Executive Summary

Q3 2025 delivered an EPS and revenue beat versus Wall Street: diluted EPS $0.85 vs $0.831 consensus and revenue $4.706B vs $4.691B consensus; comps rose 5.6% and gross margin expanded to 51.9% *. Values retrieved from S&P Global.
Management raised FY 2025 comparable store sales guidance to 4.0–5.0% and reaffirmed gross margin and operating margin ranges; EPS guidance increased to $2.90–$3.00 .
Free cash flow and operating cash flow guidance were lowered due to accelerated payment of transferable renewable energy tax credits; the effective tax rate was reduced to 21.6%, partially offsetting the cash flow impact .
Professional sales drove outperformance (pro comps “just over 10%”), while DIY saw modest ticket count pressure amid tariff-driven price levels; pricing remained rational industry-wide .
Capital deployment remains active: 4.3M shares repurchased in Q3 ($420M) and store/DC expansion continues, including a new Stafford, VA distribution center and a 2026 target of 225–235 net new stores .

What Went Well and What Went Wrong

What Went Well

Professional side strength: “comparable store sales of just over 10%” with broad-based share gains and strong pro ticket count growth .
Margin execution: Q3 gross margin 51.9% (+27 bps YoY) on prudent supply chain management and distribution productivity; operating margin 20.7% (vs 20.5% LY) .
Guidance upgrades: FY comps raised to 4.0–5.0%, EPS to $2.90–$3.00; tax rate lowered to 21.6%, enhancing earnings power .

What Went Wrong

DIY pressure: management saw modest deferral of larger-ticket DIY jobs amid higher price levels; transaction counts pressured as the quarter progressed .
SG&A inflation: per-store SG&A growth ~4% at the top end; full-year SG&A expected at or slightly above the top end (3.5%) driven by medical/casualty insurance .
Free cash flow and operating cash flow guidance reduced due to timing of accelerated tax-credit payments; inventory per store up 10% YoY to $858K as network optimization and DC stocking progressed .

Financial Results

Headline KPIs vs prior year, prior quarter, and estimates

Metric	Q3 2024	Q2 2025	Q3 2025
Revenue ($USD Billions)	$4.364	$4.525	$4.706
Diluted EPS ($USD)	$0.76	$0.78	$0.85
Revenue Consensus ($USD Billions)	—	—	$4.691*
EPS Consensus ($USD)	—	—	$0.831*
Gross Margin %	51.6%	51.4%	51.9%
Operating Margin %	20.5%	20.2%	20.7%
Net Income Margin %	15.2%	14.8%	15.4%

Notes: Q3 2025 beat consensus on both EPS and revenue. Values retrieved from S&P Global.

Comparable store sales and customer mix

Metric	Q1 2025	Q2 2025	Q3 2025
Comparable Store Sales Growth (%)	3.6%	4.1%	5.6%

Revenue Disaggregation ($USD Millions)	Q3 2024	Q3 2025
Sales to DIY customers	$2,219.7	$2,304.8
Sales to Professional customers	$2,043.4	$2,307.8
Other sales and adjustments	$101.3	$93.1
Total sales	$4,364.4	$4,705.7

Operational, cash flow, and capital deployment

KPI	Q3 2024	Q3 2025
Free Cash Flow ($USD Millions)	$500.0	$297.0
Net Cash Provided by Operating Activities ($USD Millions)	$772.0	$616.5
Inventory Turnover (LTM)	1.7	1.6
Average Inventory per Store ($USD Thousands)	$781	$858
Accounts Payable to Inventory (%)	129.4%	125.9%
Total Ending Store Count	6,291	6,538
Sales per Weighted-Average Sq Ft ($USD)	$89.17	$90.80
Shares Repurchased in Quarter (Millions)	—	4.3
Buyback Spend in Quarter ($USD Millions)	—	$420

Guidance Changes

Metric	Period	Previous Guidance (Q2 release)	Current Guidance (Q3 release)	Change
Net new store openings	FY 2025	200–210	200–210	Maintained
Comparable store sales	FY 2025	3.0%–4.5%	4.0%–5.0%	Raised
Total revenue	FY 2025	$17.5B–$17.8B	$17.6B–$17.8B	Slightly raised low end
Gross profit % of sales	FY 2025	51.2%–51.7%	51.2%–51.7%	Maintained
Operating income % of sales	FY 2025	19.2%–19.7%	19.2%–19.7%	Maintained
Effective tax rate	FY 2025	22.3%	21.6%	Lowered
Diluted EPS	FY 2025	$2.85–$2.95	$2.90–$3.00	Raised
Net cash from operating activities	FY 2025	$2.8B–$3.2B	$2.6B–$3.0B	Lowered
Capital expenditures	FY 2025	$1.2B–$1.3B	$1.1B–$1.2B	Lowered
Free cash flow (non-GAAP)	FY 2025	$1.6B–$1.9B	$1.5B–$1.8B	Lowered

