Costco’s Quiet Growth: Why the Stock Is Lagging Despite Strong Fundamentals
Solid Financial Performance in 2025
Costco’s business has continued to expand at a brisk pace, but its stock has failed to keep up with broader market gains in 2025. While the company’s latest results beat analyst expectations on both revenue and earnings, its shares have lost about 5% for the year, trailing both the S&P 500 and rival Walmart, whose shares have gained nearly 30% over the same period.
Costco Wholesale (COST)
Financial Score: 95 / 99
Quick Tip
To keep your portfolio strong, stay on top of the financials for each company you hold. Solid companies mean better returns, so be sure to check in on their quarterly and annual numbers.Interesting stocks usually score 80+ on the Financial Scale, with top players hitting 90+. If that score dips below 80, it might be a good time to consider cutting ties before things take a turn.Solid Financial Performance in 2025
Costco reported first-quarter fiscal 2026 earnings of $4.50 per share, 19 cents above the consensus estimate, and revenue increased 8.3% year-over-year to $67.3 billion. Membership fee revenue, a key indicator of customer loyalty, jumped 14.0% to $1.33 billion, further highlighting the strength of its business model. The company’s “digitally enabled comparable store sales” rose 20.5% in the quarter, while overall comparable store sales grew 6.4%. These figures suggest robust customer engagement and sustained momentum in both physical and digital channels.
Market Reaction: Why the Disconnect?
Despite these strong results, Costco’s stock declined nearly 2% on the day of its earnings release, pushing its year-to-date loss to about 5%. The disconnect between operational performance and stock price may reflect broader investor sentiment. While Costco’s fundamentals remain solid, the market appears to be rewarding companies with more dramatic growth narratives or those perceived as benefiting more directly from current economic trends. Walmart, for example, has seen its shares surge as investors focus on retail’s recovery and its own digital transformation.
Membership Model and Digital Momentum
Costco’s membership fee revenue is a cornerstone of its profitability and a testament to its loyal customer base. The company continues to invest in digital engagement, with executives stating that digital sales are expected to grow at a faster pace than overall sales in the long term. This focus on digital channels is helping Costco maintain its competitive edge, but the market’s reaction suggests that investors may be looking for even more rapid expansion or higher profit margins.
Long-Term Perspective: Fundamentals vs. Sentiment
Costco’s recent performance highlights the difference between long-term fundamentals and short-term market sentiment. The company’s consistent revenue growth, strong membership base, and expanding digital footprint position it well for sustained success. However, in an environment where investors favor high-growth stories and rapid expansion, companies with steady, predictable growth may not receive the same level of enthusiasm. This divergence underscores the importance of patience and a long-term perspective for investors focused on fundamentals rather than short-term market moves.
Conclusion: The Value of Patience
Costco’s experience in 2025 illustrates that strong operational results do not always translate into immediate stock price gains. While the company continues to deliver solid financial performance and expand its digital capabilities, the market’s focus on growth narratives and rapid expansion may leave steady compounders behind in the short term. For investors who prioritize long-term value and stability, Costco’s fundamentals remain a compelling case study in the benefits of patience and consistency in a volatile market environment.
Someone’s sitting in the shade today because someone planted a tree a long time ago. ― Warren Buffett.
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