US-led mass retail and membership commerce, with Amazon's cloud business as the out-of-industry profit pool. COST / AMZN. Run 15 September 2026. Built from the research folders' sources: Costco 10-Ks FY2021 to FY2025, Q3 FY2026 10-Q and FY2026 call transcripts; Amazon 10-Ks 2020 to 2025, Q2 2026 10-Q and call transcript; plus a dated web sweep of events from September 2025 onward. Events swept through 15 September 2026; most recent events checked: Costco August 2026 sales release (2 Sep 2026) and Amazon's board appointment of Kevin Mandia (8 Sep 2026), after the DuckLabs acquisition (26 Aug 2026). Figures in USD as reported, no FX conversion. Costco's fiscal year ends around 31 August, Amazon's on 31 December: a four-month offset that is not adjusted. Amazon is 2.6x Costco by revenue, so ratios are compared, not absolutes. Not a valuation and not a recommendation.
AWS is the first cell that carries Amazon's next five years. Its demand is already contracted: backlog is $496B and growing at triple digits. Capacity, not demand, is the constraint "into 2027". OpenAI has expanded its AWS commitment by $100B over eight years, and both leading AI labs have made multi-gigawatt Trainium commitments (Q2 2026 call; GeekWire, 27 Feb 2026).
Advertising is the second cell. It grew 21% a year from 2023 to 2025 and 26% in Q2 2026, fed by marketplace traffic, Prime Video ads and live sports, and it has no Costco equivalent. Costco's own retail media effort is "early innings" (Amazon Q2 2026 10-Q and call; Costco Q2 FY2026 call).
Costco's engine is one repeatable unit. It targets 30+ net new warehouses a year, each averaging $272M in sales. Comps come from shopping frequency (+5% in FY2025), with digital adding about 20% growth on top. That engine delivered 10.4% a year over five years in the US and Canada, and FY2026 net sales rose 10.2% (FY2025 10-K; Q3 FY2026 call; 2 Sep 2026 sales release). It is durable, but it compounds at unit-opening speed.
Amazon's conversion runs through mix. Each dollar of ads, AWS and seller fees carries far more margin than a dollar of first-party goods. From 2023 to 2025, advertising (+21% a year) and seller services (+11%) outgrew online stores (+8%). Operating margin rose from 6.4% to 11.2%, and North America retail margin from 4.2% to 6.9% (Amazon FY2025 10-K).
Costco caps its merchandise margin on purpose. It takes profit through the membership fee instead. The September 2024 fee increase drove about 40% of FY2025 fee growth while US/Canada renewal held at 92.3%, and EBIT margin inched up from 3.3% to 3.8% (FY2025 10-K).
The tension is capital. Amazon's higher operating margin needs capex of 18.4% of revenue against Costco's 2.0%. FY2025 free cash flow was 1.6% of sales at Amazon (company measure) versus about 2.8% at Costco (operating cash flow less capex, inferred). Amazon is the compounder with the richer but capital-hungry engine; Costco is the fortress whose margin barely moves and never needs outside funding.
Amazon's exposure is fixed cost ahead of revenue. About $220B of 2026 capex is being committed on the view that AI demand stays short of capacity through 2027. Trailing free cash flow has already turned to -$7.6B, and trailing financing inflows were +$75.2B (Q2 2026 10-Q). If AI demand pauses, or one of the few labs behind the backlog restructures, depreciation lands on underused data centers. Discretionary retail and advertising would soften in the same downturn.
Costco's exposure is membership renewal. Fees are half of its operating income. Members sold online already renew at lower rates, and the worldwide rate slipped to 89.7% at Q3 FY2026 (Q3 FY2026 10-Q). But its sales lean to consumables (55% of net sales), and its capex is small and discretionary.
Who breaks first: Amazon's first loss is cash flow; Costco's would be a slow fee erosion that renewal data would flag quarters ahead.
