Executive Summary

Q2 FY26 delivered modest top-line growth and an earnings beat: revenue $9.44B (+1.6% y/y) and adjusted EPS $1.28; both exceeded S&P Global consensus on revenue ($9.23B) and EPS ($1.225). Mix shift toward lower-margin gaming/computing pressured gross margin 30 bps y/y to 23.2% while adjusted operating margin printed 3.9% (+10 bps y/y) . Values retrieved from S&P Global.
Management maintained FY26 guidance but said sales are “trending toward the higher end” of the range; Q3 comps expected similar to Q2 and adjusted OI rate ~3.7% (flat y/y) .
Demand catalysts: Switch 2 launch, Windows 10-to-11 upgrade cycle, improving mobile phones and AI-PC features; Marketplace launch and Retail Media (“AI That” campaign) underpin margin dollars over time .
Tariff impacts were “not material” to Q2 results; blended effective tariff exposure estimated ~16% with heavy vendor mitigation; U.S.+Mexico sourcing now ~25% of COGS (zero tariffs), China down to ~30–35% (half at 30% tariff; half at 20%) .
Capital returns remain consistent: Q2 dividends $201M and buybacks $65M; board declared a $0.95 quarterly dividend payable Oct 9, 2025 .

What Went Well and What Went Wrong

What Went Well
- Broad-based demand in gaming (Switch 2-led), computing, and mobile drove the first positive enterprise comp in three years (+1.6%); online comps +5.1% and online mix rose to 32.8% of Domestic revenue . “We delivered comparable sales growth of 1.6% in the second quarter, our highest growth in three years.” — Corie Barry, CEO .
- Execution tailwinds: strong vendor partnerships (vendor labor +~20% in 2H), AI PC assortment (125+ models; ~70% retail-exclusive), and operational improvements (FedEx as primary parcel carrier; data-driven sourcing cut costs, improved on-time delivery) .
- Marketplace launched mid-August (Mirakl) more than doubling online SKU count, expanding into select non-tech categories; expected positive OI contribution in FY26 even after startup costs .
What Went Wrong
- Mix headwind: outsized growth in lower-margin gaming/computing drove 30 bps y/y gross margin decline to 23.2%; Domestic GM down 10 bps to 23.4% .
- Category softness persisted in home theater and appliances; teams plan sharper pricing, assortment rebalancing and faster fulfillment to stabilize these businesses in 2H .
- Restructuring: $114M pre-tax in Q2 (labor/store optimization and Health-related impairments), following $109M in Q1; GAAP EPS fell to $0.87 on charges .

Financial Results

Metric	Q4 FY25	Q1 FY26	Q2 FY26	Q2 FY26 vs S&P Consensus
Revenue ($B)	13.95	8.77	9.44	9.23; Beat by $0.21B*
Adjusted Diluted EPS ($)	2.58	1.15	1.28	1.225; Beat by $0.06*
GAAP Diluted EPS ($)	0.54	0.95	0.87	—
Gross Margin %	20.9%	23.4%	23.2%	—
Adjusted Operating Income Rate %	4.9%	3.8%	3.9%	—
Enterprise Comparable Sales %	0.5%	(0.7%)	1.6%	—

Mix commentary: CFO cited 30 bps y/y gross margin pressure from lower-margin category mix (gaming, computing) .
Sequential context: Q2 revenue +7.6% q/q; adj OI rate +10 bps q/q vs .
Prior-year context: Q2 revenue +1.6% y/y; adj OI rate -20 bps y/y; diluted EPS down y/y due to restructuring .

