BBY · Q3 2026 Earnings

Cautious

Best Buy

Reported November 25, 2025

30-second summary

30-second take: Best Buy delivered the comp beat the trend implied — +2.7% vs. the ~+1.6% framing — and finally raised FY26 revenue, EPS, and comparable sales guidance after two quarters of beats-without-raises. But the same release booked a $192M non-cash Health impairment, warned Q4 gross margin will decline ~15bps with elevated promotional intensity, and quietly raised the FY tax rate 40bps. The model worked in Q3; management is telling you Q4 will be harder.

Headline numbers

EPS

Q3 FY2026

$1.40

Revenue

Q3 FY2026

$9.67B

+2.4% YoY

Gross margin

Q3 FY2026

23.2%

Operating margin

Q3 FY2026

2.0%

Key financials

Q3 FY2026

Metric	Q3 FY2026	YoY	Q2 FY2026	QoQ
Revenue	$9.67B	+2.4%	$9.44B	+2.5%
EPS	$1.40	—	$1.28	+9.4%
Gross margin	23.2%	—	23.2%	+0bps
Operating margin	2.0%	—	2.7%	-70bps

Guidance

Raised FY2026 revenue and EPS guidance on Q3 beat; comparable sales guide materially improved; narrowed revenue range signals confidence.

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Comparable sales growth	Q3 FY2026	similar to Q2 FY26 (approximately 1.6%)	2.7%	+1.1pts above guide	Beat
Adjusted operating income rate	Q3 FY2026	approximately 3.7%	4.0%	+0.3pts above guide	Beat

New guidance

Metric	Period	Guide	YoY
Comparable sales growth	Q4 FY2026	(1.0%) to 1.0%	—
Adjusted operating income rate	Q4 FY2026	4.8% to 4.9%	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Revenue	FY2026	$41.1B – $41.9B (midpoint $41.5B)	$41.65B – $41.95B (midpoint $41.8B)	+$0.3B midpoint (narrow range, higher floor)	Raised
Adjusted diluted EPS	FY2026	$6.15 – $6.30 (midpoint $6.225)	$6.25 – $6.35 (midpoint $6.30)	+$0.075 midpoint	Raised
Comparable sales growth	FY2026	(1.0%) to 1.0%	0.5% to 1.2%	+0.5pts to +0.2pts (materially higher floor)	Raised
Adjusted effective income tax rate	FY2026	approximately 25.0%	approximately 25.4%	+0.4pts	Raised

Reaffirmed unchanged this quarter: Adjusted operating income rate (approximately 4.2%), Capital expenditures (approximately $700 million)

Segment performance

Q3 FY2026

Segment	Q3 FY2026	YoY
Domestic	$8.878B	+2.1%
International	$0.794B	+6.1%

Platform metrics

Q3 FY2026

Segment	Q3 FY2026
Comparable Sales Growth	2.7%
Domestic Comparable Sales Growth	2.4%
Domestic Online Comparable Sales Growth	3.5%
International Comparable Sales Growth	6.3%
Domestic Online Revenue as % of Total Domestic Revenue	31.8%

Profitability

Q3 FY2026

Segment	Q3 FY2026
Adjusted Operating Income Rate	4.0%

Other KPIs

Q3 FY2026

Segment	Q3 FY2026
Share Repurchases (Q3)	$35 million
Dividends Paid (Q3)	$199 million

Management tone

Q1 tariff arithmetic → Q2 tariff fog → Q3 confident execution with a strategic write-down → Q4 promotional defense

Best Buy Health pivoted from a multi-quarter strategic growth pillar to an active liability inside two quarters. Q2 saw a quiet exit of the "Care at Home" initiative dropped almost casually. This quarter the broader Health franchise took a $192M non-cash impairment as management "recorded pre-tax non-cash asset impairments of $192 million related to Best Buy Health... reflect downward revisions in our long-term projections, in part due to pressures in the Medicaid and Medicare Advantage markets." The implication is that capital allocation discipline is tightening on adjacent verticals, but it also confirms management has been late to recognize Health's execution issues — the impairment retroactively validates the Care at Home exit signal from last quarter.

