ORLY · Q3 2025 Earnings

Cautious

O’Reilly Automotive

Reported October 22, 2025

30-second summary

O'Reilly delivered a 5.6% Q3 comp — well above the high end of the prior 3.0–4.5% FY range — and used the beat to raise FY comp guidance to 4.0–5.0% and FY EPS to $2.90–$3.00. But underneath the headline raise, operating cash flow guidance was cut $0.2B at both ends and free cash flow was trimmed $0.1B despite Q3 operational outperformance, and management explicitly flagged mid-quarter DIY transaction pressure as consumers began reacting to tariff-driven price increases. The Pro/DIY divergence widened sharply: Pro comp "just over 10%" with total Pro revenue +12.9% YoY, vs. DIY low-single-digit comp with total DIY revenue +3.8% YoY.

Headline numbers

EPS

Q3 FY2025

$0.85

Revenue

Q3 FY2025

$4.71B

+8.0% YoY

Gross margin

Q3 FY2025

51.9%

Operating margin

Q3 FY2025

20.7%

Key financials

Q3 FY2025

Metric	Q3 FY2025	YoY	Q2 FY2025	QoQ
Revenue	$4.71B	+8.0%	$4.53B	+4.0%
EPS	$0.85	—	$0.78	+9.0%
Gross margin	51.9%	—	51.4%	+50bps
Operating margin	20.7%	—	20.2%	+50bps

Guidance

Management raised full-year EPS and comparable store sales guidance meaningfully, reflecting Q3 outperformance, but modestly reduced operating cash flow and free cash flow ranges.

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

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Revenue	FY2025	$17.5 billion to $17.8 billion	$17.6 billion to $17.8 billion	+$0.1B low end	Raised
Diluted EPS	FY2025	$2.85 to $2.95	$2.90 to $3.00	+$0.05 at both ends	Raised
Comparable store sales growth	FY2025	3.0% to 4.5%	4.0% to 5.0%	+100 basis points at both ends	Raised
Effective income tax rate	FY2025	22.3%	21.6%	-70 basis points	Lowered
Net cash provided by operating activities	FY2025	$2.8 billion to $3.2 billion	$2.6 billion to $3.0 billion	-$0.2B at both ends	Lowered
Capital expenditures	FY2025	$1.2 billion to $1.3 billion	$1.1 billion to $1.2 billion	-$0.1B at both ends	Lowered
Free cash flow (non-GAAP)	FY2025	$1.6 billion to $1.9 billion	$1.5 billion to $1.8 billion	-$0.1B at both ends	Lowered

Reaffirmed unchanged this quarter: Gross profit as percentage of sales (51.2% to 51.7%), Operating income as percentage of sales (19.2% to 19.7%), Net new store openings (200 to 210)

Segment performance

Q3 FY2025

Segment	Q3 FY2025	YoY
Do-It-Yourself (DIY) Customer Sales	$2.305B	+3.8%
Professional Service Provider Customer Sales	$2.308B	+12.9%

Platform metrics

Q3 FY2025

Segment	Q3 FY2025
Comparable Store Sales Growth	5.6%
Total Store Count	6,538 stores
Total Employment	93,269 team members
Sales per Weighted-Average Square Foot (TTM)	$344.65
Sales per Weighted-Average Store (TTM)	$2,701 thousand
Average Inventory per Store	$858 thousand
Inventory Turnover (TTM)	1.6x

Profitability

Q3 FY2025

Segment	Q3 FY2025
Operating Income Growth (YoY)	9%

Management tone

Cautious comp raise (Q2) → Pro-led acceleration with DIY cracks emerging (Q3).

The tariff narrative completed its arc from uncertainty to claimed visibility. In Q2, the press release explicitly excluded a tariff-inflation tailwind from FY guidance because "the broader landscape remains fluid." This quarter management asserts: "While the broader tariff landscape has the potential to remain fluid, at this stage, we believe we have seen the lion's share of the cost impacts we are expecting as they relate to the tariffs currently in effect." That is a meaningful shift — they are now willing to bank an inflation benefit (the "mid-single-digit same-skew benefit in the fourth quarter"). But the hedging language ("we believe", "at this stage", "currently in effect") preserves an escape hatch.

DIY consumer commentary shifted from preemptive caution to acknowledged pressure. Q2 talked about consumers being "cautious" in the abstract. Q3 named it: "We began to encounter modest pressure to DIY transaction counts midway through the third quarter, which we believe reflects some degree of initial short-term reaction by DIY consumers in response to rising price levels." Greg Melich in Q&A elicited the specific admission that larger-ticket DIY jobs are being deferred for the first time this year. The low-single-digit DIY comp masks a mid-quarter inflection that management expects to persist into Q4.

