"The market can stay irrational longer than you can stay solvent." — John Maynard Keynes
Damn, that quote never gets old. And it fits the Costco situation like a glove.
The quarter nobody will remember 30 days from now
Costco dropped its fiscal Q2 2026 numbers on Thursday and, look... it was the kind of result that neither excites nor disappoints. The type of earnings report that, if it were a movie, would be that 6.5-on-IMDb blockbuster — nobody hates it, nobody loves it, and the theater stays packed because there's nothing better playing.
Total revenue climbed 9.2% year-over-year, hitting $69.6 billion versus the $69.12 billion Wall Street expected. Adjusted earnings per share came in at $4.58, beating the $4.56 consensus.
Beat expectations? Yes. By a laughable margin? Also yes.
In after-hours, the stock barely moved. Par for the course. There was nothing there to make anyone jump out of their seat.
The problem nobody wants to face
This is where it gets interesting — and where the mainstream financial circus prefers to look the other way.
Membership renewal rates in the US and Canada dropped again. Another quarter. And company management basically said: "this is going to keep happening for a few more quarters."
For the uninitiated, Costco isn't your average retailer. The entire business model revolves around membership fees. That's where the company actually makes money. In-store margins are kept razor-thin on purpose — the play is to charge you for the "club" and then sell you everything practically at cost.
So when renewals decline, quarter after quarter, it's like a leak in the hull of a ship. Small, but constant.
The explanation? A flood of online sign-ups from people who probably never set foot in a Costco store. They signed up on impulse, didn't see the full appeal, and let it lapse. It's the financial equivalent of signing up for a gym membership in January and never going.
The worldwide renewal rate has stabilized, that's true. But in the markets that actually matter — the US and Canada — the bleeding continues.
The tech smokescreen
CEO Ron Vachris, now two years into the job, brought out the tech artillery for the earnings call. Digital wallets, pharmacy with advance payment, pre-scan technology that lets an employee start ringing up your cart while you're still in line.
And the cherry on top: automated payment stations with an average transaction time of eight seconds. Eight. Seconds. If this works at scale, the in-warehouse experience gets a massive upgrade.
Vachris also mentioned they're working with leading artificial intelligence companies to make sure Costco products show up in AI tools. Smart move.
Is all of this relevant? Absolutely. Does it solve the renewal problem? Not yet.
The gas effect nobody's talking about
CFO Gary Millerchip raised a point I think is underappreciated: when gas prices go up, more people drive to Costco to fill up — and swing into the warehouse while they're at it. It's the oldest trick in the book: gas station as bait.
"When gas goes up, our value proposition resonates better with the member," Millerchip said. Translation from corporate-speak: inflation at the pump is free marketing for Costco.
So, buy or don't buy?
The stock is up 14% year-to-date. The last two quarters of 2025 were the first consecutive declines since 2022. The CNBC Investing Club crew is keeping a rating of 2 (equivalent to "hold") and raised their price target.
My read? This is an extraordinary company with a real problem that's being masked by absolutely monster comparable sales momentum — 6% to 7% growth month after month. Traffic and average ticket rising together. Gaining market share.
But paying a premium for a stock whose main profit engine (membership fees) has a flat tire in key markets? That takes faith. And faith in financial markets tends to come with a hefty price tag.
If US and Canada renewals don't stabilize over the next two quarters, the narrative will shift. And when the narrative shifts, my friend, whoever bought at the top becomes a meme.
The question that lingers: are you buying Costco for what it is or for what the market wants it to be?