Two quarters ago management framed tariffs as the binding constraint on guidance; this quarter the constraint shifted to promotional intensity. Q1 management quantified China COGS exposure and tariff pass-through math. Q2 refused to raise FY guidance citing tariff fog. Q3 raised across revenue/EPS/comps while warning "we expect our fourth quarter gross profit rate to decline versus last year due to a lower product margin rates, which is primarily due to increased promotional investments." Tariffs are no longer the lead worry; competitive promotional dynamics in the heaviest seasonal quarter are. That's a more durable concern than tariffs because it reflects consumer behavior, not policy.

The consumer narrative has progressively degraded from "resilient" to "deal-dependent and volatile." Q1 assumed "no material change in consumer behavior." Q2 said back-to-school was strong. Q3: "Customers remain resilient but deal-focused and attracted to more predictable sales moments... September, which was relatively quiet outside of the Labor Day sales event, had the slowest growth of the quarter." Management is essentially saying organic demand is fragile and the strong quarters are constructed around events. That's why Q4 — the most event-loaded quarter — is guided to flat comps despite a Q3 beat: lapping effects are tougher and event compression doesn't compound.

Innovation framing has become more defensive over three quarters. Q1: Switch 2, Windows 11, Mac M-chip refresh as forward catalysts. Q2: Switch 2 contribution. Q3: "Our model really shines when there is innovation... we are the trusted source for the latest and greatest new technology." The phrasing has shifted from listing catalysts to asserting category dependence on innovation cycles — implicitly acknowledging that Best Buy's model under-performs when product categories mature. The Windows 10 EOL tailwind is real (Computing +7.6%) but is a single-cycle event, not a recurring driver.

The guidance posture itself is the cleanest tone shift of the year. Q1 cut FY twice in one quarter. Q2 refused to raise despite a beat, citing "prudence given tariff uncertainty." Q3 raised revenue/EPS/comps and narrowed the revenue range from ±$0.4B to ±$0.15B. Narrowing the range is the more confident signal than the magnitude of the raise itself — management is telling you forecast conviction has returned even as the back half remains promotional.

Recurring themes management leaned on this quarter:

Promotional intensity and pricing pressure driving margin erosionAI and automation delivering operational efficiencies (customer support, fulfillment optimization)Marketplace and retail media network growth as new profit streamsConsumer behavior shift toward deal-focused, event-driven shopping with macro caution on big-ticket purchasesInnovation-driven demand (Windows 11 transition, gaming handhelds, AI glasses) as key revenue driverStore experience modernization through vendor partnerships and immersive showcases

Risks management surfaced:

Medicaid and Medicare Advantage market pressures affecting Best Buy Health profitabilityCustomer willingness to spend on big-ticket purchases remains uncertain despite demonstrated demand for innovationSeptember softness reflects unpredictable consumer behavior outside promotional windowsDeclines in home theater, appliances, and drone categories offsetting strength in computing and gamingForeign exchange headwinds in international segment

Q&A highlights

Simeon Gutman · Morgan Stanley

How did management set up Q4 guidance given lighter comps but better profit expectations? What does product adoption (Switch 2, iPhone) and demand trajectory tell us about momentum into next year?

Management raised the bottom end of Q4 sales guidance from down 4% to down 1%, keeping high end similar to August guidance. Computing and mobile expected to grow driven by Win 10 upgrades, AI innovation, and carrier improvements. Entertainment: Switch 2 continues to help Q4, other consoles slowing. TV trends improving with competitive pricing and marketing. Marketplace and ads business scaling into Q4. Long runway of upgrade opportunity expected into 2025.

Q4 sales guide bottom end raised from down 4% to down 1%Q4 EBIT guidance slightly lowered from prior guidanceComputing and mobile expected to grow in Q4 and likely into 2025Switch 2 driving Q4 growth; Switch 2 units in market significantly higher than Switch 1 at same point

Peter Keith · Piper Sandler

Why the deceleration in Q4 comp outlook despite Q3 momentum and holiday product strength? How is Marketplace performing post-launch and what was the impact on EBIT this year?

