Earnings Analysis: Walmart Beats on Revenue and EPS but Cautious Outlook Rattles a Trillion-Dollar Stock

Walmart's fiscal Q4 2026 revenue of $190.66 billion narrowly topped the $190.43 billion consensus and represented a 5.6% increase over the $180.55 billion posted in the year-ago period. Adjusted earnings per share came in at $0.74 versus estimates of $0.73. On a GAAP basis, net income declined to $4.24 billion, or $0.53 per share, from $5.25 billion, or $0.65 per share, a year earlier — a drop driven largely by investment-related losses and one-time items rather than operational weakness.

The more telling story sits in the operating income line: $8.71 billion for the quarter, a 10.8% year-over-year increase that outpaced top-line growth and points to genuine margin expansion. Gross profit margin ticked up to 24.67% from 24.58% in the prior-year Q4, while SG&A expenses as a percentage of revenue held relatively steady despite higher fulfillment costs associated with the company's booming e-commerce operations.

Across the full fiscal year, Walmart generated $713.2 billion in total revenue — a record, but no longer enough to claim the title of the world's largest company by sales. Amazon posted $716.9 billion in revenue for its most recent fiscal year, dethroning Walmart for the first time, although the comparison is imperfect given Amazon's substantial cloud computing and advertising businesses.

Perhaps the most impressive data point in the entire report: U.S. e-commerce sales surged 27% year-over-year in the fourth quarter, marking Walmart's 15th consecutive quarter of double-digit digital growth. Global e-commerce rose 24%. For the first time, digital sales accounted for 23% of Walmart's total U.S. revenue — a record high that would have seemed improbable just a few years ago for a company built on sprawling supercenters.

The engine behind this growth is store-fulfilled delivery, which jumped approximately 50% in the quarter. Walmart's roughly 4,700 U.S. stores double as micro-fulfillment centers, enabling same-day and next-day delivery at a fraction of the cost of dedicated warehouse networks. CFO John David Rainey told CNBC that this speed-and-scale combination is "really translating into continued market share gains," particularly among higher-income households that increasingly see Walmart as a credible alternative to Amazon for convenience-driven purchases.

Walmart Connect, the company's advertising business, grew approximately 41% in Q4 — a critical metric because ad revenue carries margins several multiples higher than grocery sales. Alongside the third-party marketplace, which continues to expand its seller base, these businesses represent Walmart's attempt to build an Amazon-style flywheel: attract more shoppers online, collect data on their behavior, and monetize that attention through high-margin advertising. The strategy is working, and it is a major reason operating income growth (10.8%) outpaced revenue growth (5.6%) in the quarter.

Buried in the bullish headline numbers is a more nuanced — and somewhat troubling — consumer story. CFO Rainey acknowledged that Walmart continues to "see some pressure on the lowest income cohort," noting that spending among upper-income households has "gapped out" relative to lower-income shoppers compared to a year ago. The trend reflects what economists have labeled the "K-shaped economy," in which asset-rich consumers continue to spend freely while lower-income households tighten their belts.

The data backs this up. Walmart said that in fashion — a category that grew by a mid-single-digit percentage in Q4 — almost all of the increase came from households earning more than $100,000 annually. U.S. comparable sales rose 4.6% excluding fuel, driven by higher transaction counts rather than bigger basket sizes, suggesting that new customers (likely higher earners) are walking through the door while existing lower-income customers are buying less per trip.

This dynamic is both a competitive advantage and a strategic vulnerability. On one hand, Walmart is successfully stealing share from Target (TGT) — which trades at just 14 times earnings with a $52.4 billion market cap, a fraction of Walmart's $1 trillion-plus valuation — and from traditional grocers. On the other hand, a retailer that built its identity on serving value-conscious shoppers cannot afford to lose relevance with its core demographic. Rainey's comment that U.S. inflation in the quarter was "just above 1%" at Walmart, with food inflation running slightly below that level, suggests the company is absorbing costs to protect price perception — a sustainable tactic at Walmart's scale, but one that could pressure margins if the macro environment deteriorates.

The stock's negative reaction centers entirely on forward guidance. For fiscal year 2027, Walmart projected net sales growth of 3.5% to 4.5% and adjusted EPS of $2.75 to $2.85. Wall Street had been modeling $2.96, according to LSEG — meaning the midpoint of Walmart's range ($2.80) is roughly 5% below consensus expectations. For the first quarter specifically, Walmart guided for sales growth of 3.5% to 4.5% and adjusted EPS of $0.63 to $0.65, also below Street estimates.

The valuation math makes the guidance miss particularly painful. At Thursday's price of $126.04, Walmart trades at approximately 44 times trailing earnings and roughly 45 times the midpoint of its new fiscal-year guidance. Costco (COST), the other retail premium-multiple stock, trades at a similar P/E of 53 times, but it is growing its top line faster and has not yet reported its holiday quarter. Target, by contrast, trades at under 14 times earnings — a stark reflection of how the market has bifurcated retail into haves and have-nots.

Rainey's comments on tariffs offered some reassurance, noting that the retail industry has "largely absorbed or seen the brunt of the impact from tariffs" and that the pricing environment is normalizing. But investors have heard cautious first-quarter guidance from Walmart before — the company has a well-documented history of under-promising early in the fiscal year — and the question is whether this time the conservatism reflects genuine uncertainty about consumer spending or simply a new CEO setting a low bar he can clear.

John Furner's first earnings report as CEO did not signal any dramatic strategic pivot, which is likely exactly what the board intended. Furner, who led Walmart U.S. before his promotion and oversaw the domestic e-commerce acceleration, is expected to double down on the McMillon-era priorities: growing the digital business, expanding the third-party marketplace, scaling Walmart Connect advertising revenue, and attracting higher-income shoppers without alienating the company's value-seeking core.

Alongside the earnings release, Walmart announced a new $30 billion share repurchase authorization, replacing a $20 billion program approved in 2022. The signal is clear: management believes the stock is attractively valued even at $1 trillion, and it intends to return capital aggressively. In fiscal year 2026, the company repurchased $8.09 billion in stock and paid $7.51 billion in dividends — a combined $15.6 billion return to shareholders, funded comfortably by the $41.6 billion in operating cash flow generated during the year.

The balance sheet remains solid if leveraged: total debt stood at $67.1 billion against $10.7 billion in cash at quarter end, for net debt of $56.4 billion. The debt-to-equity ratio of 0.67 is manageable for a company with Walmart's cash generation profile, and interest coverage of nearly 99 times in the quarter (aided by lower non-operating charges) gives ample runway. Capital expenditures for the full fiscal year came to $26.6 billion, a 12% increase that reflects investments in store remodels, automation, and supply chain technology — spending that should continue to widen the operational gap between Walmart and smaller competitors who cannot match this level of investment.