Best Buy Q2 Fiscal 2027 Earnings: Comparable Sales Rebound Drives Higher Outlook

Best Buy’s second-quarter results were stronger than its prior outlook, with comparable sales rising 4.1% against management’s expectation for roughly 1% growth. Revenue growth was broad-based across computing, home theater, mobile phones and several emerging categories, while higher-margin Ads and Marketplace activity helped lift gross margin. The company raised its full-year guidance, but the quality of second-half growth will depend on whether category innovation and replacement demand can offset tougher computing comparisons and higher memory-driven product prices.

As Reported on the Call

The Bigger Story

The quarter suggests that Best Buy’s consumer electronics categories are moving beyond the prolonged post-pandemic replacement lull, although growth remains uneven across product lines. Computing delivered its 10th consecutive quarter of positive comparable sales, home theater returned to its strongest growth rate since the second quarter of fiscal 2022, and major appliances moved back to modest growth after prior weakness.

More importantly, Best Buy is trying to improve the earnings quality of its retail model through advertising and third-party Marketplace operations. Those businesses contributed to gross-profit-rate expansion in the quarter, giving the company more room to invest in pricing, delivery and service in competitive categories such as appliances without fully sacrificing margin.

That strategy is beginning to show tangible scale. Management expects Marketplace GMV of $1.3B for the full year, up from a stronger-than-expected $300M in the second quarter alone. GMV is not revenue, however, and the key question remains how much of Marketplace volume can translate into durable, incremental profit after technology, marketing and operating expenses.

Revenue and Operating Performance

Enterprise revenue rose 3.6% to $9.8B, while comparable sales increased 4.1%. The result exceeded Best Buy’s previous expectation for approximately 1% comparable-sales growth in the quarter.

Domestic revenue increased 4.3% to $9.1B, supported by a 4.5% comparable-sales gain. Computing was the largest weighted contributor to growth, followed by home theater and emerging categories including AI glasses, trading cards and health rings. Management said the emerging-category group more than doubled sales from a year earlier and represented roughly one percentage point of comparable-sales growth.

Computing demand continued to benefit from replacement and upgrade activity, product innovation and growth in Best Buy’s business-to-business operation. Best Buy Business sales increased 21% year over year in the quarter, with the company citing demand across education, hospitality, health care, corporate enterprise, builders and multi-dwelling properties. Management said the business generates more than $1.1B in annual sales, though it did not provide a quarterly revenue figure.

Home theater was a notable improvement. Domestic TV sales rose more than 10% year over year, aided by assortment, inventory availability, promotions, delivery and installation execution. Best Buy also launched RGB televisions during the quarter and said it is the only national retailer offering the products for the next year. Management characterized the direct revenue contribution as early-stage, with the larger near-term benefit coming from renewed customer interest across the television category.

Major appliances produced slight sales growth, a material improvement from prior trends. Best Buy attributed the recovery to investments in pricing, marketing, product availability and faster delivery. The company said next-day delivery is now available in almost all metro delivery markets, compared with less than half in the first quarter.

Traditional gaming was the main category offset, as Best Buy lapped the prior-year launch of Nintendo’s Switch 2. Management expects Grand Theft Auto VI to benefit gaming sales in the fourth quarter through software, hardware and accessories.

International remained a weaker area. Revenue fell 4.2% to $709M, reflecting a 1.8% comparable-sales decline and unfavorable foreign exchange.

Profitability and Margins

Adjusted operating income rate increased about 40 basis points year over year to 4.3%, while adjusted diluted EPS rose 15% to $1.47. The profit improvement was driven primarily by gross-margin expansion rather than cost leverage.

Domestic gross profit rate rose 60 basis points to 24.0%. Best Buy cited growth in Marketplace and Best Buy Ads, as well as a $34M benefit from tariff refunds. The tariff refund was a meaningful one-time contributor to the quarter’s gross profit result and should not be treated as an underlying operating improvement.

Domestic product margin rates were pressured by investments in major appliances. Management has been using pricing and service investments to regain momentum in the category, and those actions appear to be contributing to sales improvement. The tradeoff is that Best Buy must show it can sustain appliance gains without giving up too much product margin.

Adjusted SG&A increased by $94M in the Domestic segment. Higher compensation expense, including incentive compensation, was the largest driver, alongside spending supporting Marketplace, Ads and advertising. Management indicated that incentive compensation could rise by approximately $130M for the full year at the high end of guidance, reflecting improved revenue and operating-income performance.

Management expects Ads and Marketplace to be a modest positive contributor to operating-income rate this year, with Marketplace’s stronger GMV outlook implying a slightly improved contribution versus earlier expectations. Still, both businesses require incremental spending on technology, advertising and employee compensation, limiting the immediate margin flow-through.

Demand, Customers and Pricing

Management described the consumer environment as stable but value-oriented. Customers remain responsive to sales events and promotions, particularly for discretionary purchases, but are still willing to spend on higher-priced products when replacement needs or meaningful technology innovation are present.

The quarterly sales cadence reflected event timing and difficult comparisons. Comparable sales rose 8% in May, approximately 5% in June and were approximately flat in July. June benefited from a sales event shifting to run alongside Prime Day, while July lapped the prior-year timing of that event. Management said August-to-date comparable sales were at the high end of its 1% to 3% second-half growth expectation, helped by back-to-school demand and Best Buy’s anniversary sale.

