Best Buy's Q3 Earnings Beat, Revenues Rise on Higher Comparable Sales

Best Buy Co., Inc. BBY reported sturdy third-quarter fiscal 2026 results, wherein revenues and earnings surpassed the Zacks Consensus Estimate and rose year over year.

Best Buy remains committed to its strategic roadmap, which focuses on elevating the omnichannel experience of customers, scaling revenue streams, such as its Best Buy Marketplace and Best Buy Ads, and boosting operational efficiency to fund long-term investments and offset external pressures. Backed by a solid Q3 and present outlook for Q4, management raised its full-year guidance.

The company is investing in reinforcing the technology platform to grab opportunities for growth. During the quarter, it has launched the self-serve platform, My Ads, which seems significant for new marketplace sellers. It has enabled on-site programmatic buying, advanced reporting capabilities and improved on-site ad supply. BBY is expanding into areas such as agencies and demand-side platforms or DSPs. It also gains popularity in non-endemic categories, with multiple partners testing the platform in distinguished ways. Financial services have also emerged as an outstanding vertical with PayPal, Klarna and Capital One shopping, each activating campaigns. 

The company has rolled out the latest AI glasses from Meta in its stores. In more than 50 locations, it has immersive showcase areas staffed by Meta experts to support customers in discovering and using the technology hands-on. BBY has introduced experiences with Breville and Shark Ninja, featuring extended assortments for at-home baristas and chefs and modern health and beauty solutions.

Driven by a solid quarter and raised outlook, BBY’s shares have risen more than 5% in the pre-trading session yesterday. Over the past six months, this Zacks Rank #3 (Hold) company has gained 12.8% compared with the industry’s 9.2% growth.

Insight Into BBY’s Quarterly Performance

Adjusted earnings of $1.40 per share surpassed the Zacks Consensus Estimate of $1.31. However, the bottom line increased 11% from $1.26 per share reported in the year-ago period.

Enterprise revenues came in at $9,672 million, surpassing the consensus mark of $9,576 million and jumped 2.4% from the prior-year quarter's figure of $9,445 million. Enterprise comparable sales rose 2.7% year over year. By month, the enterprise comparable sales rose approximately 3% in August, 1% in September and 5% in October.

In the customer support capability, the company is leveraging AI to streamline interactions and offer experiences to empower customers with self-serve content and options. Consequently, it drove a 17% decrease in the number of customer contacts in the reported quarter and improved customer experience scores. By capitalizing new data-driven sourcing solutions to select the most efficient location to fulfill more than 70% of its online orders, the company is seeing quick delivery times, better on-time delivery and reduced costs.

Best Buy Co., Inc. Price, Consensus and EPS Surprise

Best Buy Co., Inc. price-consensus-eps-surprise-chart | Best Buy Co., Inc. Quote

Gross profit edged up 1.4% to $2,248 million, while the gross margin fell 30 basis points (bps) to 23.2%. We had projected adjusted gross margin to contract 20 bps year over year. 

Adjusted operating income was $388 million, up 10.5% from the year-ago quarter. The adjusted operating margin of 4% rose 30 bps from the prior-year period, mainly driven by lower-than-planned selling, general and administrative (SG&A) expenses. We had expected the adjusted operating margin to remain flat year over year.

Adjusted SG&A expenses were $1,884 million, up 0.7% year over year. Adjusted SG&A, as a percentage of revenues, was down 30 bps to 19.5%. We had estimated adjusted SG&A expenses to leverage 20 bps.

BBY’s Domestic & International Operations

Domestic revenues of $8,878 million inched up 2.1% year over year due to a comparable sales rise of 2.4%. From a merchandising perspective, the major drivers on a weighted basis were gaming, computing and mobile phones, somewhat offset by declines in home theater and appliances. We had projected Domestic revenues of $8,783 million and a comparable sales rise of 1.5%.

Domestic online revenues of $2.82 billion increased 3.5% on a comparable basis, and as a percentage of total Domestic revenues, online revenues were 31.8%, higher than 31.4% last year.

The domestic gross margin fell 30 bps to 23.3%, primarily due to lower product margin rates, which were partly offset by rate improvement across the services category. The segment’s adjusted operating income was $360 million, up 6.5% from $338 million recorded last year. As a percentage of revenues, the metric increased 20 bps to 4.1%.