Q4 guidance similar to Q3 but with tougher year-ago comparisons; Q3 beat was driven by strong back-to-school and techtober. Gaming and wearables expected to moderate growth pace in Q4. Marketplace launch exceeded expectations with 1,000+ sellers onboarded in a quarter and 11x more SKUs. Return rates lower than first-party, 80% of returns flowing back to stores. Early metrics healthy but still early in ramp. Marketplace EBIT impact now expected neutral for year vs. prior modest improvement expectation due to slower ramp and product mix.

Q3 achieved positive growth with strong back-to-school and October techtober periodsQ4 comps tougher due to 5% growth in first three weeks of November last year1,000+ sellers onboarded in a quarter since Marketplace launch11x more SKUs added through Marketplace

Joe Feldman · Telsey Advisory Group

Can you provide details on loyalty program performance and strategy? How is Best Buy thinking about store investment for next year?

Loyalty program has 100+ million members across three tiers; Best Buy Plus and Best Buy Total paid tiers grew to nearly 8 million members (up from 7 million). Strategy focuses on personalized promotions, engagement, and testing ancillary services like discounted NFL Sunday Ticket for paid members. Store strategy centers on look and feel refresh via vendor partnerships, with continued investment in immersive experiences (AR, gaming, TVs). Testing relocations, resizing, vendor co-tenancy (IKEA pilot), and small format stores (three open, testing concepts). Gen Z showing strong store engagement and brand preference shift. 46% in-store pickup rate persists despite shipping speed improvements.

100+ million loyalty members across three tiersNearly 8 million paid members (Best Buy Plus and Total combined), up from 7 million prior yearPersonalized promotions driving member re-engagementTesting discounted NFL Sunday Ticket for paid members

Greg Melick · Evercore

How much of tariff impact has flowed through pricing? What is vendor labor funding dynamic and how does it affect customer engagement?

All tariff-related price increases reflected in flat year-over-year ASP at enterprise level, with growth driven entirely by units. Effective tariff rates in mid-teens; however, competitive promotional environment and product mix changes mute ASP impact visibility. Vendor labor represents dynamic percentage of store labor model flexing with seasonality and product launches. Best Buy differentiates with blended labor model: generalist advisors, specialized category labor (appliance pros), vendor-funded labor, and occasional vendor-direct labor. Emphasis on seamless handoffs between specialist and generalist labor types aligned with customer journey and Best Buy culture.

Enterprise ASP essentially flat year over yearUnit growth driving all sales momentumEffective tariff rates approximately mid-teensTariff impact fully reflected in pricing despite competitive pressure

Seth Sigmund · Barclays

How did you achieve SG&A reduction despite 4+ year sales growth highs? What should we expect on SG&A leverage going forward? What needs to happen for CE and appliance categories to return to growth?

Q3 SG&A favorability driven by higher-than-expected sales leverage, lower technology spend, lower labor spend, and some smaller settlements. Going forward, expect inflation in wages offset by operational efficiencies: data-driven supply chain sourcing, FedEx partnership, AGVs in warehouses, technology and analytics improvements. Appliance category facing structural headwinds: direct-replacement demand (not upgrade), single-unit purchases reducing promo effectiveness, lack of pro business. Strategy: increase labor coverage, emphasize fast delivery, offer same-day takeout options to meet direct-market customer needs. TV improved sequentially with units slightly positive, unit share up year-over-year. TV recovery driven by competitive pricing, increased marketing, expanded specialty labor, enhanced merchandising with TCL/Hisense/LG.

Q3 SG&A benefited from sales leverage, lower tech and labor spendSome smaller settlements added to favorable SG&AAppliance market: vast majority direct-replacement (broken units), single-unit purchases dominantAppliance strategy: increase labor, improve delivery speed, enable same-day takeout

Answers to last quarter's watch list

Q3 comp delivery against the ~1.6% framing — and whether FY guidance is finally raised. Comps came in at +2.7%, +110bps above the prior framing. FY26 revenue raised from $41.5B midpoint to $41.8B, FY26 EPS raised from $6.225 to $6.30, FY26 comp range raised from (1.0%)–1.0% to +0.5%–1.2%. The two-beats-without-a-raise pattern broke cleanly.

