8-K: Walmart Reports Strong Q2, Raises FY26 Outlook

Walmart Inc. announced robust second-quarter revenue growth and raised its full-year net sales and adjusted EPS outlook for fiscal year 2026, driven by strong eCommerce and grocery performance.

Summary

• Total revenue for the second quarter of fiscal year 2026 was $177.4 billion, an increase of 4.8% year-over-year, or 5.6% in constant currency.
• Global eCommerce sales grew significantly by 25%, with digital mix increasing across all segments.
• Walmart U.S. comparable sales, excluding fuel, rose by 4.6%, driven by strong growth in grocery and health & wellness.
• GAAP EPS for the quarter was $0.88, while Adjusted EPS was $0.68.
• Operating income decreased by 8.2% to $7.286 billion, affected by discrete legal and restructuring costs, but adjusted operating income in constant currency increased by 0.4%.
• The company raised its fiscal year 2026 outlook for net sales growth to 3.75% to 4.75% and adjusted EPS to $2.52 to $2.62.
• Operating cash flow for the six months ended July 31, 2025, increased by $2.0 billion to $18.4 billion.
• Free cash flow for the six months ended July 31, 2025, increased by $1.1 billion to $6.9 billion.
• The company repurchased 67.4 million shares year-to-date for $6.2 billion, with $5.9 billion remaining under the current authorization.

Sentiment

Score: 8

Explanation: The filing indicates strong operational performance with significant growth in key strategic areas like eCommerce and advertising. The company raised its full-year net sales and adjusted EPS guidance, signaling confidence in future performance. While reported operating income declined due to specific charges and higher self-insured claims, the underlying adjusted operating income showed growth. The positive cash flow generation and share repurchase activity further support a strong financial position. The only notable negatives are the specific charges and higher general liability claims, which are being managed.

Positives

• Strong total revenue growth of 4.8% (5.6% in constant currency) to $177.4 billion for Q2 FY26.
• Global eCommerce sales surged by 25%, led by store-fulfilled pickup & delivery and marketplace.
• Walmart U.S. comparable sales (excluding fuel) increased by a robust 4.6%, reflecting market share gains.
• The global advertising business grew 46%, including VIZIO, with Walmart Connect in the U.S. up 31%.
• Membership and other income increased 5.4%, including 15.3% growth in global membership income.
• Gross margin rate improved by 4 basis points, primarily driven by Walmart U.S.
• Adjusted operating income in constant currency increased by 0.4%, despite various headwinds.
• Operating cash flow increased by $2.0 billion to $18.4 billion for the six months ended July 31, 2025.
• Free cash flow increased by $1.1 billion to $6.9 billion for the six months ended July 31, 2025.
• Return on Assets (ROA) improved to 8.3% for the trailing 12 months ended July 31, 2025, up from 6.4% in the prior year.
• Raised fiscal year 2026 net sales growth outlook to 3.75% to 4.75% from previous guidance.
• Raised fiscal year 2026 adjusted EPS outlook to $2.52 to $2.62 from previous guidance.
• Walmart U.S. saw share gains across key categories and income brackets, including upper-income households.
• Walmart U.S. store-fulfilled delivery sales grew nearly 50%, with approximately one-third of orders expedited (3 hours or less).
• Walmart International net sales in constant currency grew 10.5%, led by strong performance in China, Walmex, and Flipkart.
• Sam's Club U.S. eCommerce sales grew 26%, with club-fulfilled pickup & delivery accounting for nearly 50% of this growth.
• Sam's Club U.S. membership income grew 7.6% with steady growth in member counts and renewal rates.

Negatives

• Reported operating income decreased by 8.2% ($0.7 billion) due to discrete legal and restructuring costs.
• Operating income was negatively affected by approximately 560 basis points from higher self-insured general liability claims expense.
• Walmart U.S. operating income was impacted by a 620 basis points headwind from increased self-insured general liability claims expense.
• Walmart International operating income in constant currency declined by 2.8% due to strategic growth investments in India, Canada, and Mexico.
• Currency rate fluctuations negatively affected Walmart International sales by $1.5 billion and operating income by $0.1 billion.
• Sam's Club U.S. operating income decreased by 15.8% ($0.1 billion), negatively affected by $80 million from strategic supply chain reorganization charges.
• Sam's Club U.S. adjusted operating income growth was negatively affected by approximately 710 basis points from higher general liability claims expense.
• Sam's Club U.S. inventory increased by 11.7%.