Rationale: reduced operating cash flow and FCF due to accelerated timing of transferable renewable energy tax credits; capex lowered on timing of store/DC projects; tax rate reduced reflecting benefits from the accelerated payment .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
Tariffs and pricing	Minimal impact in Q1; rational pricing; 1.5% same-SKU inflation in Q2; cautious on consumer response	Lion’s share of cost impacts seen; same-SKU inflation “just over 4%”; anticipate mid-single-digit same-SKU benefit in Q4; price elasticity modest, mainly DIY	Inflation tailwind; cautious on DIY elasticity
Supply chain health and sourcing	Strong supplier partnerships; diversification away from China; new DC plans (Fort Worth, Stafford)	Supply chain “healthiest since pandemic”; Stafford DC coming online; continued DC expansion; monitoring supplier (First Brands ~3% of COGS)	Capacity expanding; supplier risk manageable
Pro vs DIY mix	Pro-led growth; DIY low-single-digit with traffic volatility in June	Pro comps “just over 10%”; DIY low-single-digit with larger-ticket deferral; no material trade-down seen	Pro strength sustained; DIY cautious
SG&A and cost pressures	Q1 SG&A per-store 4.1%; FY guide 2%–2.5%; inflation in medical/casualty	Q3 SG&A per-store growth ~4%; FY SG&A per-store slightly above top end (3.5%); continued inflation	Elevated vs historical
Inventory strategy	+5% planned in 2025; turns 1.6; AP/Inv ~126–127%	Inventory per store $858K (+10% YoY); AP/Inv 126%; Stafford DC stocking contributed	Higher inventory to support availability
Tax rate and cash flow	FY tax rate 22.3% (Q2); FCF $1.6–$1.9B	Tax rate 21.6%; FCF lowered to $1.5–$1.8B; OC lowered due to accelerated tax credit payment	Tax rate benefit; cash flow timing headwind
Geographic expansion	Announced Fort Worth DC; Stafford ramp; growth across 34 states, PR, Mexico	2026 store target 225–235; Mid-Atlantic expansion catalyst; Canada expansion begins in 2026	Accelerating unit growth

Management Commentary

“Our professional business continues to be the more significant driver… with an increase in comparable store sales of just over 10%.”
“The contribution to same-skew inflation during the third quarter… was just over 4%… we saw a significant ramp in tariff-driven acquisition cost increases and made appropriate adjustments to selling prices.”
“For the third quarter, our gross margin of 51.9% was up 27 basis points… in line with our expectations.”
“We expect our full-year operating margin to come within our guidance range of 19.2% to 19.7%.”
“For the full year of 2025, we now expect an effective tax rate of 21.6% versus our prior expectation of 22.3%.”
“Free cash flow for the first nine months of 2025 was $1.2 billion… we have updated our expected free cash flow guidance to a range of $1.5 to $1.8 billion.”
“Capital expenditures… are slightly below our expectations… we are reducing our full-year capital expenditure guidance by $100 million to a range of $1.1 to $1.2 billion.”

Q&A Highlights

Tariff inflation and elasticity: Management expects mid-single-digit same-SKU benefit in Q4; DIY larger-ticket deferrals possible, but no material trade-down observed .
Supplier exposure: First Brands ~3% of COGS; diversified and multi-sourced lines across DCs mitigate risk; strong engagement with alternative suppliers .
Inventory posture and DC stocking: Elevated inventory per store reflects execution of availability strategy and stocking for Stafford, VA DC; LIFO mitigates pure price effects on balances .
Unit growth outlook: 2026 target of 225–235 net new stores; opportunity-rich Mid-Atlantic and Canada expansion plans .
Industry pricing rationality: Pricing spreads remain consistent with historic levels despite tariffs; O’Reilly’s competitive pricing power supported by service and availability .

Estimates Context

Q3 2025 actual vs consensus: EPS $0.85 vs $0.831 consensus; revenue $4.706B vs $4.691B consensus; EPS estimates (26), revenue estimates (23)*. Values retrieved from S&P Global.
Implication: modest beats on both lines; EPS aided by tax-rate reduction and operating leverage; consensus may need to lift FY EPS and comps assumptions, while adjusting cash flow forecasts for tax-credit timing *.

Key Takeaways for Investors

Quality beat: EPS and revenue exceeded consensus alongside gross margin expansion, with pro-led growth offsetting DIY softness *.
Guidance constructive: comps and EPS raised; margin ranges maintained—signals confidence in execution amid tariff dynamics .
Watch cash flow optics: lowered OC and FCF guidance on tax-credit timing could pressure near-term sentiment despite underlying fundamentals .
DIY elasticity risk manageable: modest deferral in larger-ticket jobs; no material trade-down observed; industry pricing rational .
Supply chain advantage: “healthiest since pandemic,” new DC capacity (Stafford) and future Fort Worth DC underpin share capture, especially in Mid-Atlantic .
Capital allocation steady: buybacks continue ($420M in Q3) within leverage target (<2.5x adjusted debt/EBITDA) .
Medium-term thesis: accelerating unit growth (225–235 stores in 2026) and geographic expansion (Canada start) provide durable growth vectors .

Bolded beats/misses above denote significant surprises. All non-GAAP references (free cash flow) follow company definitions and reconciliations provided in the releases . Values marked with an asterisk (*) are retrieved from S&P Global.

O REILLY AUTOMOTIVE INC (ORLY)·Q3 2025 Earnings Summary