Segment performance and category mix (y/y, Q2 FY26):

Segment	Revenue ($B)	Comp Sales %	Gross Margin %	Adjusted OI %	Notes
Domestic	8.70	1.1%	23.4%	4.0%	Online revenue $2.86B; 32.8% of Domestic sales
International	0.74	7.6%	21.8%	2.4%	Growth aided by Best Buy Express in Canada

Domestic category mix and comps (Q2 FY26):

Category	Mix	Comp
Computing & Mobile	45%	3.8%
Consumer Electronics	27%	(4.9%)
Appliances	12%	(8.5%)
Entertainment	8%	37.5%
Services	7%	(1.0%)
Other	1%	(6.3%)

Selected KPIs

KPI	Q4 FY25	Q1 FY26	Q2 FY26
Domestic Online Mix of Sales	39.5%	31.7%	32.8%
Restructuring Charges ($M)	(7)	109	114
Shareholder Returns ($M)	Div $200; Buybacks $215	Div $202; Buybacks $100	Div $201; Buybacks $65
Quarterly Dividend per Share	$0.95 (Mar)	$0.95 (Jul)	$0.95 (Oct 9)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY26	$41.4–$42.2B (Mar 4)	$41.1–$41.9B (May 29; reiterated Aug 28)	Lowered
Comparable Sales	FY26	0.0%–2.0% (Mar 4)	(1.0%)–1.0% (May 29; reiterated Aug 28)	Lowered
Adjusted OI Rate	FY26	4.2%–4.4% (Mar 4)	~4.2% (May 29; reiterated Aug 28)	Narrowed to ~4.2%
Adjusted EPS	FY26	$6.20–$6.60 (Mar 4)	$6.15–$6.30 (May 29; reiterated Aug 28)	Lowered/Narrowed
Adj. Tax Rate	FY26	~25% (Mar 4)	~25% (May 29; reiterated Aug 28)	Maintained
Capex	FY26	$700–$750M (Mar 4)	~$700M (May 29; reiterated Aug 28)	Tightened lower end
Q3 Color	Q3 FY26	—	Comps similar to Q2; adj OI rate ~3.7% (flat y/y)	—

Management notes sales trending toward the high end of guidance; prudence maintained due to tariff uncertainty .

Earnings Call Themes & Trends

Topic	Q4 FY25 (Nov–Feb)	Q1 FY26 (May)	Q2 FY26 (Aug)	Trend
AI/Tech initiatives	Strong computing; set stage for AI PCs; BB Ads expansion	AI search rollout planned; influencer storefronts; AI-PC momentum	“AI That” ad campaign; >125 AI PC models; 70% retail-exclusive	Improving
Supply chain	Lower supply chain costs INTL	Data-driven sourcing; on-time improvement	FedEx primary parcel; AGVs in DCs; cost savings	Improving
Tariffs/Macro	Guidance excluded tariffs (Mar)	Guidance cut to include tariffs; mitigation plan detailed	Q2 impact “not material”; blended effective ~16%; mitigations continuing	Stabilizing (managed)
Product performance	Computing strength, tablets up; gaming down in Q4	Computing/tablets/mobile up; TVs/appliances soft	Gaming (Switch 2), computing, mobile drove comps; TVs/appliances soft	Mixed: core growth, legacy softness
Retail Media & Marketplace	Set FY26 expansion goals	Onboarded DSP; non-endemic ads; Marketplace mid-year launch	Marketplace launched; OI accretive; Ads benefit GM (neutral OI in FY26)	Improving
Best Buy Health	Goodwill impairment in Q4	Restructuring charges; narrow focus	Additional restructuring; unmaterial charges expected rest of year	Restructuring ongoing
Mobile/carriers	—	Carrier model expansion; first positive comps in years	Expanding Verizon/AT&T in more stores; traffic/lift expected 2H	Improving

Management Commentary

“We delivered comparable sales growth of 1.6% in the second quarter, our highest growth in three years.” — Corie Barry, CEO .
“Adjusted operating income rate of 3.9% was 30 bps better than expected, largely driven by SG&A leverage from stronger sales; gross profit rate declined 30 bps due to mix.” — Matt Bilunas, CFO .
“Given the uncertainty of potential tariff impacts... we feel it is prudent to maintain the annual guidance... we do believe we are trending toward the higher end of our sales range.” — Matt Bilunas .
“We continue to expect Marketplace to have a positive impact on our operating income rate in fiscal 2026 even after startup costs.” — Corie Barry .
“Vendor labor investment to be approximately 20% higher than last year in the second half.” — Corie Barry .

