RuncheyResearch

AI Absorption Ledger / COST

Costco Wholesale

COST · Q3 2026 · reported 2026-09-24 · revenue $95.72bn

Assessment

The quarter is Costco's fiscal fourth quarter, the sixteen weeks ended 2026-08-30, so every line and share-of-line estimate here covers sixteen weeks against twelve in the prior quarter. The call's AI content is again about AI search, and for the first time the 10-K speaks about AI too, in new risk factors; the release and the presentation do not mention it.

AI search stays directional. The CFO says traffic from AI search grew at a triple-digit rate for a second consecutive quarter from a low base and converts best of any source, names the platforms as Gemini, Anthropic and OpenAI, and says the membership is among the top items bought from AI searches. No level is given, so the size remains the ledger's reference-class estimate, ; most of the rise from the prior quarter is the longer quarter. A new 10-K risk factor states the other side: AI tools may misstate prices or miss the value of membership (claim c9). Asked about agentic commerce, the CFO says what the company sees is AI-assisted search.

The AI bill goes unmentioned. Teams are said to work with the large language models on data and product pages, but nothing says the company uses AI for that work or what it costs, so the channel is unsized this quarter; the step is in the wording. The pharmacy in-stock tools are not mentioned. The new risk factors also name AI tools that inform members and employees (claim c11), with no tool or function, and are kept as context.

What the company credits instead is again outside AI: personalization drove triple-digit growth in personalized sales and now appears in of costco.com orders, supply chain efficiencies and labor productivity in fresh lifted margins, and third-party delivery expanded. Selling, general and administrative expenses grew against net sales growth of , with healthcare and general liability named as the faster-growing costs and no AI attribution.

Sized channels against the income statement, Q3 2026

1 of 3 channels sized

Each blue mark is one channel's dollars for the quarter; a bar is the range of an estimate. Grey marks are the company's reported lines. The distance between them is the point: how large the AI channel is next to the line it sits in.

New money and old money, Q3 2026

2 new1 relabelled

Each channel is tagged once for whether its money existed before language models, from the company's annual report and call at the start of the period. A bar splits one flow's sized dollars by that tag. The incremental total is the part that would not be there without the models: a new channel counts in full, an expanded one only for what AI added, a relabelled one at zero.

Revenue arriving through AI$6.6mn to $62mn sized

new $6.6mn to $62mnrelabelled not sized

Incremental total $6.6mn to $62mnpoint $19mn

The sized total counts every channel the company credits to AI, including relabelled money that existed before language models and the ledger's own estimates for it. The incremental total counts relabelled channels at zero. A flow is split by layer where its dollars sit at more than one: end use, compute sold to builders, and hardware. The same dollar can be a buyer's spend, a cloud's revenue and a chipmaker's revenue, so the layers are never added together.

Paid for AI1 channel · 1 not sized

vendor bill

AI model and tooling bill

Not sized

Not mentioned this quarter. The call describes teams working with large language models on data and product pages (claim c8) but no longer says the company uses AI to do that work or that it carries a cost; the new 10-K risk factor on AI tools that inform members or employees (claim c11) names no tool or function. Without a statement of use, the prior quarter's ballpark is not carried.

inscrutabledisclosure: not mentioned· motive: exploratory· before LLMs: new

In the prior quarter the CEO said there was a cost to the AI used on product pages, offset by greater sales. This quarter no source repeats it: the product-page work is described as working with the large language models, without AI as the tool, and nothing is said about cost. Selling, general and administrative expenses were , up . The step from a sized reading to none comes from the wording, not from a change shown at the company.

Evidence: 0 quotes, 2 figures, 1 confound, 2 from before coverage

What the company pays for the AI it uses: the AI that enhances product pages for large language models and whatever AI share sits in its software and cloud services. The pharmacy in-stock tools are left out: their work is read as relabelled replenishment forecasting (pharmacy-in-stock-ai), so their cost may be pre-LLM tooling under the AI name. The CEO says there is a cost to that AI, offset by greater sales, and calls the technology spend capital light; no amount, vendor or share is given, and the leading AI companies the company works with on visibility are not named. The bill sits in selling, general and administrative expenses and is not split. No AI capital spending is named, so none is registered.

Why this motive

Carried from the prior quarter; the quarter says nothing about what the company pays for AI, and silence is not evidence about motive.

Before LLMs: new

At the anchor the 10-K described substantial investments in technology and IT transformation projects, inside selling, general and administrative expenses ( for fiscal 2024), named no AI vendor or AI spend, and said some competitors were adopting artificial intelligence faster. A bill for LLM tooling, such as the AI that tunes product pages for large language models, did not exist before LLMs.

“We are currently making substantial investments in technology and IT transformation projects, including maintaining and enhancing our digital resiliency, and failure or delay in these projects could be costly and harmful to our business.”
Filing, risk factors, 10-K periodic report, 2024-10-09
“Some competitors have greater financial resources and technology capabilities, including the faster adoption of artificial intelligence, better access to merchandise, and greater market penetration than we do.”
Filing, risk factors, 10-K periodic report, 2024-10-09

Figures

  • Selling, general and administrative · 2026-CQ3
  • Selling, general and administrative growth, year over year · 2026-CQ3

What else could explain it

  • line composition: Technology spend is not reported as a line; it sits inside selling, general and administrative expenses with warehouse payroll, benefits, depreciation and card fees.

