---
title: "Earnings"
author: "DeepValues Research"
publisher: "DeepValues Research (DeepValues / LuLu Ventures LLC)"
type: "Research article"
ticker: "COST"
company: "Costco Wholesale"
sector: "Consumer Defensive"
industry: "Discount Stores"
wikidata: "https://www.wikidata.org/wiki/Q715583"
wikipedia: "https://en.wikipedia.org/wiki/Costco"
date: "2026-02-19"
language: "en"
section: "Company Research"
answer: "DeepValues Research published “Earnings” on Costco Wholesale (COST) on Feb 19, 2026. Key differences Accrual vs. cash: Gross, operating and net profits are accrual‑accounting numbers; FCF and owner's earnings are cash‑based."
canonical_url: "https://research.deepvalues.ai/company/cost/earnings/"
markdown_url: "https://research.deepvalues.ai/company/cost/earnings/index.md"
license: "CC BY 4.0"
license_url: "https://creativecommons.org/licenses/by/4.0/"
cite_as: "DeepValues Research, Earnings, https://research.deepvalues.ai/company/cost/earnings/"
publisher_url: "https://deepvalues.ai"
app: "https://deepvalues.ai"
api: "https://app.deepvalues.ai/developers"
data_note: "Reports are dated snapshots. Current data via the DeepValues API: https://app.deepvalues.ai/developers"
disclaimer: "Educational research, not investment advice."
---
### **1. Five ways a company measures what it really earns**
| **Metric** | **Where it sits on the financials** | **How it's calculated** | **What it tells you** | **Common caveats** |
|-------------------------------|---------------------------------------|-------------------------------------------------------------------------------------|---------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Gross profit** | top of the income statement | Revenue - Cost of Goods Sold (COGS) | Pricing power and direct‑cost efficiency | Ignores R&D, marketing, overhead |
| **Operating profit (EBIT)** | middle of the income statement | Gross profit - operating expenses (SG&A, R&D, D&A, other operating items) | Core profitability of the business model, before financing & taxes | Still accrual‑based; excludes capital intensity |
| **Net earnings (Net income)** | "bottom line" of the income statement | Operating profit - interest ± other gains/losses - taxes | Ultimate accounting profit available to common shareholders | Includes many non‑cash items (goodwill impairments, fair‑value marks, etc.) ([Investopedia](https://www.investopedia.com/ask/answers/101314/what-are-differences-between-gross-profit-and-net-income.asp?utm_source=chatgpt.com)) |
| **Free cash flow (FCF)** | cash‑flow statement | Operating cash flow - capital expenditures | Real cash left for buybacks, dividends, debt service & M&A | Very volatile for working‑capital‑heavy firms; growth cap‑ex treated the same as maintenance |
| **Owner's earnings**(Buffett) | economic concept, not GAAP | Net income + non‑cash charges - *maintenance*cap‑ex ± working‑capital normalisation | Sustainable cash that could be taken out *without* hurting competitive position | Company must estimate "maintenance" cap‑ex-rarely disclosed; analysts usually approximate it with long‑run average cap‑ex |
> **Key differences
> ***Accrual vs. cash*: Gross, operating and net profits are accrual‑accounting numbers; FCF and owner's earnings are cash‑based.
> *Scope*: Each step downward includes more kinds of costs, so the figures generally shrink (gross > operating > net > owner's earnings).
> *Signal*:
> • Rising **gross** margins signal pricing power or lower COGS.
> • Expanding **operating** margins show cost discipline and scale.
> • Higher **net** margins reflect efficient financing & tax structure.
> • Strong, growing **FCF / owner's earnings** underpin dividends, buybacks and debt reduction.