These six cells carry essentially all of the combined revenue and operating profit. Every score is argued in the tabs below.
| Cell (product x region) | Costco | Amazon | Why (one clause, sourced) |
|---|---|---|---|
| North America consumables and fresh | 5 | 3 | Costco: foods/sundries plus fresh are $147.6B, +7.3% a year, with gross margin rising (FY2025 10-K). Amazon: gaining from a smaller base, with perishables customers +50% YTD, but not advantaged (Q2 2026 call). |
| North America general merchandise and online | 3 | 5 | Amazon: online stores $269.3B plus seller services $172.2B (FY2025 10-K). Costco: non-foods +8.1% a year, but under 4,000 SKUs (FY2025 10-K). |
| North America fee layer (membership / Prime) | 5 | 4 | Costco: 92.3% renewal through a fee increase (FY2025 10-K). Amazon: subscriptions +11% a year and Prime membership growing double digits, but no renewal rate disclosed (10-K; Q2 2026 call). |
| North America advertising / retail media | 0 | 5 | Amazon: $68.6B, +22% in 2025 (FY2025 10-K). Costco: "early innings", no revenue disclosed (Q2 FY2026 call). |
| International retail | 4 | 3 | Costco Other International: 4.3% margin, +11.5% a year over five years. Amazon International: 2.9% margin, +9.2% a year (FY2025 10-Ks). |
| Global cloud | 0 | 4 | AWS: $128.7B at a 35.4% margin, backlog $496B. Pricing is conceded for long-term contracts, and market share is not in the sources (10-K; call). |
Scores are per cell and are not summed. Geography note: Amazon's North America segment includes Mexico, while Costco reports Mexico in Other International. The two cannot be reconciled from the filings.
Neither company discloses a product x geography cross-tab. The cells are built in two layers. The first is the geographic segments: Costco's US, Canada and Other International against Amazon's North America, International and AWS. The second is the global product lines each company reports. Costco allocates e-commerce into its merchandise categories. Amazon splits "online stores" (its own inventory, all categories) from "third-party seller services", so Amazon's grocery cannot be separated out (ND).
The headline contrast is where profit sits. Costco earns 66% of operating income in the US, 18% in Canada and 16% in Other International, at similar 3.4% to 5.0% margins. Amazon earns 57% in AWS, 37% in North America and 6% in International (FY2025 10-Ks). Costco's profit is geographically diversified but concentrated in one model. Amazon's is diversified by model but concentrated in cloud.
| Cell (normalized) | Costco rev (% total) | 5y CAGR / latest | Amazon rev (% total) | 5y CAGR / latest | Margin signal / leader |
|---|---|---|---|---|---|
| North America retail stack | $237.0B (86.1%) | 10.4% / US +11.0% Q3 FY26 | $426.3B (59.5%) | 12.5% / +14.2% H1 26 | Costco US+Canada 3.7% vs Amazon NA 6.9% operating margin. Amazon leads on margin because ads sit inside NA. |
| International retail | $38.3B (13.9%) | 11.5% / +13.0% Q3 FY26 | $161.9B (22.6%) | 9.2% / +16.7% H1 26 | Costco 4.3% vs Amazon 2.9%, which was loss-making in 2023. Costco leads. |
| Global cloud | none | n/a | $128.7B (18.0%) | 23.2% / +32.7% H1 26 | AWS 35.4% margin. Amazon only. |
Five-year window: Costco FY2020 to FY2025, Amazon 2020 to 2025. Latest: Costco Q3 FY2026 (16 weeks to 10 May 2026) segment revenue YoY; Amazon H1 2026 YoY, flattered by Prime Day moving into Q2. Operating margins are FY2025. Sources: Costco FY2021 and FY2025 10-Ks, Q3 FY2026 10-Q; Amazon FY2020 and FY2025 10-Ks, Q2 2026 10-Q.
