The news: Best Buy ended its second quarter with $6.3 billion of inventory, up 8.3% from a year earlier, while sales grew 3.6%.
Much of the extra stock is in computing. The executive who explained the buying, Jason Bonfig, joined Best Buy as an inventory analyst in 1999. He runs merchandising and fulfillment today, and becomes CEO on November 1. He told analysts the company buys the category early “where there are opportunities, and we actually have visibility that prices are going to go up.”
Memory costs are driving those price increases. DRAM and NAND prices have been rising since late 2025 as AI data centers absorb chip supply, and they are now reaching laptops and desktops. Best Buy’s computing average selling prices rose a mid-teens percentage in the quarter, while units fell high single digits.
The rules of the buy-ahead are specific: Best Buy buys early only when it can see a price increase coming, only in computing, and only up to a days-of-supply limit. The company now pays for those purchases with its own cash instead of vendor credit.
What changed: Vendors financed the early buying in the first quarter. Accounts payable is what Best Buy owes suppliers for goods it has not yet paid for, so when payables grow faster than inventory, vendors are funding the stock.
That was the case through the first quarter: payables grew 9.6% while inventory grew 7.8%. Then-CFO Matt Bilunas had told analysts “our payables are actually up more than our inventory, so we’re in a good working position.”
That reversed in the second quarter. Inventory grew 8.3% while payables grew 6.1%, and the build consumed $1.1 billion of cash in the first half, up from $717 million a year earlier. No one on the call repeated the payables point.
Bonfig said the buying discipline itself has not changed. The teams manage computing to a days-of-supply number, he said, and “there'‘s not a strategy to continue to front load.”
CEO Corie Barry, who steps down October 31, said the category moves too quickly for the stock to sit. “We turn that category really fast,” she said. “It’s not like these are inventories that are going to stretch out for years.”
Buying early only delays the cost increase, so Best Buy is also changing which models it stocks. When memory costs push a laptop above its usual shelf price, the company works with the vendor to change a model’s specifications so the price point survives.
“We have opportunities to change the assortment with our vendors to make sure that key price points are hit,” Bonfig said. He used the example of keeping an $800 option on the shelf when list prices rise.
By the numbers:
Inventory: $6.3 billion, up 8.3% year over year; revenue up 3.6%.
Computing and mobile phones: comps up 6.8%, on 46% of domestic revenue. Computing ASPs rose mid-teens percent while units fell high single digits.
Memory: conventional DRAM contract prices are forecast to rise another 13% to 18% in the third quarter, and NAND 10% to 15%, according to TrendForce.
Guidance: full-year revenue raised to $42.3 billion to $42.8 billion, comps to +1.9% to +3.0%.
The backdrop: A one-time tariff refund also boosted the quarter’s margin. Domestic gross margin rose 60 basis points, and $34 million of the gain came from refunds of duties collected under IEEPA. CBP began returning those duties after the Supreme Court struck the tariffs down in February.
Other retailers booked much larger refunds in the same reporting cycle. Walmart received about $2.9 billion, Target $994 million, Home Depot $730 million, and Lowe’s $80 million, and each is spending it differently: Walmart on prices, Home Depot against cost inflation.
Best Buy’s refund is small because it imports directly only 2% to 3% of what it sells. So, most of the refunds on its goods go to its vendors, according to the company’s first-quarter call.
Best Buy’s guidance assumes a similar refund in the third quarter and none in the fourth. That takes away a margin cushion in the same quarter the company sells through the inventory it bought early, while memory costs are forecast to keep rising.
The pattern: Best Buy is the second computing-hardware seller in two days of August earnings to describe a version of this move. It is also the fourth company in the category to make one since late 2025.
The moves differ by position in the chain: the retailer buys finished goods early, the PC makers locked component supply, and Dell’s enterprise customers are locking capacity through Dell.
HP ended its third quarter with $10.3 billion of inventory, and its nine-month build consumed $1.9 billion of cash, nearly three times the prior year’s $671 million. Personal Systems president Ketan Patel said in May the company had “secured the memory and storage we need for the fiscal year,” through supplier relationships and long-term agreements. On the third-quarter call, CFO Karen Parkhill said the benefit of that lower-cost inventory “is largely behind us,” and HP expects input costs to keep rising into 2027.
Lenovo signed long-term DRAM and NAND supply agreements before contract prices rose, DigiTimes reported in November. It still moved to raise prices on some commercial devices in March, per TrendForce.
At Dell, the customers are the ones locking in supply. COO Jeff Clarke said in May that memory uncertainty “is driving customers to proactively secure access to infrastructure” over longer periods, some through supply arrangements running up to five years.
The counter: Apple, the largest memory buyer in the group, is not locking anything in. On its July-quarter call, CFO Kevan Parekh guided September-quarter gross margin to 47% to 48%, and said memory costs explain more than the sequential decline.
But CEO Tim Cook described Apple’s cushion as “carry-in inventory” from ordinary purchasing, and said that benefit shrinks after the September quarter. Asked about multi-year memory deals, he answered “evaluating all options.”
The last memory cycle also ended quickly. The 2016-2018 DRAM cycle broke in 2019: contract prices roughly halved, and Micron’s revenue fell 42% year over year by its fiscal fourth quarter.
Willy Shih, a Harvard Business School professor who studies chip supply chains, warned memory investors in May that this run will end too. “This too will pass,” he told Fortune.
But this cycle differs from the last one in where the shortage comes from. Memory makers are moving capacity toward server chips. TrendForce says that is reducing the supply available for PC DRAM, while the 2018 cycle broke because buyers who had stockpiled stopped buying.
The extra stock comes to about $480 million year over year, and Bonfig said a lot of that build is computing, not all of it. Applying TrendForce’s 13% to 18% forecast to the full $480 million puts the saving at no more than about $86 million, and the computing share alone is smaller than that. If the cycle breaks the way 2019’s did, the same stock carries the markdown instead.
Best Buy says fast turns limit that risk. Computing sells through quickly, so the company does not hold stock bought at any one price for long.
What’s next: TrendForce’s contract-price forecasts put the next DRAM and NAND increases in the third quarter. Best Buy reports its own third quarter in late November, the first with Bonfig as CEO and Anne Bramman as CFO. That report carries the first balance sheet that will show whether the front-loading wound down or continued.
