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Will Costco's AI Search Growth Become a Meaningful Sales Catalyst?
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Key Takeaways
Costco's AI search traffic grew at a triple-digit pace in fiscal Q3 2026, though volume remains low.
AI search delivers Costco's highest conversion rate across all traffic directed to its website.
Digitally enabled comparable sales rose 21.5%, while e-commerce site and app traffic climbed 37%.
Costco Wholesale Corporation (COST - Free Report) is seeing signs that artificial intelligence could become a meaningful new traffic source for its e-commerce business. In the third quarter of fiscal 2026, traffic from AI search grew at a triple-digit pace, though the company noted that volume remains low. This activity boasts the highest conversion rate of all traffic directed to the company’s website.
Costco is working to improve how its merchandise is understood and surfaced by large language models. The aim is to make Costco’s combination of price, quality and included services more visible when consumers use AI tools to compare products. This could be particularly useful for merchandise where the full value is difficult to communicate through a conventional search result.
Costco highlighted appliances and tires as examples. Appliance pricing can include delivery, installation and haul-away, while tires can come with installation, road-hazard protection and nitrogen. AI search can potentially capture these added benefits more effectively and give shoppers a fuller view of the total offer.
The broader digital backdrop also supports the initiative. Digitally enabled comparable sales increased 21.5% in the third quarter, while e-commerce site and app traffic rose 37%.
Costco remains in the initial stages of this effort. If AI-driven traffic continues to scale while maintaining strong conversion, it could become an increasingly important contributor to digital sales growth.
How Does Costco Stack Up Against Its Industry?
Costco, which competes with Dollar General Corporation (DG - Free Report) and Target Corporation (TGT - Free Report) , has seen its shares drop 7.8% over the past three months compared with the industry’s 3% decline. While Dollar General shares have risen 16.8%, Target has jumped 31.7% over the same period.
Image Source: Zacks Investment Research
What Does Costco’s Current Valuation Suggest?
From a valuation standpoint, Costco's forward 12-month price-to-earnings ratio stands at 42.19, higher than the industry’s ratio of 30.14. However, the stock is trading below its 12-month median level of 45.72, indicating some moderation in valuation.
Costco is trading at a premium to Target (with a forward 12-month P/E ratio of 17.08) and Dollar General (15.96).
Image Source: Zacks Investment Research
What Do Earnings Estimates Signal for Costco?
The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings per share implies year-over-year growth of 9.7% and 13.5%, respectively. For the next fiscal year, the consensus estimate indicates a 7.8% rise in sales and 10.2% growth in earnings.
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Will Costco's AI Search Growth Become a Meaningful Sales Catalyst?
Key Takeaways
Costco Wholesale Corporation (COST - Free Report) is seeing signs that artificial intelligence could become a meaningful new traffic source for its e-commerce business. In the third quarter of fiscal 2026, traffic from AI search grew at a triple-digit pace, though the company noted that volume remains low. This activity boasts the highest conversion rate of all traffic directed to the company’s website.
Costco is working to improve how its merchandise is understood and surfaced by large language models. The aim is to make Costco’s combination of price, quality and included services more visible when consumers use AI tools to compare products. This could be particularly useful for merchandise where the full value is difficult to communicate through a conventional search result.
Costco highlighted appliances and tires as examples. Appliance pricing can include delivery, installation and haul-away, while tires can come with installation, road-hazard protection and nitrogen. AI search can potentially capture these added benefits more effectively and give shoppers a fuller view of the total offer.
The broader digital backdrop also supports the initiative. Digitally enabled comparable sales increased 21.5% in the third quarter, while e-commerce site and app traffic rose 37%.
Costco remains in the initial stages of this effort. If AI-driven traffic continues to scale while maintaining strong conversion, it could become an increasingly important contributor to digital sales growth.
How Does Costco Stack Up Against Its Industry?
Costco, which competes with Dollar General Corporation (DG - Free Report) and Target Corporation (TGT - Free Report) , has seen its shares drop 7.8% over the past three months compared with the industry’s 3% decline. While Dollar General shares have risen 16.8%, Target has jumped 31.7% over the same period.
Image Source: Zacks Investment Research
What Does Costco’s Current Valuation Suggest?
From a valuation standpoint, Costco's forward 12-month price-to-earnings ratio stands at 42.19, higher than the industry’s ratio of 30.14. However, the stock is trading below its 12-month median level of 45.72, indicating some moderation in valuation.
Costco is trading at a premium to Target (with a forward 12-month P/E ratio of 17.08) and Dollar General (15.96).
Image Source: Zacks Investment Research
What Do Earnings Estimates Signal for Costco?
The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings per share implies year-over-year growth of 9.7% and 13.5%, respectively. For the next fiscal year, the consensus estimate indicates a 7.8% rise in sales and 10.2% growth in earnings.
Image Source: Zacks Investment Research
Costco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.