Costco North America. FY2025 comps rose 6%: +5% shopping frequency and about +1% ticket. The rest came from 24 net new warehouses. The FY2026 plan is 26 net new, with two slipped into FY2027, against a 30+ a year target and about $6.5B of capex. The growth is entirely organic. Sales per warehouse rose from $192M in FY2021 to $272M in FY2025, so older buildings keep compounding, and high-volume buildings are being relocated to bigger sites with larger gas stations (FY2025 10-K; Q3 FY2026 call). The cost of growth is land and buildings, funded from operating cash flow.
Amazon AWS. Growth reaccelerated to 37% in Q2 2026, the fastest in 18 quarters (Q2 2026 release, web). It is driven by inference workloads that sit next to customer data, plus Bedrock and custom silicon. The cost is extreme. Cash capex is guided to about $220B in 2026, raised from $200B partly because of memory prices, and a subset of servers now depreciates over five years rather than six (Q2 2026 call; FY2025 10-K). Management says AI margins track "a little ahead" of early AWS, a company claim with no outside corroboration.
Amazon advertising and grocery. Ads compound on marketplace traffic and Prime Video, where NBA and Thursday Night Football inventory sold out. Grocery is Amazon's attack on Costco's core cell: same-day perishables in 2,300+ US cities and 50% growth in monthly perishables customers since January (Q2 2026 call; TechCrunch, 10 Dec 2025). M&A is not material to either company's revenue. Amazon's $11.6B Globalstar deal (announced 14 Apr 2026, closing 2027) supports Amazon Leo, not retail.
Both companies own their channel, and both decline to take price on merchandise. Costco carries fewer than 4,000 SKUs, buys direct and routes goods through depots. It aims to be "the first to lower prices and the last to raise them", and it is returning IEEPA tariff refunds to members, facing a customer class action over those refunds (FY2025 10-K; Q3 FY2026 call; CFO Dive, 24 Aug 2026). Amazon cites prices 14% below other retailers (Profitero, as cited by Amazon). It largely absorbed tariffs, and most imports are cleared by suppliers, not Amazon (Q2 2026 call). The difference is who pays for the second layer. Costco's members pay it directly, and accepted the 2024 fee increase with renewal steady. Amazon's sellers and advertisers pay it, and AWS customers get "pricing changes primarily driven by long-term customer contracts" (FY2025 10-K).
| Costco | Amazon | |
|---|---|---|
| Sourcing model | Direct from numerous suppliers via depots; Kirkland Signature private label | Supplier-imported goods for most items; third-party sellers own their inventory |
| Accounts payable / inventory, FY2025 | 1.09x ($19.8B / $18.1B) | 3.18x ($121.9B / $38.3B) |
| Binding constraint | High-quality food supply at volume (risk factors) | AI compute: memory costs and power; capacity short of demand into 2027 |
| Recent shock handled | Q3 FY2026 gas supply spike met with record volumes | Memory inflation pushed 2026 capex guide from $200B to $220B |
Sources: Costco FY2025 10-K balance sheet and risk factors, Q3 FY2026 call; Amazon FY2025 10-K balance sheet, Q2 2026 call; Fortune, 30 Jul 2026.
Costco names Walmart, Target, Kroger and Amazon as general-merchandise competitors, plus Sam's Club and BJ's among clubs (FY2025 10-K). Amazon calls itself the second-largest US grocer (Q2 2026 call). Cloud rivals Azure and Google Cloud are not quantified in the sources (share ND). Both companies look like share-takers in North America retail on current growth (inferred; market growth not in sources).
Risks by cell:
Paid membership habit (durability High). 81.0M paid members in FY2025 and 82.9M at Q3 FY2026. 38.7M are Executive members, who account for 73.6% of sales. Renewal is 92.3% in the US and Canada. Fees of $5.3B equal 51% of operating income.
