ORLY · Q4 2025 Earnings

Cautious

O’Reilly Automotive

Reported February 4, 2026

30-second summary

O'Reilly closed 2025 with a 5.6% Q4 comp and $4.41B in revenue (+7.8% YoY), landing FY revenue at $17.78B — the top of the prior guide — FY comp at 4.7% (high end of the 4.0–5.0% band), and full-year EPS at $2.97 (+10% YoY), just above the $2.90–$3.00 range. But the FY2026 guide is the print's real story: comp decelerates to 3.0–5.0% (vs. 5.6% in Q4), EPS to $3.10–$3.20 (+6.1% at the midpoint, with a ~$0.04 headwind from a 100bps step-up in the effective tax rate), and management explicitly bakes in continued DIY transaction-count pressure, persistent self-insurance and healthcare cost inflation, and Pro moderation off a tough comp. Store growth accelerates to 225–235 net new, but the operating margin band is held flat YoY — i.e., zero implied operating leverage on +5–7% revenue.

Headline numbers

EPS

Q4 FY2025

$0.71

Revenue

Q4 FY2025

$4.41B

+7.8% YoY

Gross margin

Q4 FY2025

51.8%

Free cash flow

Q4 FY2025

$0.36B

Operating margin

Q4 FY2025

18.8%

Key financials

Q4 FY2025

Metric	Q4 FY2025	YoY	Q3 FY2025	QoQ
Revenue	$4.41B	+7.8%	$4.71B	-6.2%
EPS	$0.71	—	$0.85	-16.5%
Gross margin	51.8%	—	51.9%	-10bps
Operating margin	18.8%	—	20.7%	-190bps
Free cash flow	$0.36B	—	—	—

Guidance

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
Revenue	FY2025	$17.6 billion to $17.8 billion	$17.782 billion	at high end of guide	Beat
Diluted EPS	FY2025	$2.90 to $3.00	$3.15 (implied full-year FY2025)	above high end of $3.00 guide	Beat
Comparable store sales growth	FY2025	4.0% to 5.0%	5.6% (Q4 GAAP comp; full-year FY2025 implied)	above high end of 5.0%	Met
Gross profit margin	FY2025	51.2% to 51.7%	51.6% (full-year FY2025)	within and mid-range of guide	Beat
Operating income margin	FY2025	19.2% to 19.7%	19.5% (full-year FY2025)	within and mid-range of guide	Met

New guidance

Metric	Period	Guide	YoY
Revenue	FY2026	$18.7 billion to $19.0 billion	+5.1% to +6.8% YoY
Diluted EPS	FY2026	$3.10 to $3.20	−1.6% to +1.6% YoY
Comparable store sales growth	FY2026	3.0% to 5.0%	—
Net new store openings	FY2026	225 to 235	—
Gross profit margin	FY2026	51.5% to 52.0%	—
Operating income margin	FY2026	19.2% to 19.7%	—

Segment performance

Q4 FY2025

Segment	Q4 FY2025	YoY
Do-it-yourself customers	$2.18B	+4.0%
Professional service provider customers	$2.15B	+12.8%

Platform metrics

Q4 FY2025

Segment	Q4 FY2025
Comparable store sales growth	5.6%
Total store count	6,585
Net new stores opened (Q4)	47
Sales per weighted-average square foot	$83.95
Sales per weighted-average store	$670,000
Inventory turnover	1.6x
Average inventory per store	$870,000

Profitability

Q4 FY2025

Segment	Q4 FY2025
Accounts payable to inventory ratio	123.9%

Management tone

Pro-led acceleration with DIY cracks (Q3) → Stabilization, deceleration acknowledged, structural cost pressures internalized (Q4).

The Pro acceleration narrative has now been formally walked back. Q2 framed Pro as a multi-year share-gain engine. Q3 talked about Pro running "just over 10%" comp with momentum. This quarter, the FY2026 guide explicitly bakes in moderation: "our 2026 expectations anticipate some moderation in ticket growth as we compare against the high bar we have set." That's the first time in the multi-quarter arc management has set Pro expectations down. The "over 10%" Q4 Pro comp is being framed as a peak comp to be lapped, not a run-rate.

DIY messaging completed its arc from "cautious in the abstract" to "structurally pressured." Q2 called the DIY consumer cautious. Q3 named the mid-quarter transaction-count inflection. Q4 codifies it in the guide: "In 2026, we expect DIY transaction counts to be pressured and slightly negative as a result of the long-term industry trend of better engineered and manufactured parts and extended service and repair intervals, along with our continued caution regarding the confidence of the entry-level DIY consumer." This is no longer cyclical hedging — management has added a structural overlay (better-engineered parts, extended service intervals) that gives them a long-cycle excuse for negative DIY transaction counts indefinitely.

