Executive Summary

Inline quarter with modest upside on core operations: revenue $4.53B (+6% YoY) and diluted EPS $0.78 (+11% YoY), with gross margin 51.4% (+67 bps YoY) and operating margin 20.2% (flat YoY) .
Comparable store sales rose 4.1% (pro >7% comps; DIY low single-digit), as professional ticket-count strength offset softer DIY traffic in June; same‑SKU inflation ran just under ~1.5% on early tariff effects .
Guidance raised: FY25 comps 3.0–4.5% (from 2.0–4.0%) and revenue $17.5–$17.8B (from $17.4–$17.7B); EPS guided to $2.85–$2.95 (split‑adjusted), gross margin and operating margin ranges unchanged; tax rate trimmed to 22.3% .
Stock narrative catalysts: raised comps/revenue guide, resilient gross margin with tariff‑timing tailwind, continued pro share gains, and transparency on SG&A inflation and tariff risk management .

What Went Well and What Went Wrong

What Went Well

Pro outperformance and balanced comp: “professional…increase in comparable store sales exceeding 7%,” while DIY grew low single‑digit; comps +4.1% overall .
Margin execution: gross margin 51.4% (+67 bps YoY) benefited from supply chain productivity and favorable timing as pricing actions preceded some tariff‑driven cost increases .
Strategic expansion: announced Fort Worth (Haslett, TX) DC (target service ~350 stores) and nearing completion of Stafford, VA DC to unlock Mid‑Atlantic/Northeast growth capacity .

What Went Wrong

SG&A pressure: SG&A rose to 31.2% of sales (from 30.5%) on inflation and medical/casualty/self‑insurance costs; management raised FY25 average SG&A per store growth to 3.0–3.5% .
DIY softness and discretionary categories: June DIY traffic saw pressure; discretionary categories remain sluggish, indicating a cautious consumer backdrop .
Free cash flow timing headwind: Q2 FCF fell to $449M from $718M YoY, with YTD FCF $904M vs $1.16B prior year; management cited timing of renewable energy tax credit payments .

Financial Results

Core P&L vs prior periods

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue ($B)	$4.27	$4.14	$4.53
Gross Margin (%)	50.7%	51.3%	51.4%
Operating Income ($M)	$863	$741	$914
Operating Margin (%)	20.2%	17.9%	20.2%
Net Income ($M)	$623	$538	$669
Diluted EPS ($)	$0.70	$0.62 (pre‑split $9.35)	$0.78

Notes: Q1 2025 EPS shown split‑adjusted for the 15‑for‑1 split completed June 10, 2025; figure derived from reported $9.35/15 with split disclosure .

Q2 2025 Actuals vs S&P Global Consensus

Metric	Consensus	Actual	Surprise	#Estimates
Revenue ($B)	$4.5347*	$4.5251	-0.2%*	24*
EPS ($)	$0.7822*	$0.78	-$0.00*	26*

Values marked with * retrieved from S&P Global.

Segment/Channel Mix (Sales)

Sales ($M)	Q2 2024	Q2 2025
DIY	$2,152.7	$2,228.6
Professional	$2,012.2	$2,195.8
Other/Adjustments	$107.4	$100.7
Total	$4,272.2	$4,525.1

KPIs

KPI	Q2 2024	Q2 2025
Comparable store sales growth	+2.3%	+4.1%
Same‑SKU inflation (quarter commentary)	n/a	just under ~1.5%
Free cash flow (quarter, $M)	$718.2	$448.8
Inventory per store ($K)	$767	$833
AP to Inventory (%)	130.0%	127.0%
Effective tax rate (quarter)	23.2%	22.4%
Sales/weighted‑avg sq ft ($)	$87.88	$88.76
Ending store count	6,244	6,483

Trend snapshot (revenue and split‑adjusted EPS):

Q4 2024: Revenue $4.096B; EPS $0.63 (pre‑split $9.50)
Q1 2025: Revenue $4.137B; EPS $0.62 (pre‑split $9.35)
Q2 2025: Revenue $4.525B; EPS $0.78

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Comparable store sales	FY25	2.0%–4.0%	3.0%–4.5%	Raised
Total revenue	FY25	$17.4B–$17.7B	$17.5B–$17.8B	Raised
Gross margin (%)	FY25	51.2%–51.7%	51.2%–51.7%	Maintained
Operating margin (%)	FY25	19.2%–19.7%	19.2%–19.7%	Maintained
Effective tax rate	FY25	22.4%	22.3%	Lowered
Diluted EPS (split‑adj)	FY25	$2.86–$2.89 (from $42.90–$43.40 pre‑split)	$2.85–$2.95	Slightly raised/narrowed (midpoint +~1%)
Net cash from ops	FY25	$2.8B–$3.2B	$2.8B–$3.2B	Maintained
Capital expenditures	FY25	$1.2B–$1.3B	$1.2B–$1.3B	Maintained
Free cash flow	FY25	$1.6B–$1.9B	$1.6B–$1.9B	Maintained
Net new stores	FY25	200–210	200–210	Maintained
Avg SG&A/store growth	FY25	n/a	3.0%–3.5%	Introduced (raised vs internal outlook)

Note: EPS comparability shown on split‑adjusted basis; company completed 15‑for‑1 split on June 10, 2025 .