Risks

• Fluctuations in foreign currency exchange rates.
• Changes in global economic and geopolitical conditions, tariff and trade policies.
• Customer demand and spending, inflation, interest rates, and world events.
• Expenses pertaining to general liability claims, for which the company self-insures.
• Impact of pandemics on business and the global economy.
• Changes in market interest rates and market levels of wages.
• Changes in the size of various markets, including eCommerce markets.
• Unemployment levels, consumer confidence, disposable income, credit availability, spending levels, shopping patterns, debt levels, and demand for certain merchandise.
• The effectiveness of the implementation and operation of strategies, plans, programs, and initiatives.
• Unexpected changes in objectives and plans.
• The impact of acquisitions, investments, divestitures, store or club closures, and other strategic decisions.
• Ability to successfully integrate acquired businesses, including within the eCommerce space.
• Changes in the trading prices of certain equity investments held.
• Initiatives of competitors, competitors' entry into and expansion in markets, and competitive pressures.
• Customer traffic and average ticket in stores, clubs, and eCommerce websites.
• The mix of merchandise sold, the cost of goods sold, and the shrinkage experienced.
• Trends in consumer shopping habits around the world and in the markets in which the company operates.
• Gross profit margins.
• The financial performance of Walmart and each of its segments, including the amounts of cash flow during various periods.
• Transportation, energy, and utility costs; commodity prices and the price of gasoline and diesel fuel.
• Supply chain disruptions and disruptions in seasonal buying patterns.
• The availability of goods from suppliers and the cost of goods acquired from suppliers.
• Consumer acceptance of and response to stores, clubs, eCommerce platforms, programs, merchandise offerings, and delivery methods.
• Cyber security events affecting the company and related costs and business impact.
• Developments in, outcomes of, and costs incurred in legal or regulatory proceedings to which the company is a party or is subject, and any associated liabilities, obligations, and expenses.
• Consumer enrollment in health and drug insurance programs and such programs' reimbursement rates and drug formularies.
• The effective tax rate and the factors affecting it, including assessments of certain tax contingencies, valuation allowances, changes in law, administrative audit outcomes, impact of discrete items, and the mix of earnings between the U.S. and international operations.
• Changes in existing tax, labor, and other laws and regulations and changes in tax rates, including the enactment of laws and the adoption and interpretation of administrative rules and regulations.
• The imposition of new taxes on imports, new tariffs, and changes in existing tariff rates.
• The imposition of new trade restrictions and changes in existing trade restrictions.
• Adoption or creation of new, and modification of existing, governmental policies, programs, initiatives, and actions in the markets in which Walmart operates and elsewhere.
• Changes in accounting estimates or judgments.
• The level of public assistance payments.
• Natural disasters, changes in climate, geopolitical events, and catastrophic events.
• Changes in generally accepted accounting principles in the United States.

Future Outlook

For the third quarter of fiscal year 2026, net sales in constant currency are expected to increase by 3.75% to 4.75%, and operating income in constant currency is projected to increase by 3.0% to 6.0%, with adjusted EPS expected to be between $0.58 and $0.60. For the full fiscal year 2026, the company raised its net sales growth outlook to 3.75% to 4.75% and adjusted EPS to $2.52 to $2.62, while adjusted operating income guidance remains unchanged at 3.5% to 5.5% growth.

Management Comments

• The top-line momentum we have in our business comes from how we're innovating and executing.
• Connecting with our customers and members through digital experiences is helping to drive our business, and the way we're deploying AI will make these experiences even better.
• We're people-led and tech-powered, and I love how our associates continue to drive change and results for our company.

Industry Context

Walmart's strong eCommerce growth of 25% globally, coupled with significant gains in its advertising business, reflects a broader industry trend towards digital transformation and diversified revenue streams beyond traditional retail. The focus on store-fulfilled delivery and expedited orders aligns with increasing consumer demand for convenience and speed in the retail sector. While the company faces headwinds from higher self-insured general liability claims, its ability to maintain positive adjusted operating income growth and raise its full-year outlook suggests resilience in a dynamic retail environment, leveraging its scale and omnichannel capabilities to capture market share, including from higher-income households.

Comparison to Industry Standards

• The filing does not explicitly list specific comparable companies, projects, or results for direct comparison.
• The strong eCommerce growth (25%) and advertising business growth (46%) are indicative of performance that is competitive with or exceeding many traditional retailers and even some digital-first companies.
• The company's ability to gain share across income brackets, including upper-income households, suggests a strong value proposition that resonates broadly, potentially outperforming competitors focused on specific demographics during periods of economic uncertainty.
• The emphasis on 'store-fulfilled pickup & delivery' and 'expedited' orders (nearly 50% growth in store-fulfilled delivery, ~1/3rd of orders expedited) positions Walmart favorably against pure-play e-commerce competitors by leveraging its extensive physical store footprint for last-mile efficiency.

Legal Proceedings

• Charges related to certain legal matters, impacting adjusted EPS by $0.05 for Q2 FY26.

Stakeholder Impact

• Shareholders: Positive impact due to raised guidance for net sales and adjusted EPS, strong share repurchase activity ($6.2 billion YTD), and increased ROA.
• Customers: Benefiting from increased convenience through eCommerce/omnichannel offerings, more Rollbacks in pricing, faster delivery options (e.g., ~1/3rd of Walmart U.S. store-fulfilled orders expedited), and expanded assortment.
• Employees (Associates): Mention of continued investments in associate wages for Sam's Club U.S., Canada, and Mexico. Management comments highlight associates driving change and results.
• Suppliers: Implied continued strong demand for goods given sales growth and inventory management.

Next Steps

• Continue innovation and execution in the business.
• Further deployment of AI to enhance digital experiences.
• Strategic growth investments in India, Canada, and Mexico.
• Continued focus on store-fulfilled pickup & delivery and marketplace growth.
• Ongoing inventory management.
• Capital expenditures of approximately 3.0% to 3.5% of net sales for FY26.

Key Dates

Recommendation

The filing demonstrates robust underlying business performance, characterized by strong top-line growth, significant eCommerce expansion, and effective market share gains across various segments and income demographics. The decision to raise full-year net sales and adjusted EPS guidance signals strong management confidence and positive momentum. While reported operating income was impacted by discrete legal and restructuring charges, the adjusted operating income in constant currency showed positive growth, indicating healthy core operations. The substantial free cash flow generation and ongoing share repurchase program further enhance shareholder value. The strategic investments in technology and international markets position the company for sustained long-term growth, making it an attractive investment despite some short-term cost pressures.

Keywords

Retail, Omnichannel, eCommerce, Grocery, General Merchandise, Sam's Club, Walmart U.S., Walmart International, Financial Results, Earnings, Revenue, EPS, Operating Income, Cash Flow, Guidance, Supply Chain, Advertising Business, Membership, VIZIO, AI, Consumer Spending