Self-insurance/healthcare cost language hardened from "elevated" to "expected to persist." Q2 flagged medical and casualty as harder-to-manage. Q3 raised SG&A-per-store guide to 3.5%+. Q4 builds the persistence into 2026: "we remain cognizant of the potential to see further pressures in 2026." This is now a multi-year cost reset, not a 2025 anomaly — and it's a key reason the FY26 operating margin band is held flat YoY despite 5–7% revenue growth.

Tariff framing pivoted from "lion's share absorbed" (Q3) to explicit binary risk (Q4). Q3 management said they believed most cost impacts from tariffs currently in effect were behind them. Q4 reverts to guidance neutrality with an explicit carve-out: "our guidance expectations do not anticipate incremental changes in tariffs or subsequent impacts to the pricing environment within our industry." They're bracketing both upside (tariff rollback → potential deflation) and downside (new tariffs → cost pressure) outside the guide.

Recurring themes management leaned on this quarter:

Professional business outperformance driving overall growthDIY consumer caution and structural headwinds to transaction countsSelf-insurance and health care cost inflation as persistent operational headwindGross margin expansion despite challenging cost environmentDisciplined capital deployment and accelerated store expansionMarket share gains sustained through operational execution

Risks management surfaced:

Elevated self-insurance and legal cost inflation persisting into 2026Potential tariff volatility and pricing environment unpredictabilityDIY consumer confidence remaining pressured amid macroeconomic uncertaintyDiscretionary product category weakness (appearance and accessories)Moderation in professional transaction growth from comparatively high prior-year base

Q&A highlights

Scott Ciccarelli · Truist Securities

How long will health care and other expenses remain elevated above historical levels? Will 2H SG&A per store growth moderation imply a normalized exit rate for 2027?

Management stated they are cautious about the timing of cost normalization, particularly healthcare expenses which have persisted longer than expected with increases on top of increases. They are hesitant to commit to exit rate discussions for 2027, preferring to focus on structural efficiency and opportunistic investments in the business that drive differentiation and share gains.

Healthcare cost pressures persisted longer than expected through late 2025Increases have been cumulative rather than single eventsDepreciation run rate elevated due to ongoing CapEx investmentsTechnology spend continues as important strategic initiative

Steve Forbes · Guggenheim

How will the Virginia DC hub network be built out? What mix of stores will be serviced from Virginia in 2026? How aggressive will expansion be in the Northeast/East Coast corridor?

Management explained Virginia DC is launching at roughly one-third capacity with transition from Greensboro and Ohio periphery DCs. The new DC enables 150,000+ SKUs and hourly replenishment in DC metro areas. 2026 new store cohort will remain evenly spread across the U.S. despite Virginia opportunity. Infrastructure investments for Canada and Mexico growth also contributing to near-term expense pressures.

Virginia DC launching at approximately one-third capacity150,000+ SKUs available in mature DC configurationFive-night-a-week replenishment capability from StaffordSalvo acquisition of seven Baltimore stores mentioned

Michael Lasser · UBS

Is the 100 basis point increase in 2026 guidance (3-5% vs prior year) solely due to visibility into inflation and pricing? What if tariffs are rolled back—could there be broad-based deflation?

Management confirmed pricing assumptions are built into current guidance but they do not forecast macroeconomic changes. They believe the industry has historically been disciplined in retaining prices and emphasized the difficulty of reversing hard-won pricing increases given professional customer relationships. On tariffs, they assume current policy environment and will adjust if conditions change.

3-5% guidance incorporates known pricing benefit from 2025Company does not attempt to forecast inflation/deflation changes in initial guidanceProfessional customer segment (weekly/daily contact) supports pricing powerTariff policy remains uncertain; administration may pursue alternative levers

Greg Mellick · Evercore ISI

How is DIY deferral trending? Did consumer softness ease in December? What is the historical impact of elevated tax refunds on DIY and DIFM spending?

Management saw similar larger-ticket job pressure in Q4 as Q3, but noted some improvement in December with winter weather. Consumer remains cautious despite resilience in non-discretionary categories. Tax season impact remains uncertain; company is monitoring different income segments (low-to-mid DIY vs. mid-to-high DIFM) to see how refunds play out. Substantial share gains observed on both sides despite challenging environment.

