Walmart (WMT) Q4 2026 earnings review
Profit Engine Firing: Adj. OI Grows 2x Sales for the Third Straight Year
Walmart capped FY26 with a strong Q4: net sales rose 5.6% to $188.9B (+4.9% cc), adjusted operating income surged 10.5% (cc)—more than double the rate of sales growth—and adjusted EPS climbed 12.1% to $0.74. Every segment grew profits faster than sales. Global eCommerce grew 24%, reaching 23% of the sales mix. GAAP EPS fell 18.5% to $0.53, dragged down by $2.1B in equity investment losses (primarily Symbotic), but this is noise—adjusted numbers reflect the real story. FY27 guidance signals confidence: adj. OI (cc) growth of 6-8% on sales growth of 3.5-4.5%, and a new $30B buyback authorization. Full-year revenue crossed $700B for the first time.
🐂 Bull Case
Adjusted OI (cc) grew 10.5% vs 4.9% sales growth in Q4—the strongest quarterly leverage in FY26. This is the third consecutive year of profit growing faster than sales. FY27 guidance of 6-8% OI growth vs 3.5-4.5% sales growth implies the leverage continues.
Advertising ($6.4B, +46% FY) and membership ($4.3B+) now represent roughly one-third of operating income. eCommerce exceeded $150B in sales and was profitable in all four quarters. These high-margin, fast-growing streams are still early in their maturity curve.
The board authorized a new $30B share repurchase program, Walmart's largest ever. Combined with a 13% dividend increase ($0.99/share annualized), Walmart returned $15.6B to shareholders in FY26 through dividends and buybacks.
🐻 Bear Case
FY27 cc sales guidance of 3.5-4.5% represents a meaningful step-down from FY26's 5.1% cc growth. Maximum Fair Pricing legislation adds a ~100 bps headwind to health and wellness comps. The company will need to prove it can maintain profit leverage as the top line moderates.
Capital expenditures reached $26.6B in FY26 (3.8% of sales), up from $23.8B. While management says spending is peaking on supply chain automation and store remodels, FCF of $14.9B represents just 36% of operating cash flow. Total debt rose $5.7B to $51.5B.
GAAP EPS of $0.53 vs adjusted $0.74 highlights the growing gap driven by equity investment swings. The $2.1B Q4 loss (primarily Symbotic) and FY26's effective tax rate of 24.4% vs 23.4% in FY25 make reported earnings unpredictable even as the core business performs well.
⚖️ Verdict: 🟢
Bullish. Walmart's model transformation is delivering tangible results: profit is growing consistently faster than sales, eCommerce is profitable at scale, and high-margin businesses are compounding. FY27 guidance implies OI growth acceleration (6-8% vs 5.4% in FY26). The CapEx peak and sales deceleration are real headwinds, but management has beaten guidance each of the past three years. The underlying business has rarely been in better shape.
Key Themes
eCommerce Profitable at Scale, Driving the Business
Global eCommerce sales grew 24% in Q4 and exceeded $150B for FY26—representing 23% of the total sales mix, up 550 bps from just two years ago. Critically, eCommerce was profitable in all four quarters of FY26, with double-digit incremental margins. In the U.S., 35% of store-fulfilled orders arrived in under 3 hours. China eCommerce surpassed 50% of the sales mix. Sam's Club doubled its club-fulfilled delivery sales. CFO Rainey noted they've 'far surpassed break-even' and don't even track it as a separate metric internally anymore.
Advertising and Membership: The Profit Flywheel
The combination of advertising income and membership fees represented nearly one-third of Q4 operating income—up from about a quarter just one year ago. Global advertising grew 46% for FY26 to nearly $6.4B, with Q4 growth at 37% (Walmart Connect U.S. +41%). VIZIO saw triple-digit ad growth in Q4 as monetization ramps. Membership fees exceeded $4.3B globally, with 15.1% fee revenue growth in Q4. These businesses carry structurally higher margins than retail and are still early: Walmart's ad revenue as a percentage of addressable GMV still lags best-in-class competitors significantly.
Agentic Commerce via Sparky
Walmart's AI shopping assistant, Sparky, showed encouraging early results: roughly half of app users engaged with Sparky in Q4, and those users had average order values about 35% higher than non-Sparky users. The assistant converts search-based shopping into intent-driven commerce—understanding what a customer is trying to accomplish (a birthday party, a camping trip, meal planning) and generating personalized solutions. Furner noted that Sparky connects digital intent to Walmart's physical assets and 1.5 million U.S. associates for immediate fulfillment. Still very early, but the engagement velocity is promising.