Volume per SKU (High). Fewer than 4,000 SKUs and $272M average sales per warehouse give buying scale and higher-margin Kirkland Signature. Supplier-funded inventory (Med). Accounts payable exceed inventory. (FY2025 10-K; Q3 FY2026 10-Q)
AWS scale plus custom silicon (High, contestable). $496B backlog, Graviton and Trainium chips, contracts of five years or more for AI capacity.
Delivery network (High). $102.7B of shipping costs in 2025 and same-day delivery in 2,300+ cities: years and capital to copy. Marketplace plus ads flywheel (High, regulatory target). Seller services $172.2B, advertising $68.6B. (FY2025 10-K; Q2 2026 call)
Costco: no customer above 10% of sales. Members prepay, and the company raised the fee in September 2024 without losing renewal (92.3%). Executive upgrades keep rising (+9.6% at Q3 FY2026), and the program launched in China that quarter (FY2025 10-K; Q3 FY2026 call).
Amazon: consumers are unconcentrated, and Amazon controls access for sellers. Seller services and ads grew faster than first-party sales from 2023 to 2025, evidence of take rising. But that lever is the subject of the FTC and state antitrust case, and Amazon paid $2.5B to settle the FTC's Prime case in September 2025. In AWS, AI backlog rests heavily on a few labs, and Amazon is also an investor in both leading ones (a $50B OpenAI commitment; the Anthropic stake produced a $53.4B Q2 2026 gain). That concentration is inferred, since no share is disclosed. (FY2025 10-K; Q2 2026 10-Q; FTC, 25 Sep 2025; GeekWire, 27 Feb 2026)
Costco: shares cost increases with suppliers and buys early and in volume. Gross margin on net sales still rose from 10.57% to 11.12% over FY2023 to FY2025, through inflation and tariffs: strong pass-through without raising relative price (FY2025 10-K).
Amazon retail: stronger leverage. Payables are 3.2x inventory, and suppliers bear import tariffs.
Amazon AWS: the weak point. AI capacity depends on a few memory, accelerator and power suppliers, and the 2026 capex guide was raised from $200B to $220B partly on memory costs (Q2 2026 call; Fortune, 30 Jul 2026). Dual sourcing: Costco Med-High; Amazon retail High, AWS Low-Med (inferred from custom silicon still needing third-party memory).
| Cell | Route control | Pocket price | Continuity | Outcome (share / margin) | Confirming KPI |
|---|---|---|---|---|---|
| NA consumables and fresh | Costco: own warehouses plus third-party same-day partners. Amazon: own network. | Both claim lowest; parity (inferred) | Both high | Costco share up, margin flat (reinvests). Amazon share up from a small base, margin up with density (inferred). | Costco core-on-core margin (call); Amazon perishables customers (call) |
| NA general merchandise and online | Amazon controls the marketplace; Costco curates under 4,000 SKUs | Costco below on curated items (inferred) | Amazon high | Amazon share up, margin up via ads. | Amazon NA operating margin at or above 7.5% FY2026 |
| Global cloud | Amazon direct and marketplace; Costco none | Conceded for term (10-K) | Capacity-constrained into 2027 | Share ND; margin flat to down as depreciation ramps (inferred). | AWS operating margin vs 35.4% in FY2025 |
Tension: Amazon grows fastest exactly where it concedes price and spends the most capital. Its highest-growth cell carries its weakest pricing lever.
1. Business mix (Major). Amazon has cloud and ads layers; Costco has none. Costco cannot close this and should not try, since it is outside its model.
2. Capital intensity (Major). Capex is 2.0% of revenue at Costco against 18.4% at Amazon. Amazon closes the gap only when AI capex growth slows, which management frames as happening "at some point": realistically 2028 or later on its own capacity comments.
3. Consent vs contest (Moderate). Costco's fee increases are accepted; Amazon's seller terms are in court from March 2027. This is unresolved for two to three years.
