AutoZone (AZO) Q1 2026 Margin Compression Challenges Bullish Earnings Growth Narratives

AutoZone (AZO) opened fiscal Q1 2026 with total revenue of $4.6 billion and basic EPS of $31.88, setting the stage against a backdrop where trailing twelve month revenue sits at $19.3 billion and EPS at $147.34. Over recent quarters the company has seen revenue move from $6.2 billion in Q4 2024 to $6.2 billion in Q4 2025 and then to $4.6 billion in Q1 2026, while quarterly EPS tracked from $53.0 to $50.0 and now $31.9, leaving investors weighing solid top line scale against signs of compressed profitability.

See our full analysis for AutoZone.

With the headline numbers on the table, the next step is to compare these results with the dominant narratives around AutoZone’s growth, margins, and durability to see which stories hold up and which may require a reassessment.

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Margins Slip From 14.2% To 12.8%

• Net profit margin over the last 12 months came in at 12.8%, down from 14.2% a year earlier, even though trailing revenue grew from $18.5 billion to $19.3 billion.
• Analysts' consensus view expects investments in new distribution centers and technology to support margins over time, yet the current margin step down highlights execution risk:
  • Consensus points to automation in new California and Virginia facilities as a key lever to improve efficiency, which needs to offset the recent deterioration from 14.2% to 12.8%.
  • At the same time, the narrative flags higher SG&A from aggressive expansion and technology spending, which lines up with the observed squeeze in net margin despite revenue growth.

Earnings Growth Forecasted At 8.4% Annually

• Over the last 12 months, net income was $2.5 billion on $19.3 billion of revenue, and analysts now forecast earnings to grow about 8.4% per year with revenue at roughly 6.9% per year.
• Supporters of the bullish view lean on these mid single digit to high single digit growth forecasts, arguing that operational initiatives can sustain that pace:
  • The consensus narrative highlights expansion of Mega Hub locations and a plan to open 100 international stores in a fiscal year, which is expected to drive the 6.9% annual revenue growth outlook.
  • Ongoing share buybacks, alongside a forecast for earnings to reach $3.1 billion by around 2028, are cited as key reasons bulls believe EPS can compound faster than revenue even if margins simply hold steady.

Over the next few years, some investors think this steady earnings climb and store expansion could make short term margin noise less important for the long term story. 🐂 AutoZone Bull Case

Debt, Negative Equity And A 23.6x P/E

• AutoZone trades at 23.6 times trailing earnings, above the US specialty retail average of 18.9 times but below a 39.8 times peer average, while also carrying high debt and reporting negative shareholders' equity.
• Bears focus on this combination of leverage and valuation, questioning how much room is left if growth underdelivers:
  • Critics highlight that the stock price of $3,496.77 already sits above a DCF fair value of $3,202.11, which they see as limited cushion if earnings fall short of the 8.4% annual growth forecast.
  • They also point to negative equity and high debt as structural balance sheet risks that could become more important if margins stay closer to 12.8% rather than returning to the higher levels seen previously.

Skeptical investors are asking whether a 23.6x multiple and negative equity leave enough downside protection if the growth story slows. 🐻 AutoZone Bear Case

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for AutoZone on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your AutoZone research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

Explore Alternatives

AutoZone’s slipping margins, elevated leverage, and premium valuation raise questions about how resilient its balance sheet will be if growth or profitability disappoints.

If those pressure points concern you, use our solid balance sheet and fundamentals stocks screener (1937 results) to quickly focus on businesses with stronger finances, lower debt, and balance sheets built to handle tougher conditions.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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