### **2. How the current S&P 500 heavyweights stack up**
*(latest fiscal year: FY‑2024 for most, FY‑2025 for Nvidia; figures in **billions USD**)*
| **Company (Ticker)** | **Gross Profit** | **Operating Profit** | **Net Income** | **Free Cash Flow** | **3‑yr trajectory** |
|----------------------------|------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------|
| Microsoft (MSFT) | **171.0**([Macrotrends](https://www.macrotrends.net/stocks/charts/MSFT/microsoft/gross-profit?utm_source=chatgpt.com)) | **109.4**([Macrotrends](https://www.macrotrends.net/stocks/charts/MSFT/microsoft/operating-income?utm_source=chatgpt.com)) | **88.1**([Macrotrends](https://www.macrotrends.net/stocks/charts/MSFT/microsoft/net-income?utm_source=chatgpt.com)) | **74.1**([Macrotrends](https://www.macrotrends.net/stocks/charts/MSFT/microsoft/free-cash-flow?utm_source=chatgpt.com)) | New record; 5‑yr CAGR \~12 % across all four metrics |
| Nvidia (NVDA)\* | **97.9**([Macrotrends](https://www.macrotrends.net/stocks/charts/NVDA/nvidia/gross-profit?utm_source=chatgpt.com)) | **81.5**([Macrotrends](https://www.macrotrends.net/stocks/charts/NVDA/nvidia/operating-income?utm_source=chatgpt.com)) | **72.9**([Macrotrends](https://www.macrotrends.net/stocks/charts/NVDA/nvidia/net-income?utm_source=chatgpt.com)) | **60.9**([Macrotrends](https://www.macrotrends.net/stocks/charts/NVDA/nvidia/free-cash-flow?utm_source=chatgpt.com)) | Hyper‑growth: gross profit up **7×**since FY‑2022; margins \~75 % |
| Apple (AAPL) | **180.7**([Macrotrends](https://macrotrends.net/stocks/charts/AAPL/apple/gross-profit?utm_source=chatgpt.com)) | **123.2**([Macrotrends](https://macrotrends.net/stocks/charts/AAPL/apple/operating-income?utm_source=chatgpt.com)) | **96.2**([Macrotrends](https://www.macrotrends.net/stocks/charts/AAPL/apple/income-after-taxes?utm_source=chatgpt.com)) | **108.8**([Macrotrends](https://www.macrotrends.net/stocks/charts/AAPL/apple/free-cash-flow?utm_source=chatgpt.com)) | Stable; gross margin holds \~44 % while FCF keeps >$100 B |
| Amazon (AMZN) | **311.7**([Macrotrends](https://macrotrends.net/stocks/charts/AMZN/amazon/gross-profit?utm_source=chatgpt.com)) | **68.6**([Macrotrends](https://www.macrotrends.net/stocks/charts/AMZN/amazon/operating-income?utm_source=chatgpt.com)) | **59.2**([Macrotrends](https://www.macrotrends.net/stocks/charts/AMZN/amazon/net-income?utm_source=chatgpt.com)) | **38.2**([Macrotrends](https://www.macrotrends.net/stocks/charts/AMZN/amazon/free-cash-flow?utm_source=chatgpt.com)) | Swung from negative FCF in 2022 to $38 B; operating margin doubled to 10 % |
| Alphabet (GOOGL) | **203.7**([Macrotrends](https://www.macrotrends.net/stocks/charts/GOOG/alphabet/gross-profit?utm_source=chatgpt.com)) | **112.4**([Macrotrends](https://www.macrotrends.net/stocks/charts/GOOG/alphabet/operating-income?utm_source=chatgpt.com)) | **100.1**([Macrotrends](https://www.macrotrends.net/stocks/charts/GOOGL/alphabet/net-income?utm_source=chatgpt.com)) | **72.8**([Macrotrends](https://www.macrotrends.net/stocks/charts/GOOGL/alphabet/free-cash-flow?utm_source=chatgpt.com)) | Re‑accelerating after 2022 dip; record profits while AI cap‑ex rises |
| Meta Platforms (META) | **134.3**([Macrotrends](https://www.macrotrends.net/stocks/charts/META/meta-platforms/gross-profit?utm_source=chatgpt.com)) | **69.4**([Macrotrends](https://www.macrotrends.net/stocks/charts/META/meta-platforms/operating-income?utm_source=chatgpt.com)) | **62.4**([Macrotrends](https://www.macrotrends.net/stocks/charts/META/meta-platforms/net-income?utm_source=chatgpt.com)) | **54.1**([Macrotrends](https://www.macrotrends.net/stocks/charts/META/meta-platforms/free-cash-flow?utm_source=chatgpt.com)) | Cost‑cuts drove net margin from 19 % (2022) to 38 % |
| Broadcom (AVGO) | **32.5**([Macrotrends](https://www.macrotrends.net/stocks/charts/AVGO/broadcom/gross-profit?utm_source=chatgpt.com)) | **13.5**([Macrotrends](https://macrotrends.net/stocks/charts/AVGO/broadcom/operating-income?utm_source=chatgpt.com)) | **5.9**([Macrotrends](https://www.macrotrends.net/stocks/charts/AVGO/broadcom/net-income?utm_source=chatgpt.com)) | **19.4**([Macrotrends](https://www.macrotrends.net/stocks/charts/AVGO/broadcom/free-cash-flow?utm_source=chatgpt.com)) | VMware deal lifts gross profit 32 %, but integration hits net |
| Tesla (TSLA) | **17.45**([Macrotrends](https://macrotrends.net/stocks/charts/TSLA/tesla/gross-profit?utm_source=chatgpt.com)) | **9.6** (EBIT)† | **7.13**([Macrotrends](https://www.macrotrends.net/stocks/charts/TSLA/tesla/net-income?utm_source=chatgpt.com)) | **3.58**([Macrotrends](https://www.macrotrends.net/stocks/charts/TSLA/tesla/free-cash-flow?utm_source=chatgpt.com)) | Gross margin has fallen from 29 % (2022) to <18 % as price cuts bite |
| Berkshire Hathaway (BRK.B) | n/a‡ | **118.1**(operating) ([Macrotrends](https://www.macrotrends.net/stocks/charts/BRK.B/berkshire-hathaway/operating-income?utm_source=chatgpt.com)) | **89.0**([Macrotrends](https://www.macrotrends.net/stocks/charts/BRK.B/berkshire-hathaway/net-income?utm_source=chatgpt.com)) | **11.6**([Macrotrends](https://www.macrotrends.net/stocks/charts/BRK.B/berkshire-hathaway/free-cash-flow?utm_source=chatgpt.com)) | Operating earnings up 27 % YoY; FCF lower after heavy cap‑ex & insurance float growth |
| JPMorgan Chase (JPM) | **177.6**([Macrotrends](https://www.macrotrends.net/stocks/charts/JPM/jpmorgan-chase/gross-profit?utm_source=chatgpt.com)) | n/a‡ | **56.9**([Macrotrends](https://www.macrotrends.net/stocks/charts/JPM/jpmorgan-chase/net-income?utm_source=chatgpt.com)) | **-42.0**(working‑capital swing) ([Macrotrends](https://www.macrotrends.net/stocks/charts/JPM/jpmorgan-chase/free-cash-flow?utm_source=chatgpt.com)) | Record profits on higher rates; FCF not meaningful for banks |
\*Nvidia's fiscal year ends late‑January 2025.