Resolved positively

Q4 adj. operating income rate implied by reaffirmed 4.2% FY. Q4 is now guided to 4.8-4.9%, below the ~5.0%+ run-rate the reaffirmed 4.2% FY would require given H1's 3.8%/3.9% and Q3's 4.0%. The FY 4.2% reaffirmation now sits at the low end of plausibility — at the Q4 guide midpoint of 4.85%, FY math arrives at approximately 4.17-4.18%, rounding to ~4.2%. Management did not walk back the 4.2% target, but the buffer has disappeared.

Resolved negatively

Appliances trajectory. -8.4% in Q3 vs. -8.5% in Q2 — essentially unchanged. Management's improvement plan (sharper pricing, vendor partnerships, fulfillment investment) has not produced visible category recovery. Q3 commentary explicitly identified structural headwinds (direct-replacement demand, single-unit purchases, lack of pro business) — implying the issue is market structure, not Best Buy execution. The back-half stabilization narrative has failed for this category.

Resolved negatively

Marketplace quantification. Management disclosed activity metrics (1,000+ sellers, 11x SKUs, sub-first-party return rates, 80% of returns to stores) but no GMV, take rate, or 3P revenue. FY Marketplace EBIT contribution was downgraded from "modest improvement" to "neutral." Qualitative-only disclosure plus a downgraded contribution expectation suggests cannibalization is meaningfully offsetting third-party growth, or the ramp is slower than initially modeled.

Resolved negatively

Gross margin in Q3. Q3 GM printed 23.2% — flat with Q2 and at the boundary of the "below 23.0% would confirm acceleration" threshold. Management guided Q4 gross profit rate to decline YoY on promotional intensity, and now expects FY26 GM to decline ~15bps vs. LY. The mix problem from computing is intact and management is now layering promotional pressure on top.

Resolved negatively

What to watch into next quarter

Q4 comp delivery within the (1.0%)–1.0% range, and whether the +0.5% FY floor is preserved. With three quarters in the books (Q1 -0.7%, Q2 +1.6%, Q3 +2.7%), FY comps are tracking ~+1.2% through Q3. Q4 above ~0% holds the new FY floor. A negative Q4 comp would push FY back into the prior range.

Q4 adj. operating income rate vs. the 4.8-4.9% guide. This is the third revision down from the historical Q4 run-rate implied by the 4.2% FY target. A print below 4.8% would force a FY operating rate miss and confirm promotional pressure is outpacing operational gains.

Gross margin print and the ~15bps FY decline framing. Q4 GM determines whether the mix-plus-promotion thesis is fully embedded or worsening. A FY GM decline materially worse than 15bps would invalidate the "narrow and confident" guidance posture from this quarter.

Appliances — whether the category exits the high-single-digit decline. Two quarters at -8.4%/-8.5% with no visible improvement despite management's plan. If Q4 prints another -7% or worse, the category needs a structural strategy shift rather than tactical fixes.

Marketplace quantitative disclosure. Two quarters post-launch with no GMV, take rate, or 3P revenue figures and a downgraded EBIT contribution. Q4 should be the first reportable holiday quarter — continued qualitative-only commentary plus another downgrade would confirm the initiative is contributing less than originally modeled.

Best Buy Health follow-through. A $192M impairment is rarely the last word. Watch for further restructuring, divestiture, or wind-down disclosures, and any commentary on the residual Health business's financial contribution.

Sources

Best Buy Q3 FY2026 press release, filed 2025-11-25 — https://www.sec.gov/Archives/edgar/data/764478/000076447825000050/bby-fy26q3xexx99.htm
Best Buy Q3 FY2026 earnings call commentary and Q&A
Best Buy Q2 FY2026 and Q1 FY2026 prior-quarter Tapebrief coverage (for cross-quarter tone arc)

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