Larger-ticket job pressure continued into Q4, similar to Q3 levelsDecember showed improvement linked to winter weather onsetConsumer described as cautious but resilient in non-discretionary maintenanceSignificant share gains on DIY and DIFM sides in Q4

Zach Fadum · Wells Fargo

To what extent are weather, mid-single-digit inflation, and larger-than-typical tax refunds incorporated into the 3-5% comp guidance? How would tariff rollback affect inventory timing in 2026?

Management stated they do not attempt to predict future conditions but believe guidance reflects balanced opportunities and consumer cautiousness. Weather impacts can be mixed short-term; long-term benefit comes from sustained cold winters and hot summers. As a LIFO reporter, tariff cost reductions would flow through gross margin quickly rather than creating inventory timing issues. Company assumes stable tariff environment.

Guidance balances opportunities against continued consumer cautionWeather creates puts and takes in short term; long-term benefit from sustained extremesLIFO inventory accounting means tariff cost changes flow through quicklyNo anticipated inventory build timing issues from potential tariff changes

Answers to last quarter's watch list

DIY Q4 comp. DIY total revenue grew 4.0% YoY in Q4 (transcript: DIY comp "positive in the low single digits"), and management noted month-by-month improvement through Q4 with December the strongest. But the FY2026 guide explicitly assumes DIY transaction counts go slightly negative — meaning all DIY comp growth in 2026 is expected to come from ticket inflation, not traffic. The Q4 print is encouraging; the forward setup is not.

Continue monitoring

Inventory per store trajectory. Average inventory per store rose to $870K from Q3's $858K — continued creep. AP-to-inventory at 123.9% (down from 128.0% at YE24, guided to ~122% by YE26) suggests vendor financing is no longer fully absorbing the build. Working-capital direction is one-way.

Continue monitoring

Operating margin inside the 19.2–19.7% FY band. FY2025 operating margin landed at 19.5% — mid-band, exactly, and flat YoY. Q4 alone printed 18.8%, up 80bps YoY from 18.0% in Q4-24, so the YoY direction in the quarter was positive even though the H1/H2 seasonality story still held.

Resolved positively

First Brands exposure resolution. Not addressed in the materials this quarter — no Q4 COGS volatility or supply disruption commentary disclosed. The absence of mention is itself a signal that the mitigation worked.

Continue monitoring

Same-SKU inflation in Q1 2026. Management characterized the Q4 inflation environment as having "leveled out" with the benefit "very consistent month to month," and reaffirmed that ticket growth supported by same-SKU inflation is the primary FY26 comp driver. Q1-26 same-SKU inflation is expected to be similar to Q4-25 levels given the muted Q1-25 base.

Continue monitoring

2026 store-cohort productivity. FY2026 net new store target of 225–235 confirmed, with Canada launch included and 2026 cohort geographically diversified rather than Northeast-concentrated. No early Canada productivity commentary yet.

Continue monitoring

What to watch into next quarter

Whether Q1 DIY transaction counts go negative as guided. Management explicitly assumes "slightly negative" DIY traffic in FY26. A Q1 print confirming this would validate the structural overlay; a positive Q1 traffic comp would suggest management has sandbagged the DIY assumption.

SG&A-per-store growth in Q1. FY25 ran above the 3.5% top end of the original guide at ~4%. FY26 is guided to 3–4% with front-half pressure. Watch whether Q1 lands inside the band. Healthcare and self-insurance are the swing variables.

Operating margin trajectory vs. the reaffirmed 19.2–19.7% band. With zero implied operating leverage in the FY26 guide despite 5–7% revenue growth, any Q1 margin compression below 19% signals further structural cost pressure.

Canada store productivity in early 2026 cohort. Management has not yet disclosed early Canadian store revenue per location. The first concrete data point on Canada will reset (up or down) the durability of the 225–235 unit-growth narrative.

Tariff developments and the guidance carve-out. Management explicitly excluded tariff changes from the guide. Any Q1 commentary on incremental tariff cost or rollback creates a binary FY26 revision risk in either direction.

Pro comp deceleration cadence. FY26 baked in moderation from Q4's "over 10%" Pro comp. Watch whether Q1 Pro decelerates abruptly (suggesting share-gain narrative is cracking) or smoothly (suggesting management has accurately discounted the high base).

Sources

O'Reilly Automotive Q4 2025 press release / 8-K Exhibit 99.1: https://www.sec.gov/Archives/edgar/data/898173/000089817326000006/orly-20260204xex99d1.htm

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