Earnings Call Themes & Trends

Topic	Q4 2024 (Q-2)	Q1 2025 (Q-1)	Q2 2025 (Current)	Trend
Tariffs/pricing	No explicit tariff impact highlighted; set initial FY25 guide	Maintained comps 2–4%; called tariff landscape “fluid,” difficult to predict impact	Same‑SKU inflation just under ~1.5%; pricing timing aided GM; cautious on consumer/tariff shocks	Increasing focus; managed but watchful
Supply chain & distribution	Relocated ATL DC in Q4; network build‑out continued	Continued expansion and store openings	New Fort Worth DC; Stafford, VA DC ramping for Mid‑Atlantic growth	Capacity expanding; unlocks regional growth
Consumer/macro	Strong Q4 comps; steady non‑discretionary demand	Solid start; uncertainty from tariffs	DIY traffic softened in June; discretionary weak; consumer cautious but resilient	Stable core demand; pressure at low end
Category mix	n/a	n/a	Maint./undercar strong; discretionary soft	Mix favoring non‑discretionary
SG&A/inflation	Self‑insurance reserve charge in Q4 impacted EPS by $0.46 (pre‑split)	n/a	SG&A/store growth raised to 3–3.5% on medical/casualty and inflation	Persistent cost inflation
Technology/process	n/a	n/a	Ongoing modernization to equip teams; tools/tech to enhance service	Steady investment

Management Commentary

“Our professional business was once again the more significant driver…with an increase in comparable store sales exceeding 7%, fueled by continued strong ticket count growth.” — Brad Beckham, CEO
“Within the second quarter, we did realize a benefit from [pricing vs cost] timing…which contributed to our positive gross margin results.” — Brent Kirby, President
“We are revising our full‑year guidance for average SG&A per store growth to a range of 3%–3.5%.” — Brent Kirby, President
“We…acquired a facility in Haslett, Texas…our 33rd distribution center…expected capacity to serve 350 stores.” — Brent Kirby, President
“We have updated our EPS guidance to a range of $2.85–$2.95…an increase of approximately 1% from the midpoint of our previous guidance (split‑adjusted).” — Brad Beckham, CEO

Q&A Highlights

Tariffs and pricing cadence: Management expects rational industry behavior; timing differences can temporarily help or hurt margins; balancing customer impact while working with suppliers .
SG&A outlook: Back‑half SG&A/store growth embedded at ~3–4% run‑rate (with Q4 comparison benefit), pressures include medical/casualty and inflation; willingness to spend to support share capture and service levels .
Consumer elasticity: Majority of sales are non‑discretionary; risks mainly from broader wallet pressure causing deferrals/trade‑downs in discretionary/deferrable work; shocks historically short‑lived .
Competitive/pricing spreads: Not seeing unusual changes vs history; responses vary by category and timing but market remains rational .
Distribution capacity as share catalyst: Virginia DC to unlock Mid‑Atlantic/Northeast growth capacity; Fort Worth DC to relieve constraints in South Central region .

Estimates Context

Q2 2025 printed essentially in line with consensus: revenue $4.525B vs $4.535B consensus (−0.2%) and EPS $0.78 vs $0.782 consensus (−$0.00). Guidance raised for comps/revenue and slightly for EPS midpoint, which may drive modest upward revisions to H2 revenue and EPS, partly offset by higher SG&A/store growth; gross margin range unchanged given tariff timing uncertainty .
Values marked with * in the estimates table were retrieved from S&P Global.

Key Takeaways for Investors

Pro remains the growth engine (>7% comps) with continued share gains; DIY is positive but choppy, with June traffic softness and discretionary weakness .
Margin execution was solid (GM +67 bps YoY) aided by tariff/pricing timing; management explicitly cautions against extrapolating H2 gross margin tailwinds as tariff cost timing catches up .
FY25 outlook strengthened: comps and revenue raised; EPS midpoint nudged higher; tax rate trimmed; capex/FCF unchanged—signals confidence in top‑line durability with balanced caution on costs .
SG&A inflation is the primary headwind; updated 3–3.5% avg SG&A/store growth embeds cost pressure and investment to protect service and share capture .
Capacity unlocks are a medium‑term catalyst: Fort Worth and Stafford DCs support accelerated store growth and service in high‑opportunity regions (Mid‑Atlantic/Northeast, South Central) .
Near‑term trading setup: Raised comps/revenue guide and resilient margins are supportive, but tariff/consumer uncertainty and SG&A inflation could cap multiple expansion until H2 cadence/progress on costs becomes clearer .
Cash return remains robust: Q2 buybacks of $617M (avg price ~$90.71 split‑adjusted) with $1.16B authorization remaining; FCF seasonality and timing drove YoY Q2 FCF decline .

Source Documents Read

Q2 2025 8‑K and press release (financials, guidance, KPIs)
Q2 2025 earnings call transcript (prepared remarks and Q&A)
Prior quarters for trend/guidance baseline: Q1 2025 press release ; Q4 2024 press release

O REILLY AUTOMOTIVE INC (ORLY)·Q2 2025 Earnings Summary