By quarter

  • Q2 2026described · our inference · exploratory · $619k to $15mn
  • Q3 2026not mentioned · inscrutable · exploratory

Revenue arriving through AI2 channels · $6.6mn to $62mn sized · $6.6mn to $62mn incremental · 1 not sized

distribution

Sales from members arriving through AI search and large language models

0.01% to 0.06% of the quarter’s revenue

Incremental total: counts in full.

our inferencedisclosure: direction only· motive: channel-defensive· before LLMs: new

The quarter is the sixteen weeks ended 2026-08-30. The CFO again gives direction without a level: traffic from AI search grew at a triple-digit rate for a second consecutive quarter from a low base, still converts best of any source, and the sales it originates, led by appliances and consumer electronics, also include memberships. The platforms are named for the first time as Gemini, Anthropic and OpenAI, and the CFO says what the company sees is AI-assisted search, not agentic commerce. The counterparty is those platforms; nothing is said to be paid to them. The size shown is the ledger's own estimate, , on the prior quarters' reference class, with the high end now capped by the digitally-enabled share the 10-K reports, .

Evidence: 10 quotes, 4 figures, 4 confounds, 2 from before coverage

E-commerce sales placed by members and prospective members who arrive at the company's sites from AI assistants and large language models rather than from a search engine or the company's own app. The company works with the leading AI companies so that its prices show up in their answers and uses AI to enhance its product pages for the same purpose; it gives no volume, share or revenue. Sales credited to personalized recommendation carousels, and the incremental sales the first-quarter call credits to modernized product pages, are not part of this channel: management never separately attributes them to AI.

Why this motive

Answer-engine optimization to stay present where customers now start: teams work with the large language models to update data and product pages so that value shows up there (claim c8), and the CFO frames AI search as a neutral place to be visible for a company that buys no paid digital advertising (claims c4 and c5). The highest conversion rate of any source is a comparison of traffic sources, not a lift the company measures from AI, so it does not meet the offensive tell; the less durable motive is kept, as in the prior quarter.

Before LLMs: new

Sales arriving from AI platforms are not in the anchor: the fiscal 2024 10-K puts e-commerce at about of net sales ( for the year), with no traffic from AI tools, and names competitors' faster adoption of artificial intelligence as a competitive risk; the first call of fiscal 2024 does not mention AI and describes the e-commerce site being re-platformed. Such orders would arrive inside e-commerce net sales, with no part from AI platforms then.

“Some competitors have greater financial resources and technology capabilities, including the faster adoption of artificial intelligence, better access to merchandise, and greater market penetration than we do.”
Filing, risk factors, 10-K periodic report, 2024-10-09
“Right. Well, our first order of business was fixing the foundation. We're in the middle of re-platforming our e-commerce.”
CFO, qa, earnings call, 2023-12-14

Figures

  • Net sales · 2026-CQ3
  • Digitally-enabled comparable sales growth, year over year · 2026-CQ3
  • E-commerce site and app traffic growth, year over year · 2026-CQ3
  • Digitally-enabled sales as a share of total net sales, fiscal 2026 · FY2026

What else could explain it

  • mix shift: Members arriving from an AI assistant may be members who would otherwise have arrived from a search engine; the best conversion rate of any source may reflect who uses AI search more than what it adds.
  • other: The quarter's measured e-commerce gains are credited to personalization (sales from personalized initiatives growing at a triple-digit rate, with of costco.com orders including a personalized item, claim c10), which management never attributes to AI. None of those sales is counted here.
  • line composition: The membership itself is among the top items bought from AI searches (claim c2). Membership fees sit outside net sales, so the estimate, built on net sales, leaves out any fee revenue arriving this way.
  • seasonality: The fiscal fourth quarter is sixteen weeks against twelve in the prior quarter, so a size built on the quarter's net sales rises with the quarter's length, not with the channel.

