Walmart Earnings Preview: Elevated Valuation Raises Expectations

Walmart Inc. (NYSE: WMT) is set to report its fiscal Q4 2025 earnings before the market opens on February 20, 2025. Analysts expect the retail giant to post earnings per share (EPS) of $0.53, revenue of $180.2 billion, and operating income of $6.8 billion. This represents a year-over-year decline of 12% in EPS and 6% in operating income, while revenue is expected to increase by 4%. Investors will be watching the report closely, as shares of WMT are trading near all-time highs, up 15% year-to-date, significantly outperforming the S&P 500's 4% gain.

Key drivers of Walmart’s results will include strong comp sales, improving discretionary trends, and growth in high-margin alternative revenue streams, such as advertising and third-party fulfillment. Analysts at Piper have raised their Q4 comp estimate for Walmart U.S. from 2.5% to 4.5%, citing strong holiday sales momentum. However, comps are expected to show deceleration from Q3 on a two- and three-year stacked basis. Merchandise mix could be a tailwind in 2025 after being a headwind for the last two years, particularly as general merchandise trends improve. Additionally, Walmart+ and Sam’s Club membership growth are becoming increasingly important contributors to total EBIT.

One of the most anticipated aspects of Walmart’s report will be its fiscal 2025 guidance. Management is expected to guide conservatively, with projections of 4-6% EBIT growth, factoring in approximately 200 basis points of foreign exchange pressure. The Street is currently modeling above-algorithm operating profit growth of 10.6%, well above Walmart’s long-term target range of 4-8%. Bernstein and Citi both anticipate a cautious outlook from management, though they believe investors will look past the initial guidance, given Walmart’s history of raising forecasts throughout the year. Additionally, automation initiatives, such as Walmart’s partnership with Symbotic for same-day fulfillment, could provide structural improvements in e-commerce margins and long-term efficiency gains.

Another key area of focus is Walmart’s advertising business, which continues to expand rapidly and drive higher-margin growth. Advertising revenue grew 28% year-over-year in Q3 and is expected to remain a critical profit driver in 2025. Analysts at Raymond James believe advertising could contribute up to one-third of Walmart’s total EBIT growth in the coming year. Similarly, third-party marketplace expansion is expected to create a positive flywheel effect, further boosting advertising and supplier revenue streams.

From a valuation perspective, Walmart’s stock is trading at 33-35x expected fiscal 2026-2028 EPS, with an expected earnings growth rate of 11% over the next three years. Its price-to-sales ratio has recently crossed the 1x mark after trading below that level for 89 consecutive quarters, indicating revenue multiple expansion. If Walmart meets consensus revenue expectations, its price-to-sales will stand at 1.22x post-earnings. The stock’s P/E multiple has also expanded significantly, rising from 25x in fiscal Q1 2024 to 41x based on Q4 expectations. Given this rapid expansion, some analysts believe Walmart’s stock could be due for a correction, though strong fundamental trends continue to support long-term upside.

Overall, Walmart enters its earnings report with considerable momentum, having gained share across all income cohorts and diversified into higher-margin businesses. While the initial FY25 guide may be conservative, analysts believe continued strength in advertising, marketplace, and automation initiatives will help drive long-term profitability. Investors will be keenly watching management’s commentary on discretionary spending trends, membership growth, and automation efforts to assess Walmart’s ability to sustain its recent momentum.