Confidence on share gains and store growth strengthened even as macro tone hardened. This is the unusual feature of the print. Management announced an elevated 2026 store target of 225–235 (vs. 200–210 in 2025), confirmed Canada launch in 2026, and characterized Mexico as a "virtually untapped market." On the call: "Our supply chain is at its healthiest point since we emerged from the pandemic." The posture is: macro is choppy, our competitive position is widening, lean in.

SG&A leverage was reframed as structurally harder. UBS pressed on whether O'Reilly could return to historical 2% SG&A-per-store growth. Management's answer was direct: wage and healthcare inflation are not easily reversible, and they will not cut for cost's sake. Q3 SG&A per store grew 4% and FY is now expected to come in at or slightly above the top end of the 3.5% full-year guide.

Recurring themes management leaned on this quarter:

Professional segment outperformance and share gainsDIY consumer sensitivity to tariff-driven price increasesTariff navigation and supply chain resilienceInventory productivity and in-stock availabilityStore expansion acceleration into new markets including CanadaMargin management amid volatile cost environment

Risks management surfaced:

DIY consumer deferrals in discretionary categories due to rising price levelsPotential for further tariff-related acquisition cost increases beyond current expectationsConsumer uncertainty and continued pressure on DIY spendingSupplier partner concentration risks and financial stability monitoringContinued inflationary pressures in medical and casualty insurance programs

Q&A highlights

Greg Mellick · Evercore

On same-skew inflation, does the 4% figure mean all residual inflation has passed through, or will there be additional flow-through in Q4/Q1? Follow-up on price elasticity and DIY customer behavior, particularly on larger ticket items.

Management expects mid-single-digit tailwind from same-skew in Q4 and Q1. Most cost adjustments are behind them. On elasticity, some deferral of larger ticket jobs seen in Q3 (first time this year), but break-fix items still required. Management cautious but sees good repair/maintenance trends overall.

Mid-single-digit same-skew tailwind expected Q4 and Q1Most tariff-driven cost adjustments completedSome deferral observed in larger ticket DIY jobs in Q329 years of industry experience cited for historical elasticity context

Chris Horvers · J.P. Morgan

Why is Q4 comp guidance not higher than the 4% inflation expected if elasticity isn't worsening? Also asked about long-term store growth acceleration potential in US, Mexico, and Canada.

Jeremy explained difficult year-over-year comps, caution on DIY consumer reaction to pricing, and early stage of Q4 visibility. Brad discussed strong new store cohorts, continued US store count potential upward revision, Mexico as major long-term opportunity (building capabilities post-pandemic), and Canada expansion officially starting 2026.

Q4 is most difficult year-over-year comparisonOver 4% unit growth targeted for 2026New store cohorts performing well; quality focus on hiring teamsUS store count opportunity being ramped upward annually

Scott Ciccarelli · Truist Securities

Any notable geographic performance differences in Q3 weather patterns? Direct question on First Brands supplier exposure and disruption risk.

No material geographic differences; regional performance in line with internal plans. On First Brands, represents just over 3% of COGS. Multi-sourced (dual/triple/quad) on most lines by DC. Over 50% of revenue from proprietary brands. New First Brands leadership engaged; have longstanding relationships with many acquired brands even pre-acquisition. Confident in ability to manage through without material disruption.

No material regional/geographic performance differencesFirst Brands = >3% of COGSOver 50% of revenue from proprietary O'Reilly brandsMulti-source strategy: dual/triple/quad sourced by DC

Michael Lasser · UBS

Is mid-single-digit Q4 inflation the peak benefit going forward? Is mid-single-digit comp growth the ceiling for O'Reilly's model, or can it do better? What conditions needed to restore 2% SG&A per-store growth seen historically?

Jeremy: Most inflation benefit expected in Q4; tariff environment still has uncertainty. Historically pricing has not driven business; consolidation and share gains are the focus. No absolutes given ongoing uncertainty. Brad emphasized team execution, 10% share opportunity, and conviction on mid/long-term consolidation. On SG&A, Jeremy noted wage and inflation pressures differ from historical low-inflation periods; company prioritizes service levels and long-term profit dollars over cost cuts. Brad added focus on disciplined investment in technology, teams, supply chain while maintaining operating profit leverage.