International revenues of $794 million increased 6.1% year over year due to a comparable sales rise of 6.3% and revenues from Best Buy Express locations excluded from comparable sales, somewhat offset by the adverse impacts of foreign exchange. We had projected International revenues of $757.1 million and a comparable sales growth of 2%.

International gross margin rose 30 bps to 22.8%, primarily due to favorable supply-chain costs. The segment’s adjusted operating income was $28 million, up significantly from $13 million recorded in the year-ago quarter. As a percentage of revenues, the metric increased 80 bps year over year to 3.5%.

BBY’s Financial Snapshot

Best Buy ended the quarter with cash and cash equivalents of $923 million, long-term debt of $1,155 million and a total equity of $2,653 million.

During the quarter under review, the company returned $234 million to shareholders, comprising $199 million in dividends and $35 million in share repurchases. On a year-to-date basis, BBY returned $802 million to shareholders via dividends of $602 million and share repurchases of $200 million. The company anticipates spending roughly $300 million on share repurchases during FY26.

The company’s board has authorized paying a regular quarterly dividend of 95 cents a share in cash, payable Jan. 6, 2026, to shareholders of record as on Dec. 16, 2025.

Best Buy’s FY26 Guidance`

Management projects delivering sales growth in the fiscal year. The high end of its Q4 view assumes growth in computing, gaming and mobile, reflecting improved trends in TVs backed by a blend of pricing, higher marketing, specialty labor and enhanced delivery and install offerings. The company also has a comprehensive trade-in program throughout the holiday to aid customers in adapting to new technology easily. It continues to be the official home entertainment retailer of the NFL, and its holiday campaign will have a highly in-game presence in NBC, Peacock, CBS, Fox and Netflix.

Moving forward, management will continue to utilize AI augmented optimization in several areas of business, from scan detection to customer aid to personalized e-mail marketing. Hence, it is increasingly using AI for product search, product recommendations and bolstering product content, and growing into conversational AI and agentic commerce. The company has officially kicked off the holiday season and is poised well with amazing deals on hot products, solid marketing and competitive fulfillment options. Management expects gaming to be a hot holiday gift category with products such as the Nintendo Switch 2, the ASUS Rog Xbox Ally handheld gaming system, gaming laptops and gaming monitors. Also, the other exciting gifts for the holiday consists of AI glasses from Ray-Ban and Oakley, 3D printers, OLED TVs, the new Hyperboot by Nike, limited quantity Pokemon cards and LEGO toys and JBL PartyBox speakers. 

For the fiscal fourth quarter, BBY anticipates comparable sales growth in the bracket of down 1% to up 1.0% and adjusted operating margin of 4.8-4.9% versus the last year’s rate of 4.9%. The fourth-quarter comparable sales view for Canada more closely aligns with the projections for the domestic segment.

Fourth-quarter gross margin is likely to decline year over year owing to a lower product margin rate, which is mainly owing to the higher promotional investments. The other key drivers include growth from Buy ads, its online marketplace and enhanced profitability from its services category. With respect to SG&A, the most notable planned puts and takes include increased SG&A Best Buy ads and marketplace efforts, which consist of advertising, technology and employee compensation costs. Offsetting such factors are lower Best Buy Health and incentive compensation costs. The low end of its guidance reflects the company’s plans to further lower its variable expenses, with incentive compensation to align with the sales trends.

For fiscal 2026, revenues are predicted in the band of $41.65-$41.95 billion, compared with the prior outlook of $41.1-$41.9 billion. It projects comparable sales of 0.5-1.2% versus the earlier guidance of (1.0%) to 1.0%. Adjusted operating margin of about 4.2% is unchanged, while the adjusted effective income tax rate is nearly 25.4%. Best Buy continues to envision adjusted earnings per share between $6.15 and $6.30, versus the earlier guided view of $6.15-$6.30. Capital expenditures are still projected at around $700 million for the fiscal year. Fiscal 2026 gross profit rate is now likely to decline nearly 15 bps compared with the last year. The high end of its guidance reflects incentive compensation that is almost year over year.

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