Walmart reported their fiscal Q3 ’26 financial results last Thursday morning, November 20th, ’25, and the stock bounced sharply during the day’s trading, up 6.46%, despite the overall difficult tape from the Nvidia-led drop in the markets causing the SP 500 to decline 1.5% and the Nasdaq Composite to fall -2.5%.
That being said, it’s one day’s action so don’t make too much of it. Many pundits think Walmart is overvalued in the low $100’s here, but the stock has been pretty resilient in 2025, amidst the tariff pressures and despite talk of grocery inflation, despite Walmart saying on the conference call that the grocery segment is the product line with most price rollbacks. Per the conference call transcript, Walmart has 7,400 active price rollbacks in place today, and more than half of those rollbacks are in the grocery category.
The big reveal in the Q3 ’26 conference call was the raised guidance for Q4 ’26 and the fiscal year ’26, led by strong e-commerce results (+27% y-o-y) and healthy quarterly comps.
Most importantly, adjusted operating income rose 8% y-o-y, while delivery centers are only halfway through their supply chain automation initiative, with the goal of having all the fulfillment centers 100% automated in the next few years. The comment on the conference call quoted directly, “Roughly 50%, in fact more than 50% of our volume from fulfillment centers is coming from automation. And that translates into lower shipping costs. Our shipping costs have been down for many quarters in the 30% range.” (This is a direct win for e-commerce as Walmart is delivering product to front doors, at a lower cost than previous years.)
Management really went out of their way to talk about e-commerce growth both in the US and internationally. E-commerce has just become profitable for Walmart in the last few quarters, and – from parsing the conference call notes – may be more profitable internationally than it is in the US, at least for now. Low to mid 20% ecommerce growth is a plus for Walmart although they haven’t really broken out the numbers for the sell-side analysts yet. The same with advertising and Walmart Connect too.
Walmart valuation:
The big pushback by investors these days comes from Walmart’s PE multiple at 39x expected fiscal ’26 (ends January ’26) of $2.63, with just 5% growth expected this year, but fiscal ’27 and ’28 EPS growth is expected to return to 13% and 11%, since (I’m assuming) Walmart will see more operating margin expansion over the next two years, thanks to supply-chain costs coming down and advertising growth and Walmart Connect adding to margins, not to mention some slight easing in tariffs as tariffs lap the 2025 compares.
Global advertising grew 53% in fiscal Q3, but little else was said about advertising in the conference call. Walmart Connect is growing at 20%, although Morningstar assumes that Connect will grow at just 10% annually, and given the rich margins, account for 10% of Walmart’s operating margin after 10-years. Connect is growing at more than twice that 10% currently and is a relatively new revenue stream for Walmart. Morningstar may be a tad too conservative on Connect’s longer-term growth rate, but that’s ok, Morningstar usually is.
Summary / conclusion: Walmart’s story remains unchanged relative to the earnings preview from last week, but the retail giant continues to innovate and is constantly making “cost” a focus so they can keep their promise of “every day low price”.
Trailing-twelve-month revenue for Walmart as of this latest quarter of results is $703 billion for the giant, and once above $700 billion, it’s unlikely to return below that number.
I don’t know of another SP 500 company that has printed $700 billion in annual revenue with the possible exception of Exxon-Mobil or Chevron, and only when crude oil prices were spiking.
What an amazing accomplishment. (Too bad Sam Walton couldn’t be around to see it.)
Walmart is a 4% – 7% secular revenue grower, a 6% to 9% secular operating income grower, and a 7% to 10% EPS grower. It’s too big to be anything else, but the 8% – 11% operating income guidance for Q4 ’26 (aided by currency) was duly noted.
The longer-term story for Walmart is that Amazon has stolen market share gradually from Walmart for years, likely beginning in the early part of last decade when apparel started to be sold online, while Walmart fiddled with “ecommerce” delivery options that took years to work out. A guy by the name of Jason DelRay, wrote a book called “Winner Sells All” a few years ago, which detailed the ecommerce struggles of Walmart in the home delivery arena, and Walmart’s issue with how to move the Walmart business model close to Amazon, while Amazon was gobbling up share in the general merchandise segment from Walmart. Today, Amazon is trying the brick-and-mortar approach with Amazon Fresh, and Whole Foods, but it’s a struggle, as Amazon tries to grab share in grocery, which is a dominant strength of Walmart. The two giants, each headed for $700 billion plus in revenue, are trying to encroach on each other’s business models.
Personally, I think Walmart is closer to grabbing more share from Amazon in e-commerce, than Amazon is from grabbing share from Walmart in grocery.
Both are phenomenal companies, and both are locked in a dog fight as the rest of retail pays the price.
Total retail sales in the US in 2024 were $7.4 trillion per the Census Bureau (googled), while ex gas stations and auto dealers, etc., that number is $5.25 trillion, which would make Walmart’s $700 billion roughly 13% of the $5.25 trillion and 10% of the $7.4 trillion.
Nothing has changed with our Walmart position in calendar 2025. In aggregate, the Walmart position represents a 1.3% weight in client accounts.
None of this is advice or a recommendation, but only an opinion. Past performance is no guarantee of future results. Readers should gauge their own comfort with portfolio volatility and adjust accordingly. The above information may or may not be updated, and if updated may not be done in a timely fashion.
Thanks for reading.