Costco Wholesale Corporation COST is witnessing a notable shift in online shopping behavior as artificial intelligence increasingly shapes how consumers discover products. Although AI-driven search remains a relatively small channel compared with traditional sources of website traffic, its growing adoption is opening new opportunities for the warehouse retailer to connect with shoppers and drive online purchases.
On its fourth-quarter fiscal 2026 earnings call, Costco reported that traffic reaching its website through AI searches grew at a triple-digit rate for the second consecutive quarter. More importantly, this traffic continued to deliver the highest conversion rate among all sources visiting its site. Management stated that sales originating from searches conducted through AI tools, including those offered by OpenAI, Anthropic and Gemini, were growing at a triple-digit pace.
Appliances and consumer electronics lead purchases originating from AI searches, broadly mirroring Costco’s overall e-commerce mix. Memberships are also among the leading items discovered through these searches, suggesting shoppers are finding not just products but the retailer’s membership proposition.
Costco sees an advantage in AI-driven product discovery because it does not use paid digital advertising. The company is working with large language model providers to improve product data and website pages so its offerings appear clearly in search results. While the channel remains in its early stages, the strong growth in traffic and sales, coupled with high conversion rates, highlights its potential to become a more important source of online purchases.
How Are WMT and BJ Leveraging AI to Drive Digital Growth?
Walmart Inc. WMT is using AI to make digital shopping more personalized and convenient. Walmart said usage of its AI-powered Sparky assistant increased 70% year over year, while customers using Sparky spend 40% more per order. Walmart also highlighted Sparky’s ability to build meal plans, recommend products and recognize prior purchases across stores and online, helping shoppers avoid duplicate purchases and simplifying product discovery.
BJ’s Wholesale Club Holdings, Inc. BJ is also deepening digital engagement through AI-enabled shopping support. BJ’s Wholesale said its AI-powered assistant, Bev, has handled more than 100,000 member conversations, helping shoppers find products, check club hours and better use their memberships. BJ’s Wholesale is pairing this capability with broader digital convenience, as digitally enabled comparable sales rose 30% in the second quarter of fiscal 2026 and digitally engaged members demonstrated stronger spending and loyalty.
How Does Costco Stack Up Against Its Industry?
Costco stock has climbed 16.4% year to date compared with the industry’s rise of 13.2%.
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What Does Costco’s Current Valuation Suggest?
Costco's forward 12-month price-to-earnings ratio stands at 43.55, higher than the industry’s ratio of 28.91. However, it is trading below its 12-month median level of 44.36, indicating some moderation in valuation.
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What Do Earnings Estimates Signal for Costco?
The Zacks Consensus Estimate for Costco’s current fiscal-year sales and earnings per share implies year-over-year growth of 8.4% and 11%, respectively. For the next fiscal year, the consensus estimate indicates a 7.2% rise in sales and 9.8% growth in earnings.
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Costco’s Investment Case
Costco’s strong membership loyalty, expanding digital capabilities and growing AI-driven engagement support its long-term growth prospects. However, the emerging AI-search opportunity remains relatively small, while the stock’s premium valuation warrants caution despite encouraging earnings expectations. Investors may prefer a balanced approach at the current juncture. Costco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).