Quotes

“While starting from a low base relative to other channels, AI continues to grow in its influence on how our members are searching for products. Traffic to our site from AI search grew triple digits for the second consecutive quarter and continues to show the highest conversion rate of all site traffic.”
c1 · CFO, prepared remarks, earnings call, 2026-09-24
“Similar to e-commerce sales overall, sales originated from AI search are led by appliances and consumer electronics. Interestingly, the Costco membership is also among the top items originated from AI searches, indicating that there is a strong positive sentiment around the value of our membership coming from these sources.”
c2 · CFO, prepared remarks, earnings call, 2026-09-24
“I think as we talked about a little bit earlier on the call, we are excited about the opportunity with AI particularly. I don't know if I would say agentic commerce at the moment. I think for us what we see is more members definitely using AI as a tool to help them search for items as they're looking and thinking about shopping for different products and services.”
c3 · CFO, qa, earnings call, 2026-09-24
“But AI presents an opportunity in a sort of neutral environment for us to be able to ensure that our value and our quality shows up transparently for our members. So it's early days in our mind. The traffic is growing significantly, but it's still a very low base.”
c4 · CFO, qa, earnings call, 2026-09-24
“So we feel it's a great opportunity for us, particularly as today we don't do any paid digital advertising.”
c5 · CFO, qa, earnings call, 2026-09-24
“When we look at the volume that we see, we're seeing triple-digit growth in terms of the sales that we're seeing originate from that search activity on the different large language models, the AI tools that are out there for members. So think of that being Gemini, Anthropic, and OpenAI.”
c6 · CFO, qa, earnings call, 2026-09-24
“I think you heard me say on the earlier part of the call, what's also encouraging to us is when consumers, or in our case, members are searching, it's also highlighting the value of a Costco membership, and we're seeing strong flow-through of membership activity and engagement because of the way our value is showing up there too.”
c7 · CFO, qa, earnings call, 2026-09-24
“There's a lot of work going on in the teams right now to work with those large language models to identify how we can continue to clean up and update our data and our product pages so that our value continues to show up transparently in that environment.”
c8 · CFO, qa, earnings call, 2026-09-24
“Additionally, the emergence of AI tools may change consumer shopping habits and increase the competition we face. AI may also present inaccurate pricing or product data, or fail to capture the full value of our membership offering, impacting member purchasing decisions by prioritizing immediate or inaccurate price comparison or logistics over member loyalty.”
c9 · Filing, risk factors, 10-K periodic report, 2026-10-07
“During the quarter, we continued to accelerate personalization, including enhanced product placements and email communications. Our approach is resonating well with members, leading to triple- digit growth in sales from personalized initiatives in Q4. 10% of all costco.com orders now include a personalized item.”
c10 · CFO, prepared remarks, earnings call, 2026-09-24

By quarter

  • Q1 2026described · our inference · channel-defensive · $4.8mn to $39mn
  • Q2 2026direction only · our inference · channel-defensive · $4.8mn to $39mn
  • Q3 2026direction only · our inference · channel-defensive · $6.6mn to $62mn

operations · cheap to verify

Pharmacy sales kept by AI tools that improve in-stock positions

Not sized

Not mentioned this quarter; pharmacy sales are not reported and no source gives an in-stock measure.

inscrutabledisclosure: not mentioned· motive: exploratory· before LLMs: relabelled

The CEO credits pharmacy growth to expanding digital capabilities, the GLP-1 and fertility programs, mobile pay-ahead and pickup lockers, without naming AI; the 10-K names pharmacy among the drivers of ancillary sales growth, also without AI. The channel is carried with no reading of its own.

Evidence: 0 quotes, 2 from before coverage

Pharmacy sales that would otherwise be lost to stock-outs, kept because new AI tools improve the pharmacy's in-stock positions. The CFO names the tools once and gives no measure; pharmacy sales are not reported and sit inside warehouse ancillary and other businesses. Read as a revenue channel because the stated effect is in-stock positions, which keep sales; any inventory carrying cost avoided is not separated. Digital checkout enhancements named in the same sentence are not AI and are not part of the channel.

Why this motive

Carried from the prior quarter; the quarter does not mention AI in pharmacy, and silence is not evidence about motive.

Before LLMs: relabelled

At the anchor the company's IT systems already tracked and valued inventory for business decisions, and pharmacy led sales growth in warehouse ancillary and other businesses, with no AI named. Replenishment decisions that improve in-stock positions predate LLMs; the covered call calls the new tools AI and shows no in-stock rate, sales or cost moving because of them, so the activity is read as renamed.

“These systems are utilized to process a very high volume of transactions, conduct payment transactions, track and value our inventory and produce reports critical for making business decisions.”
Filing, risk factors, 10-K periodic report, 2024-10-09
“Sales increased $1,276, or 3% in warehouse ancillary and other businesses, led by pharmacy, partially offset by a decrease in gasoline.”
Filing, mdna, 10-K periodic report, 2024-10-09

By quarter

  • Q1 2026described · our inference · exploratory · $1.2mn to $36mn
  • Q2 2026not mentioned · inscrutable · exploratory
  • Q3 2026not mentioned · inscrutable · exploratory

Reported lines, year-over-year growth

Revenue +11.1%

Q3 2026. Growing slower than revenue: selling, general and administrative (+7.9%). A displaced cost shows up as a line that stays under the dashed revenue line. These are the audited lines, as first reported; nothing here is attributed to AI by the filing.

Merchandise costsSelling, general and administrativeRevenue
0%2.5%5%7.5%10%12.5%Q1 2025Q2 2025Q3 2025Q4 2025Q1 2026Q2 2026Q3 2026Merchandise costsRevenueSelling, general and administrative
Reported values and filings
LineQ2 2025Q3 2025Q4 2025Q1 2026Q2 2026Q3 2026
Total revenue$63.20bn$86.16bn$67.31bn$69.60bn$70.53bn$95.72bn
Merchandise costs$55.00bn$75.04bn$58.51bn$60.72bn$61.52bn$83.53bn
Selling, general and administrative$5.68bn$7.78bn$6.33bn$6.27bn$6.19bn$8.39bn