Walmart Inc. WMT delivered a fiscal second-quarter earnings beat, broad digital growth and a higher full-year outlook. The results strengthened the operating story as faster-growing businesses continued to improve the revenue mix.
The next test is profit conversion. Rising expenses, heavier capital spending and planned price investments could keep near-term operating leverage from matching the pace of sales and digital gains.
Walmart’s Q2 Beat Shows Broad-Based Strength
Second-quarter revenues increased 5.9% year over year to $187.9 billion, topping the Zacks Consensus Estimate of $186.3 billion. Adjusted earnings rose 19.1% to 81 cents per share and beat the consensus estimate of 73 cents.
Walmart Inc. Revenue (Quarterly)
Walmart Inc. revenue-quarterly | Walmart Inc. Quote
Constant-currency revenues advanced 5.1%, while adjusted operating income increased 17.4% at constant currency to $9.25 billion. The gross profit rate improved 96 basis points to 25.4%, helped by tariff refunds and a more favorable business mix.
WMT’s Digital Mix Is Improving Economics
Global e-commerce sales rose 23%, global advertising increased 38% and membership fee revenues advanced 17%. Walmart U.S. e-commerce generated double-digit incremental margins in the first half as delivery density, fee-based speed, advertising, membership and automation improved digital economics.
Peers are investing in similar channels. Target Corporation TGT reported 8.7% growth in digital comparable sales in its latest quarter, led by more than 25% growth in same-day delivery. Costco Wholesale Corporation COST reported 17.9% growth in digitally enabled comparable sales for August, highlighting continued digital demand across large-format retail.
Walmart Raised Its Fiscal 2027 Outlook
Walmart raised its fiscal 2027 constant-currency net sales growth forecast to 4%-5% from 3.5%-4.5%. The adjusted operating income growth outlook increased to 7%-8.5% from 6%-8%.
The company also lifted adjusted EPS guidance to $2.80-$2.87 from $2.75-$2.85. The higher outlook reflects confidence in sustained growth even as Walmart plans to reinvest tariff-refund benefits into price and customer experience.
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WMT’s Q3 Guide Highlights the Cost Tension
For the third quarter, Walmart expects constant-currency net sales growth of 3%-3.75%, while adjusted operating income is projected to rise only 2%-4%. Adjusted EPS is expected to be 62-64 cents.
Expense pressure remains a constraint. Higher U.S. health-care costs and depreciation weighed on second-quarter expenses, while management expects more than $2 billion of incremental fuel-related costs in fiscal 2027. Vibe acquisition and integration costs are also expected to reduce operating income growth by about 20 basis points.
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Walmart’s Capex Could Test Cash Conversion
First-half capital expenditures increased to $14.2 billion from $11.4 billion as Walmart invested in stores, technology, fulfillment and automation. Operating cash flow rose $1.4 billion to $19.7 billion, but free cash flow declined $1.4 billion to $5.5 billion as capital spending increased.
Management raised fiscal 2027 capital-spending guidance to approximately 4% of net sales from about 3.5%. Walmart still expects double-digit free-cash-flow growth for the year, leaving cash conversion dependent on operating cash flow keeping pace with the heavier investment load.
WMT’s Signals Reward Growth but Warn on Momentum
The quarter reinforced Walmart’s growth case, but the third-quarter profit guide and elevated investment needs show why cost discipline remains important. Stronger sales and digital monetization can support earnings, yet near-term upside may depend on better expense leverage and cash conversion.
The stock currently carries a Zacks Rank #3 (Hold). Its Growth Score of A points to favorable growth characteristics, while the Value Score of D and Momentum Score of F are weaker offsets. The VGM Score of C leaves the combined style profile mixed, supporting a measured rather than aggressive stance. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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