Q&A Highlights

Outlook mechanics: Q3 comps to mirror Q2; AOI rate ~3.7%; August comps running low-single digits on back-to-school strength .
Tariffs: U.S.+Mexico ~25% of COGS (zero tariffs); China ~30–35% (half at 30%, half at 20%); blended effective ~16%; mitigation via manufacturing flexibility, cost negotiations, assortment changes; Q2 impact “not material” .
Gaming trajectory: Expect continued growth in Q3 and Q4 with Switch 2; handheld PC gaming also strong; planning supply accordingly .
Promotions: Breadth and depth higher y/y; balancing demand stimulation and margin control with vendor support .
Vendor partnerships: Increased vendor labor and shop-in-shop investments; supports sales and customer experience .
Restructuring cadence: Additional restructuring not expected to be material in the remainder of the year .

Estimates Context

Q2 FY26 actual vs S&P Global consensus: revenue $9.44B vs $9.23B; adjusted EPS $1.28 vs $1.225; EBITDA $576M vs $550M — broad-based beat. Values retrieved from S&P Global.

Metric	Q2 FY26 Actual	Q2 FY26 Consensus	Beat/Miss	Q3 FY26 Consensus	Q4 FY26 Consensus
Revenue ($B)	9.438	9.232*	Beat	9.592*	14.021*
Primary EPS ($)	1.28	1.225*	Beat	1.313*	2.536*
EBITDA ($M)	576*	550*	Beat	571*	917*

Values retrieved from S&P Global.

Implications: Company commentary implies Q3 comps like Q2 and AOI rate flat y/y; consensus embeds continued seasonal uplift into Q4 — watch gross margin mix if gaming/computing momentum persists .

Key Takeaways for Investors

Positive inflection in comps with a clean revenue/EPS beat; momentum into Q3 supported by back-to-school, Switch 2, and AI-PC upgrades; near-term trading skew favorable on sales cadence .
Mix remains the key swing factor: growth in gaming/computing supports sales but pressures margin; Retail Media and Marketplace should help offset GP pressure into 2H .
Guidance held but high-end sales bias; tariff risk managed via sourcing diversification and vendor mitigation — monitor policy headlines but Q2 impact was immaterial .
Category stabilization plan in TVs/appliances (pricing, assortment, specialty labor, large-item fulfillment) is critical for 2H margin quality .
Structural growth levers (Marketplace, Ads, carrier model, AI search, FedEx logistics) create medium-term OI expansion optionality beyond seasonal cycles .
Capital returns are consistent (4%+ dividend yield contextually) with 2H buybacks targeted (~$300M FY26) supporting downside .
Watch Q3: comps vs cadence, gross margin mix, and early indications of Marketplace/Ads monetization; any shift in Windows 11 upgrade pace could drive upside in AI PCs .

Appendix: Additional Q2 Details

Restructuring: $114M in Q2 (incl. ~$40M asset impairments) to redirect resources; trailing two quarters total $223M .
Shareholder returns: Q2 dividends $201M; buybacks $65M; dividend declared $0.95 payable Oct 9, 2025 .
Segment detail: International comps +7.6% with new Best Buy Express locations in Canada; International GM 21.8% (down 210 bps y/y) on product margin rates .

Citations:
Q2 FY26 8-K and press release: .
Q2 FY26 earnings call: .
Q1 FY26 press/call: .
Q4 FY25 press/8-K: .
Marketplace & dividend press: .

BEST BUY CO INC (BBY)·Q2 2026 Earnings Summary