majority of which (other than leases) are due in the next 12 months. We believe that our cash and investment position and operating cash flow, with capacity under existing and available credit agreements, will be sufficient to meet our liquidity and capital requirements for the foreseeable future and our U.S. current and projected asset position is sufficient to meet our U.S. liquidity requirements.

Cash Flows from Investing Activities Net cash used in investing activities totaled $985 in the first quarter of 2025, compared to $366 in the first quarter of 2024, and is primarily related to capital expenditures. Net cash from investing activities also includes purchases and maturities of short-term investments.

Capital Expenditure Plans Our primary requirements for capital are acquiring land, buildings, and equipment for new and remodeled warehouses, information systems and manufacturing and distribution facilities. In the first quarter of 2025, we spent $1,264 on capital expenditures, and it is our current intention to spend a total of approximately $5,000 during fiscal 2025. These expenditures are expected to be financed with cash from operations, cash and cash equivalents, and short-term investments. We opened seven new warehouses, including one relocation, in the first quarter of 2025 and plan to open 22 additional new warehouses, including two 22 relocations, in the remainder of fiscal 2025. There can be no assurance that current expectations will be realized, and plans are subject to change upon further review of our capital expenditure needs and the economic environment.

Bank Credit Facilities and Commercial Paper Programs We maintain bank credit facilities for working capital and general corporate purposes. At November 24, 2024, we had borrowing capacity under these facilities of $1,184. Our international operations maintain $689 of this capacity under bank credit facilities, of which $159 is guaranteed by the Company. Short-term borrowings outstanding under the bank credit facilities, which are included in other current liabilities on the consolidated balance sheets, were immaterial at the end of the first quarter of 2025 and at the end of fiscal 2024. We have letter of credit facilities, for commercial and standby letters of credit, totaling $222. The outstanding commitments under these facilities at the end of the first quarter of 2025 totaled $202, most of which were standby letters of credit that do not expire or have expiration dates within one year. The bank credit facilities have various expiration dates, most within one year, and we generally intend to renew these facilities. The amount of borrowings available at any time under our bank credit facilities is reduced by the amount of standby and commercial letters of credit outstanding.

Recent Accounting Pronouncements See discussion of Recent Accounting Pronouncements in Note 1 to the condensed consolidated financial statements included in Part I, Item 1 of this Report.

E-commerce13 %6 % Increases in comparable sales excluding the impact of changes in foreign-currency and gasoline prices(1): U.S.7 %3 % Canada7 %8 %