Market Share Gains Led by Upper-Income Households
Walmart continues to gain market share across all income cohorts, with the majority of gains again coming from households earning above $100,000. This is now a multi-year trend. In Q4, Walmart U.S. comp transactions grew 2.6% and average ticket rose 2.0%. Fashion had several consecutive quarters of mid-single-digit growth. The addition of ~100 new elevated brands in FY26 (Fender, Kenmore, Weber, Stanley) and 40 bps growth in private brand penetration in grocery show the assortment is broadening while the core value proposition holds.
International Profit Turnaround in Q4
Walmart International delivered standout Q4 results: operating income surged 36% reported (+26.5% cc), with OI margin expanding 96 bps to 5.3%. This was driven by lower eCommerce losses, format mix improvements, and lapping prior-year strategic investments. China sales grew 19.3% (cc) with eCommerce exceeding 50% of sales. Walmex comp sales grew 3.3% in Mexico. The full-year reported OI decline of 7.2% was driven by the $722M PhonePe share-based compensation charge and currency headwinds; adjusted OI (cc) grew 8.0% for the year.
Sam's Club U.S. Comp Deceleration
Sam's Club U.S. comp (ex-fuel) decelerated from 6.8% in Q4 FY25 to 4.0% in Q4 FY26, with a trough of 3.8% in Q3. Average ticket turned negative (-1.3%) for the first time in recent quarters, while transactions remained strong at +5.3%. Gross profit rate fell 16 bps, and operating income grew just 3.8%—well below the 6.6% at Walmart U.S. The good news: membership income grew 6.1%, eCommerce surged 23%, and the business is investing in delivery (club-fulfilled express delivery to 60% of U.S. households in under 3 hours). But the margin trajectory bears watching.
Maximum Fair Pricing Headwind Begins
The Maximum Fair Pricing legislation on branded drugs took effect January 1, 2026, and management expects it to create a ~100 bps headwind to health and wellness comps for FY27. In Q4, with only one month of impact, it already represented about 30 bps of drag. Health and wellness has been one of Walmart's strongest comp categories (high single-digits in Q4), so this legislative headwind directly impacts a key growth driver. Management believes the overall business will still grow through it, but it narrows the margin for error on comp sales.
Lower-Income Consumer Under Pressure
CEO Furner explicitly noted that households earning below $50,000 have 'wallets that are stretched' and are in some cases managing spending paycheck to paycheck. During the Q4 government shutdown, there was a measurable impact on sales from benefits disruptions. While Walmart gains disproportionately when consumers trade down (upper-income gains offset lower-income pressure), this cohort represents a meaningful portion of Walmart's customer base. If economic conditions deteriorate further—student loan delinquencies, hiring slowdown—this could become a more significant drag on comp transactions.
CapEx at Peak Levels, Debt Rising
FY26 capital expenditures of $26.6B (3.8% of sales) were the highest in company history, up $2.9B from FY25. Total debt rose $5.7B to $51.5B. Management says this is the 'peak' of spending on supply chain automation and store remodels, guiding 3.5% of sales for FY27. On a ~$735B sales base, that still implies ~$25.7B in CapEx. While these investments are driving the automation and delivery speed advantages that underpin the bull case, the cash consumption is significant—FY26 free cash flow of $14.9B was just 36% of operating cash flow, limiting the pace of deleveraging.
CEO Transition and 'Build Once, Scale Globally' Restructuring
John Furner has fully taken over from Doug McMillon as CEO. The call reinforced strategic continuity—no change in capital allocation philosophy or growth framework. A key organizational change: Seth Dallaire's portfolio (marketplace, VIZIO, advertising, data services, Walmart+) was elevated from a Walmart U.S. role to an enterprise role, reflecting a 'build once, scale globally' platform approach. International segment leadership was restructured to accelerate deployment of U.S.-proven digital capabilities (advertising, fulfillment services, AI tools) across global markets. Management believes this will lower the marginal cost of growth over time.
Grocery Mix Still a Margin Headwind, But Improving
Sales growth continues to skew toward lower-margin grocery and health/wellness categories, which pressures gross margin. However, merchandise category mix is improving as a headwind. General merchandise was positive globally, with Walmart U.S. GM growing low single-digits, led by fashion. CFO Rainey noted that the negative mix impact from GM is expected to be about half of what it was in FY25. The company is actively mitigating grocery inflation through rollbacks (6,200 in Q4, up 23% YoY) to unlock purchasing power for GM categories.
