Walmart (WMT) reports their fiscal Q2 ’27 before the opening bell on Thursday, August 20th, 2026.
Current consensus per the LSEG data is expecting $0.74 in EPS on $186.8 in revenue for expected y-o-y growth of 5% and 8.8% respectively.
The stock has gone down and then up again recently on the cyclospora headlines, as Walmart did have some exposure to the Taylor Farms, but all that seems to have been recently resolved.
While pre-earnings retail talk is all about back-to-school, Walmart’s e-commerce profitability gains, advertising and membership income, have become new revenue sources for the grocery giant, hence the title of this earnings preview on the flywheel.
Morningstar noted two quarters ago that advertising is now 25% of WMT’s EBIT while last quarter Jefferies noted that advertising and membership are now 1/3rd of Walmart’s EBIT. That growth has come on in the just the last 3 years, mainly advertising, which is a good sign.
While Walmart isn’t publishing hard numbers yet, and giving investors data to track, e-commerce – after years of getting the formula right, with trial and error – is now profitable, with international being more profitable then domestic US. Again, Walmart is not giving us hard data on the e-commerce segment, but that will eventually happen.
Fiscal Q1 ’27: Last quarter WMT reported 7% revenue growth, 7% operating income growth and 8% EPS growth. Advertising grew 37% globally, and – in an unusual twist – merchandise saw it’s strongest quarter in the last 5 years. (More on this below.) Forward revenue estimates rose again after the quarter, but EPS estimates have been relatively flat, most of that possibly due to uncertainty over tariffs and refunds.
Valuation: The one part of Walmart’s valuation that (I think) analysts get wrong is looking at the 40x PE for fiscal ’27, but not looking at the cash-flow multiple of 20x price to cash-from-ops. The difference is WMT’s store depreciation expense, which is non-cash, and thus gets added back on the statement of cash-flow. 20x cash-flow may not seem cheap, but it’s not 40x (as the PE is).
Walmart’s longer-term revenue and EPS growth expectation of 5% (revenue) and high-single-single, or low double-digit) remain unchanged.
This blog’s earnings quality test runs cash-from-ops and free-cash-flow, over net income to see the coverage and Walmart’s cash-flow coverage of net income is typically 200% – 250%. That’s pretty rare, hence looking at the cash-flow valuation for Walmart might be a better read on valuation.
Margin – the one problem: The one aspect to WMT’s financials that has surprised me is that the operating margin has NOT expanded very much, if at all, despite the advertising revenue and e-commerce profitability and these various flywheel revenue spokes which are new in the last few years. The numbers could still be small, given Walmart’s expected $752 billion in revenue this fiscal year ’27 (ends January ’27), so analysts are waiting to see if Walmart management will give us hard numbers on these emerging revenue streams.
Walmart’s operating margin is still stuck around 4.5%, even though I’d hoped it would be over 5% by now. Gross margin has improved a little as the movement of the supply-chain and logistics has resulted in some gross margin increase, just not what was expected.
Summary / conclusion: You can’t talk Walmart without talking Amazon, and in Amazon’s 2nd quarter, which was fattened again by the Anthropic mark-up, one analyst noted that Amazon’s “retail” business saw a roughly 9% operating margin, which is 2x that of Walmart’s. Excluding AWS, Amazon’s “retail-related” revenue in Q2 ’26 was $158.4 billion, versus Walmart’s fiscal Q1 ’27 revenue of $177.75 billion in revenue, so Walmart still maintains the revenue lead on Amazon “ex-AWS” despite Amazon taking the lead in overall revenue.
Walmart’s sustainable competitive advantage held over Amazon is the grocery business, which – depending on which analyst you read – the Street estimates at 60% – 65% of Walmart’s total revenue. While that is lower margin business for Walmart, it drives foot traffic into the stores and is higher turnover, so if you think about the DuPont ROE model, it’s what makes Walmart, Walmart. The fact that in fiscal Q1 ’27, Walmart’s merchandise business (which has likely been under attack by Amazon for years) had it’s best quarter in 5 years is a big positive as long as “merch” grew and grocery didn’t shrink.
Amazon closed their AmazonGo stores, and have basically abrogated their retail grocery business to the old Whole Foods stores. There was an AmazonGo store not too far from me in the western burb’s of Chicago and I shopped at the store regularly as well as used Walmart’s delivery business, but Walmart’s ecommerce business is so far ahead of Amazon’s (at least from what i can tell in the western suburbs of Chicago) that all grocery items are now bought through Walmart.
With the supply-chain AI improvements, ad revenue, and membership income, I’d like to see Walmart’s operating margin start to edge higher. It’s the last piece of the puzzle so to speak, as management has really improved the retailer’s revenue streams, to capture additional dollars, most of which – like advertising – are higher margin dollars than the core business.
This blog has a 1.2% position in Walmart, most it bought in ’22 and ’23 between $45 – $60, after the excess inventory disaster.
I’ve always appreciated management’s ability to navigate the toughest business in America and deliver consistent and stable results. (This blog has posted numerous articles on Walmart over the years, more frequently since 2022 and 2023, so please scroll Walmart at the top of the toolbar on the blog to see a chronological recap of Walmart’s story.)
The stock could be up or down $5 after Thursday morning’s release. The one clue is that there remains pressure on EPS estimates. 4 quarters ago, 13% EPS growth was expected for Walmart in fiscal ’27, while today that has slipped to 9%. Revenue growth is unchanged.
None of this is advice, or a recommendation, but only an opinion. Past performance is no guarantee of future results. All EPS and revenue estimates are sourced from LSEG. None of this information may be updated, and if updated, may not be done on a timely basis.
Thanks for reading.