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Best Buy (BBY) comfortably exceeded 4Q25 EPS and revenue estimates while achieving its first positive comp since 3Q22 as the recovery in PCs and tablets continued to gain steam. However, this good news is being clouded over by BBY's tepid 1Q26 comp guidance, which calls for a return to negative territory at "slightly down versus last year", and a FY26 EPS outlook that fell short of expectations based on the midpoint of the guidance range.

Making matters worse, the company's guidance doesn't contemplate the potential impact of tariffs, so its FY26 forecast looks like a "best case scenario." Particularly damaging to BBY is the doubling of the tariff on Chinese imported goods to 20% from 10%. According to CEO Corie Barry, approximately 60% of BBY's cost of sales move through China in some form. Therefore, the tariffs placed on China will ultimately result in higher prices for PCs, laptops, phones, and other devices as manufacturers pass on the higher costs.

• The tariffs come just as BBY was experiencing a long-awaited recovery in the computing and mobile phone categories, which account for approximately 44% of its total sales. In Q4, domestic comparable sales for the combined computing and tablet categories jumped by 9% as the upgrade and replacement cycle accelerated. This momentum, though, will soon be put to the test when higher prices begin to trickle through at a time when consumers are still reeling from the effects of inflation and high interest rates.
• Overall, enterprise level comps edged higher by 0.5%, beating expectations and ending a long streak of yr/yr declines. Strength in computing was partly offset by ongoing softness in appliances, gaming, and home theater, although BBY saw some improvement in TVs and headphones within the theater category. 
• BBY is still seeing some consumer hesitancy around big-ticket purchases and the company expects that to continue in FY26. When new product innovations are released, consumers have been more willing to pull the trigger on a purchase. With that in mind, BBY's FY26 comp guidance of flat to +2% is based on growth weighted towards 2H26 based on the timing of new product launches, including AI PCs.
• During this difficult stretch, BBY has prioritized its high-margin services business, like installation, repair, and support for electronics and appliances. This has had a positive impact on BBY's margins and earnings, helping it to mitigate the consistent sales declines. In Q4, domestic gross margin expanded by 50 bps yr/yr to 20.9%.

While BBY turned in a solid Q4 performance, mainly driven by strengthening PC and laptop sales, the company's tepid outlook and intensifying concerns about the impact of tariffs on its business are outweighing the solid quarterly results.