Other KPIs
Expanding. Up 40 bps from 6.2% in Q4 FY25, the highest quarterly adjusted EBITDA margin in the trailing five quarters. This metric strips out the noise from equity investment swings and PhonePe charges, showing the core operational improvement. Adjusted EBITDA reached $12.4B in Q4, driven by higher gross margins, operating expense leverage (-13 bps), and the growing contribution from advertising and membership.
Up $5.1B (+14.1%) from $36.4B in FY25. The increase was driven by higher operating income, lower cash tax payments, and favorable timing of certain payments. Free cash flow grew 17.9% to $14.9B despite the $2.9B increase in CapEx. Shareholder returns totaled $15.6B ($7.5B dividends + $8.1B buybacks). Cash and equivalents ended at $10.7B, up from $9.0B.
Stable. Down 40 bps from 15.5% in FY25 due to higher average invested capital from record CapEx. However, ROI benefited from improved operating income. The decline includes a ~35 bps impact from discrete items (PhonePe share-based compensation and certain legal matters). Management highlighted that ROI will benefit as the current cycle of supply chain investments begins generating returns—only ~50% of eCommerce FC volume is automated, and ~60% of U.S. stores receive freight from automated DCs.
Stable growth. Up 6.6% YoY with operating margin expanding 10 bps to 5.4%. Growth driven by higher gross margins (+17 bps from inventory management and business mix), expense leverage (-2 bps from labor productivity), and improved eCommerce economics. SG&A leveraged for the first time in several quarters. Walmart Connect advertising was up 41%, contributing meaningfully to the operating income outperformance vs sales. Full-year OI of $25.2B grew 5.3%.
Guidance
Accelerating. FY26 delivered 5.4% adj OI (cc) growth, so the FY27 guide midpoint of 7.0% represents a step-up. The base is $31.0B in adjusted OI. Implied midpoint: ~$33.2B. Growth drivers include continued margin expansion from business mix (advertising, membership), automation-related productivity, and less merchandise category mix headwind. Q1 is expected to be the weakest quarter due to expense timing and lapping tariff impacts from Q2 FY26. Management noted they've outperformed initial OI guidance each of the past three years.
Decelerating. Down from 5.1% cc growth in FY26, reflecting the ~100 bps pharmacy headwind from Maximum Fair Pricing legislation and efforts to mitigate food price inflation. Management expects eCommerce to remain the primary growth driver, with modest increases from store and club sales. At the midpoint, implies ~$735B in net sales. Currency is expected to be a ~70 bps tailwind to reported sales.
Accelerating. Growth of 4.2-8.0% on the FY26 base of $2.64. Higher interest expense (~$200-300M increase) and a slightly higher effective tax rate (23.5-24.5% vs 23.9% adjusted in FY26) partially offset the OI leverage. At the midpoint of $2.80, implies ~6.1% growth—consistent with the profit-faster-than-sales framework.
Steady. Growth of 3.3-6.6% vs $0.61 in Q1 FY26. Management flagged Q1 as the weakest quarter for OI growth (4-6% cc) due to expense timing and lapping tariff impacts that began in Q2 FY26. Importantly, first-half results are expected to be within the range of full-year guidance. Currency is expected to provide an ~150 bps tailwind to reported OI in Q1.
Stable to slightly down. On an implied ~$735B sales base, this equates to approximately $25.7B—down from $26.6B in FY26. Management stated this is the 'peak' of annual spending on supply chain automation and store remodels. Investments in AI are incorporated into the CapEx assumptions, with Walmart pursuing AI through partnerships rather than building proprietary infrastructure.
Key Questions
Marketplace Profitability Timeline
You characterized Marketplace as 'an area of ongoing investment' and declined to discuss a profitability timeline. With Marketplace categories growing 40%+ and WFS at 52% seller penetration, when should investors expect Marketplace to contribute positively to segment margins? What's the path from investment to harvest?
Tariff Sensitivity in FY27
Last year, tariffs caused significant quarterly earnings volatility and required withdrawing Q2 guidance. Your FY27 outlook assumes current tariff levels. What is the sensitivity—in basis points of OI margin—to a potential escalation in tariffs, particularly on Chinese imports? Have you pre-bought inventory as a buffer?
CapEx Post-Peak Trajectory
You described FY26/FY27 as 'peak' spending levels. What is the glide path for CapEx as a percentage of sales over the next 2-3 years? What level of free cash flow conversion should investors expect once automation investments mature?
Sparky Monetization and Advertising Interplay
With half of app users engaging Sparky and 35% higher AOV, how do you plan to integrate advertising into agentic commerce without eroding customer trust? Will Sparky recommendations be subject to sponsored placements, and how will you measure the effectiveness?