Most pricing benefit concentrated in Q410% market share in North America (implies 90% upside)Tariff environment remains fluid with uncertaintyWage rate inflation and healthcare cost pressures are structural headwinds to SG&A leverage

Simeon Gutman · Morgan Stanley

To what extent is DIY deferral driven by price elasticity vs. timing of price movements (potential head fake)? Follow-up on investment posture: is shift from SG&A per-store leverage to new store growth? Any change in operating margin philosophy to capitalize on disruption?

Brad: Deferral observed in some categories but not all, not directly tied to tariff-affected lines. Early stage; seasonality, weather, weekly timing all factors. Not seeing trade-down; seeing lower/middle income consumers trading up for value (batteries, warranties). Professional side remains strong. Jeremy: No fundamental shift in operating margin philosophy. Inflation-driven cost pressures are temporary flexes. Focus remains on competitive operating posture and team support. Not cutting for cuts' sake. Brad: Teams managing SG&A-to-sales well, balancing profitability and service levels; some medical/self-insurance costs out of control.

Deferral observed in some categories, not others; not across-the-boardNo material trade-down to lower-price tiers observedLower/middle-income DIY trading up for value and warranty (e.g., batteries)No fundamental operating margin shift planned

Answers to last quarter's watch list

Whether DIY comp stays positive. DIY printed a low-single-digit comp (total DIY revenue +3.8%) — but management explicitly disclosed mid-quarter deceleration and elasticity emerging on larger-ticket jobs. The headline answer is encouraging; the texture beneath it is the opposite.

Continue monitoring

Same-SKU inflation trajectory. Q3 same-SKU inflation was "just over 4%," and management now expects "mid-single-digit same-SKU benefit in Q4." Comp guidance was raised, partially validating that the consumer is absorbing it, but the mid-Q3 transaction-count pressure suggests absorption is incomplete.

Resolved negatively

SG&A per store landing inside 3.0–3.5%. Q3 SG&A per store grew 4%, at the top end of management's expectations, and FY is now expected to land at or slightly above the 3.5% top end of guide. Management acknowledged in Q&A that wage and healthcare inflation are structural — not transient — pressures.

Resolved negatively

Operating margin holding above 20%. Q3 operating margin came in at 20.7%, well above the 19.2–19.7% FY band, with operating income up 9% YoY. Management refused to raise the FY operating margin guide, implying a meaningful Q4 step-down.

Resolved positively

Stafford (VA) DC ramp and Northeast/mid-Atlantic store opens. Q3 added 55 net new stores; year-to-date pace consistent with the 200–210 FY target, and 2026 target raised to 225–235 with Canada included. Stafford, VA DC begins servicing stores in Q4 2025.

Resolved positively

Pro vs. DIY gap. The gap widened materially: Pro comp ~10% vs. DIY low-single-digit. Pro overtook DIY in absolute quarterly revenue this quarter. Management is calling this share gain; the cyclical-vs-structural debate is unresolved but the trajectory is now undeniable.

Continue monitoring

What to watch into next quarter

DIY Q4 comp. Management telegraphed pressure mid-Q3 and a tougher YoY compare. Watch whether DIY decelerates further on the print; that would confirm elasticity is biting rather than transient.

Inventory per store trajectory. Q3 hit $858K, up 10% YoY. If the Q4 figure pushes materially higher without commensurate sell-through, the working-capital overhang persists.

Whether operating margin lands inside the 19.2–19.7% FY band. Q3 ran 20.7% and 9M ran 19.7%. To land at the high end of guide (19.7%), Q4 operating margin only needs to come in around 19.7%; a sub-18% Q4 print would push FY toward the low end (19.2%). A materially-above-19.7% Q4 print would suggest management has been sandbagging the margin band all year.

First Brands exposure resolution. Management quantified the 3%-of-COGS exposure and described mitigation, but the situation is fluid. Any Q4 COGS volatility or supply disruption commentary is the tell.

Same-SKU inflation in Q1 2026. Management said the mid-single-digit benefit extends into Q1. If Q1 reported same-SKU inflation comes in materially below mid-single-digit, the FY2026 comp setup deteriorates.

2026 store-cohort productivity. With a 225–235 target including Canada, new-store revenue per location and any commentary on Canada productivity vs. Mexico will set the durability of the store-growth narrative.

Sources

O'Reilly Automotive Q3 2025 press release / 8-K Exhibit 99.1: https://www.sec.gov/Archives/edgar/data/898173/000089817325000055/orly-20251022xex99d1.htm

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