Both companies report costs by function, but the labels do not line up, so the mapping is stated once:
| % of revenue, 3y avg | Costco | Amazon | Gap | What drives it |
|---|---|---|---|---|
| COGS | 87.4 | 51.3 | 36.1 | Amazon's service mix (AWS, ads, seller fees carry no product cost) plus fulfillment classified outside COGS |
| R&D | ND | 14.6 | ND | Amazon's proxy is inflated by AWS infrastructure; Costco does not disclose |
| SG&A | 9.0 | 24.6 | 15.6 | Amazon's parcel-by-parcel fulfillment and marketing vs Costco's pallet-on-rack warehouses and short hours |
| Gross margin | 12.6 | 48.7 | 36.1 | Mix and classification, not efficiency |
| EBIT margin | 3.6 | 9.4 | 5.8 | AWS (35.4% margin) and ads; Costco self-caps merchandise margin |
| Year | Costco COGS | SG&A | GM | EBIT | Amazon COGS | T&I | SG&A-eq | GM | EBIT |
|---|---|---|---|---|---|---|---|---|---|
| 2023 | 87.7 | 8.9 | 12.3 | 3.3 | 53.0 | 14.9 | 25.7 | 47.0 | 6.4 |
| 2024 | 87.4 | 9.0 | 12.6 | 3.6 | 51.1 | 13.9 | 24.2 | 48.9 | 10.8 |
| 2025 | 87.2 | 9.1 | 12.8 | 3.8 | 49.7 | 15.1 | 24.0 | 50.3 | 11.2 |
Costco FY2023 (53 weeks) to FY2025: revenue $242.3B / $254.5B / $275.2B; merchandise costs $212.6B / $222.4B / $239.9B; SG&A $21.6B / $22.8B / $25.0B; operating income $8.1B / $9.3B / $10.4B (FY2025 10-K). Amazon 2023 to 2025: net sales $574.8B / $638.0B / $716.9B; cost of sales $304.7B / $326.3B / $356.4B; operating income $36.9B / $68.6B / $80.0B (FY2025 10-K). Supplementary: capex as a share of revenue was 1.8% / 1.9% / 2.0% at Costco and 9.2% / 13.0% / 18.4% at Amazon (gross purchases of property and equipment).
The most persistent gap is EBIT margin. Amazon's lead is present in all three years and widening: it gained 4.8 points to Costco's 0.4. The mechanism is the mix identified in the Growth Map. AWS and advertising supply most of Amazon's profit, while Costco deliberately caps merchandise margin and lets fees supply half of its operating income. Even on retail alone, Amazon's North America segment (6.9%) out-earns Costco's US and Canada (3.7%), because ads sit inside that segment.
The cross-check both confirms and qualifies the power map. Costco's pricing power does show up where expected: in fee growth, and in gross margin rising through inflation. But Amazon's higher EBIT margin is financed by capex at nine times Costco's intensity. FY2025 free cash flow was 1.6% of sales at Amazon against about 2.8% at Costco (inferred from operating cash flow less capex), and Amazon's trailing figure is now negative. On this lens Amazon has the better operating engine and Costco the better cash engine. Which matters more depends on whether the capex earns its return, and that is exactly the open question behind the verdict.
| Metric | Threshold | By when | If it hits, it favors | Where published |
|---|---|---|---|---|
| AWS net sales growth YoY | At or above 30% each quarter | Through Q2 2027 (Jul 2027) | Amazon | Amazon 10-Q, Note: Segment Information |
| Amazon trailing free cash flow | Back above $0 | FY2027 10-K (Feb 2028) | Amazon | 10-K / 10-Q non-GAAP reconciliation |
| Amazon North America operating margin | At or above 7.5% | FY2026 10-K (Feb 2027) | Amazon | 10-K Note: Segment Information |
| Costco US/Canada renewal rate | At or above 92.0% | FY2027 10-K (Oct 2027) | Costco | 10-K / 10-Q MD&A |
| Costco net new warehouses | At or above 30 in FY2027 | FY2027 10-K (Oct 2027) | Costco | 10-K highlights; Q4 call |