AI Takeaway
AZO posted Q2 FY2026 revenue of $4.27B (+8.1% YoY), but rising costs pressured gross margin to 52.5% and net income fell 3.9% to $469M, reflecting the trade-off between top-line growth and cost inflation.
Revenue
$4.27B
++8.15% YoY
EPS (Basic)
$28.29
-2.65% YoY
Gross Margin
52.5%
-1.37% YoY
Operating Income
$698.46M
-1.18% YoY
Filed · Analysis updated · Source: SEC EDGAR 10-Q filing
Revenue grew 8.1% YoY to $4.27B in Q2 FY2026, suggesting continued consumer demand for auto parts and likely contributions from new store openings domestically and internationally.
Source: Source: 10-Q Income Statement
Cost of revenue increased 11.4% YoY to $2.03B, outpacing the 8.1% revenue growth rate, which compressed gross margin by approximately 137 basis points to 52.5% from 53.9% in the prior-year period.
Source: Source: 10-Q Income Statement
SG&A expenses rose 8.7% YoY to $1.54B, contributing to a 1.2% decline in operating income to $698M and a contraction in operating margin from 17.9% to 16.3%.
Source: Source: 10-Q Income Statement
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Upgrade to unlockAZO carries -$2.91B in stockholders' equity and $8.91B in long-term debt, reflecting its aggressive share buyback program funded by debt. While this is a deliberate capital allocation strategy, it leaves the company financially vulnerable to rising interest rates or an economic downturn that could impair cash flow generation.
Source: Source: 10-Q Balance Sheet
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Upgrade to unlockReported EPS of $27.63 versus the $27.40 analyst consensus — a +0.8% beat for Q2 FY2026.
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Revenue | $4.27B | $3.95B | +8.15% |
Cost of Revenue | $2.03B | $1.82B | +11.36% |
Gross Profit | $2.24B | $2.13B | +5.40% |
Operating Income | $698.46M | $706.77M | -1.18% |
Net Income | $468.86M | $487.92M | -3.91% |
EPS (Basic) | $28.29 | $29.06 | -2.65% |
EPS (Diluted) | $27.63 | $28.29 | -2.33% |
SG&A Expense | $1.54B | $1.42B | +8.67% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Total Assets | $20.44B | $18.12B | +12.82% |
Current Assets | $8.83B | $7.8B | +13.19% |
Current Liabilities | $9.92B | $9.27B | +7.06% |
Stockholders' Equity | $-2.91B | $-4.46B | +34.75% |
Cash & Equivalents | $285.49M | $300.9M | -5.12% |
Long-Term Debt | $8.91B | $9.05B | -1.60% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Operating Cash FlowYTD | $1.32B | $1.4B | -5.59% |
Investing Cash FlowYTD | $-667.5M | $-563.42M | -18.47% |
Financing Cash FlowYTD | $-642.9M | $-826.45M | +22.21% |
Share BuybacksYTD | $741.69M | $866.48M | -14.40% |
D&AYTD | $303.83M | $271.09M | +12.08% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Gross Margin | 52.5% | 53.9% | -1.37% |
Operating Margin | 16.3% | 17.9% | -1.54% |
Net Margin | 11.0% | — | — |
ROE | -16.1% | — | — |
ROA | 2.3% | — | — |
Current Ratio | $0.89 | — | — |
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AZO's Q2 FY2026 results showed revenue of $4.27B (+8.1% YoY) and diluted EPS of $27.63, though EPS declined 2.3% from the prior year's $28.29. Whether AZO beat Wall Street consensus estimates would depend on analyst forecasts not included in the filing itself.
AZO's net income declined 3.9% YoY to $469M even as revenue grew 8.1%, because cost of revenue surged 11.4% and SG&A expenses rose 8.7%, both outpacing revenue growth and compressing margins. Gross margin fell from 53.9% to 52.5%, and operating margin dropped from 17.9% to 16.3%, reflecting meaningful cost inflation pressures.
AZO carries $8.91B in long-term debt and negative stockholders' equity of -$2.91B due to its aggressive share buyback strategy, and its current ratio of 0.89 means current liabilities exceed current assets. However, the company generated $1.32B in YTD operating cash flow, demonstrating strong underlying cash generation that supports its debt obligations and capital return program.
AZO spent $742M on share buybacks on a year-to-date basis through Q2 FY2026, which is 14.4% less than the $866M spent in the same period of the prior fiscal year. The buyback program continues to be a key mechanism for returning capital to shareholders and reducing the share count.
The key takeaways are that AZO delivered solid 8.1% revenue growth to $4.27B, but rising costs compressed gross margin by ~137 bps to 52.5% and caused net income to fall 3.9% to $469M. The company remains highly leveraged with $8.91B in long-term debt, though its YTD operating cash flow of $1.32B demonstrates continued strong cash generation.