Memory cost inflation is the most visible pricing issue. In computing, average selling prices increased in the mid-teens in the second quarter while units declined in the high single digits. Management said the unit response was somewhat better than it had expected, aided by assortment adjustments, vendor promotions, trade-in offers and financing tools.

The company expects that computing pricing dynamic to continue through the remainder of the year. It does not currently expect memory-cost pressure to spread materially beyond computing, memory products and graphics cards. While higher prices can support sales dollars, continued unit declines would be a risk if consumers become less willing to absorb the increases.

Management said it has not seen material evidence of broad customer demand pull-forward ahead of anticipated price increases. It saw a short-lived increase in demand following one major announcement, but did not view it as material to quarterly results.

What is Best Buy’s guidance and outlook?

Best Buy raised its fiscal 2027 outlook following the stronger first half. Management now expects:

• ·Revenue of $42.3B to $42.8B
• ·Comparable-sales growth of 1.9% to 3.0%
• ·Adjusted operating income rate of 4.4% to 4.5%
• ·Adjusted diluted EPS of $6.70 to $6.90
• ·Capital expenditures of approximately $750M

For the second half, management expects enterprise comparable-sales growth of 1% to 3%. Third-quarter comparable sales are also expected to grow 1% to 3%, with adjusted operating income rate of approximately 4.1% to 4.2%, or 10 to 20 basis points above the prior year.

Management expects continued growth in phones, TVs, emerging categories and appliances. Computing growth is expected to slow as the company laps two years of growth and a particularly strong prior-year third quarter that benefited from the end of Windows 10 support.

Full-year gross profit rate is expected to improve by approximately 30 to 40 basis points. The outlook assumes continued contribution from Ads and Marketplace, a similar level of tariff refunds in the third quarter as in the second quarter, and ongoing appliance investments.

Strategic Developments

Best Buy continues to expand its revenue sources and customer touchpoints beyond traditional electronics retailing.

The Marketplace reached approximately $300M of domestic GMV in the second quarter, and management raised its full-year GMV expectation to $1.3B. The company plans to begin adding international sellers later in the quarter, expanding beyond its earlier requirement that sellers have a U.S. physical presence.

Best Buy Ads is expected to grow 10% this year following $900M in collections last year. Management views advertising and Marketplace as higher-margin growth engines that can help fund investments in customer experience and pricing.

The company is also testing smaller store formats in markets that cannot support traditional large-format locations. Management said these stores are functioning as customer-acquisition points that can lead shoppers into Best Buy’s app, digital channels, memberships and services.

In larger stores, Best Buy is repurposing space toward vendor experiences and outlet offerings. It is more than halfway through deploying 50 Meta Lab @ Best Buy locations, each with roughly 900 square feet dedicated to Meta products, including AI glasses and virtual reality devices.

What Investors Should Watch

1. Computing Demand Versus Memory-Driven Price Inflation

Computing sales have been a major growth driver, but mid-teen average-selling-price increases and high-single-digit unit declines show that demand is being tested. Investors should watch whether Best Buy can preserve unit trends through assortment changes, promotions and financing as memory costs remain elevated.

2. Home Theater and Appliance Momentum

TV sales grew more than 10% and appliances returned to growth, helping diversify the recovery beyond computing. Sustained gains would support management’s view that replacement cycles and better execution are broadening, while a reversal could indicate that recent strength was primarily promotion- or event-driven.

3. Marketplace and Ads Profit Contribution

Marketplace GMV and advertising collections are expanding quickly, but GMV is not revenue and these businesses require operating investment. Investors should watch for evidence that their gross-margin benefit continues to exceed associated SG&A growth.

4. Gross Margin Excluding Tariff Refunds

The $34M tariff refund helped second-quarter gross profit. Best Buy’s ability to expand gross margin after that benefit fades will be a cleaner measure of whether Ads, Marketplace and operating execution are offsetting appliance pricing investments and product-margin pressure.

5. Leadership Transition

Jason Bonfig is scheduled to become CEO on November 1, while Anne Bramman recently joined as CFO. The transition comes as Best Buy is balancing retail investments with the development of new profit streams, making continuity of execution and future capital-allocation priorities important issues to monitor.

AlgovestIQ Takeaway

Best Buy delivered a stronger quarter than its own prior expectations and raised its full-year outlook, supported by broad-based domestic category improvement and higher gross margin. The company’s results indicate that consumer technology demand has become more constructive, particularly where product innovation meets replacement needs.

The improvement is not solely a macro or product-cycle story. Best Buy’s execution in home theater and appliances appears to be improving, while Marketplace and Ads are beginning to provide a more meaningful profit contribution. Those initiatives could make the company less dependent on product margins over time, particularly in categories where pricing remains highly competitive.

However, the second-half setup is less straightforward than the headline guidance increase suggests. Computing faces tougher prior-year comparisons and elevated memory costs, with sales-dollar growth increasingly reliant on higher average prices despite lower unit volumes. Meanwhile, part of the second-quarter margin expansion came from tariff refunds, and incentive compensation is absorbing a significant portion of the benefit from stronger operating performance.

The central investment question is whether Best Buy can convert its current category recovery into sustained growth while maintaining operating-margin progress after unusual tariff benefits normalize. Continued gains in TVs, appliances, mobile and emerging categories, combined with measurable Marketplace and Ads profitability, would strengthen that case. Slower computing demand, renewed unit pressure from higher prices, or heavier-than-expected promotional investment would weaken it.