†Tesla's latest EBIT from investor filings (margin \~8 %).
‡For conglomerates & banks, "gross" and "operating" definitions differ; analysts focus on operating earnings (BRK) or net interest margin (JPM).
### **3. Company‑by‑company pulse‑check**
- **Microsoft** - Cloud & AI keep gross margin near an all‑time‑high 69 %. FCF covers \~84 % of net income-a very "clean" conversion, signalling ample room for buybacks and a rising dividend.
- **Nvidia** - Every metric is in hyper‑growth mode: gross profit, operating profit and FCF have risen >5× in two years, driven by AI datacentre GPUs. Margins above 75 % give it a cash‑machine profile unusual for chip makers.
- **Apple** - Revenue is flat, yet FCF topped **$100 B** for the third straight year thanks to services mix and tight working‑capital cycles. Owner's earnings ≈ FCF because maintenance cap‑ex is a small slice of cash flow.
- **Amazon** - AWS and advertising lifted gross profit to **$312 B** while head‑count and fulfilment cuts doubled operating margin. Positive FCF is back after the pandemic‑driven warehouse build‑out.
- **Alphabet** - Operating income rebounded to **$112 B**; despite record AI cap‑ex, Alphabet still minted **$73 B** of FCF-evidence that the ad engine funds its "other bets."
- **Meta** - Ruthless cost control pushed net margin to \~38 %, even as Reality Labs losses persist. FCF now runs ahead of cap‑ex by nearly **$20 B**.
- **Broadcom** - VMware acquisition reset the P&L (one‑off charges), so net income dipped, but underlying FCF hit a record **$19 B** as AI networking chips take off.
- **Tesla** - Price cuts to defend share sliced gross margins by \~11 ppt in two years; net income has halved and FCF fell below **$4 B**. High growth cap‑ex means owner's earnings are smaller still-an early‑cycle warning sign.
- **Berkshire Hathaway** - Operating earnings, Buffett's preferred profit yard‑stick, set a record **$118 B**. Insurance float and higher rates helped; reported net swings with unrealised equity gains.
- **JPMorgan** - Net income crossed **$57 B**, its best ever, as NIM widened. FCF is negative because bank cash‑flow statements treat deposit inflows/outflows as working capital-net income is the cleaner profitability gauge here.
### **4. Take‑aways for investors**
1. **Gross‑to‑FCF "cascade"**: Companies that preserve a high share of gross profit all the way down to FCF (Microsoft, Nvidia, Apple) have the widest strategic optionality and lower need for outside capital.
2. **Growth vs. durability**: Nvidia's 55 % net margin is exhilarating-but also the most cyclical. Apple's and Microsoft's steadier margins signal *durable competitive advantage*.
3. **Watch margin direction**: Falling gross margins at Tesla and Broadcom foreshadow the profitability pressure you later see in net earnings and FCF.
4. **Owner's earnings matter most when cap‑ex is heavy**: For Tesla or Amazon (logistics), subtracting *maintenance*cap‑ex gives a truer picture than raw FCF; for the software‑heavy giants, FCF already approximates owner's earnings.
5. **Banks/insurers need special lenses**: Net interest margin (JPM) and underwriting plus investment income (Berkshire) are better "operating profit" proxies than the manufacturing‑style metrics used for tech and retail names.
**Bottom line:
**The *Magnificent Tech* names are not only the biggest in the S&P 500-they are also generating record cash after a fresh wave of AI‑driven cap‑ex. Nvidia leads in growth; Apple and Microsoft lead in sheer cash harvest. Amazon and Meta have repaired margins impressively, while Tesla shows how quickly those margins can compress in a volume‑driven industry. For long‑term, value‑oriented analysis, track **owner's earnings** alongside headline profits-the metric Buffett uses to judge whether today's record numbers really translate into wealth for shareholders.