Walmart Earnings Preview: Can the Retail Giant Justify Its Sky-High Valuation?

Walmart (WMT) reports fiscal Q4 results Thursday morning before the open, and as the world’s largest retailer, the print will be read as a referendum on the U.S. consumer. With the stock up roughly 15% year-to-date and recently surpassing a $1 trillion market cap, expectations are high. That combination—strong momentum and elevated valuation—sets up what could be a volatile reaction depending on guidance.

What Wall Street Expects

Consensus calls for Q4 EPS of roughly $0.72–$0.73, up about 10%–11% year over year. Revenue expectations range from approximately $188 billion to $190 billion, implying 4%–5% growth. Operating income is expected to grow around 10% year over year.

Several analysts are modeling U.S. comparable sales (SSS) growth in the 4%–5% range, consistent with recent trends. RBC, for example, expects U.S. comps of 4.2%, while Deutsche Bank and BTIG are closer to 4.5%–4.7%. Most anticipate a modest EPS beat, but the real debate centers on initial fiscal 2026 guidance.

Guidance: The Real Catalyst

Multiple analysts warn that Walmart’s fiscal 2026 outlook could be below consensus, even if Q4 results are solid. The Street is modeling roughly 11% operating income growth next year, but several firms expect management to guide within its long-term algorithm of 4%–8% EBIT growth. That gap is meaningful.

Evercore and DA Davidson both flagged risk that fiscal ’26 EPS guidance could come in 3%–5% below Street estimates, which might overshadow a strong holiday quarter. Investors may remember that Walmart shares dropped 6.5% last year on a similar setup despite decent results.

Management previously guided full-year sales growth of 4.8%–5.1% and operating income growth of 4.8%–5.5%, with Q4 adjusted EPS expected between $0.67–$0.72. If Q4 lands near the high end of that range, attention immediately shifts to how conservatively new CEO John Furner frames fiscal 2026.

CEO Transition: A New Chapter

This will be John Furner’s first earnings call as Walmart’s fifth CEO since Sam Walton. He replaces Doug McMillon, who oversaw Walmart’s transformation into a digitally integrated retail ecosystem. Investors will be listening closely to Furner’s tone on consumer trends, margin trajectory, and capital allocation.

Management commentary from prior calls emphasized continued market share gains, especially among higher-income households trading down for value. That theme—Walmart as a value beneficiary in a cautious consumer environment—has been central to the bull case.

Key Metrics to Watch

U.S. Comparable Sales – Anything below 4% would raise questions about consumer momentum.

E-commerce Growth – Last quarter, U.S. e-commerce grew 28% and global e-commerce 27%. Sustained 20%+ growth would reinforce Walmart’s digital flywheel.

Advertising (Walmart Connect) – Global advertising grew 53% last quarter, with U.S. up 33%. This “margin-rich” revenue stream is critical to long-term margin expansion.

Membership Income – Walmart+ and Sam’s Club membership income rose 17% last quarter; this supports recurring revenue and higher engagement.

Operating Margin – Investors want proof that automation and AI investments are translating into leverage.

Advertising and membership are increasingly central. CFO John Rainey previously noted that advertising and membership represented roughly one-third of consolidated adjusted operating income. That mix shift toward higher-margin alternative revenue is a key reason the stock commands a premium multiple.

Tariff and Cost Exposure

Walmart has historically sourced a meaningful portion of goods domestically, which partially insulates it from tariff volatility. On the last call, management acknowledged pockets of consumer moderation but emphasized low inflation (~1%) and improved shipping costs, which have declined in the 30% range for several quarters.

Still, tariff policy and supply chain costs remain variables. Investors will want clarity on gross margin pressure from merchandise mix (health and wellness outpacing general merchandise) and whether automation investments are offsetting wage and shrink headwinds.

Digital and Grocery Delivery: The Amazon Battle

Walmart’s e-commerce momentum continues to accelerate, with grocery delivery playing a pivotal role. Management has emphasized sub-three-hour and even sub-one-hour delivery growth, suggesting strong adoption. Grocery remains 50%–70% of revenue depending on estimates, making delivery execution critical.

The battle with Amazon is intensifying. While Amazon dominates overall e-commerce share, Walmart reportedly holds a larger share in online grocery. Execution consistency and logistics efficiency remain key swing factors.

Valuation: The Elephant in the Room

Walmart now trades at roughly 45x forward earnings (and near 50x on fiscal ’26 numbers), compared with Costco around 44x. RBC estimates shares trade near 38x 2027 EPS. Some valuation models suggest the stock may be 25%+ above fair value.

This premium multiple reflects confidence in Walmart’s revenue flywheel—omnichannel dominance, advertising growth, membership income, automation gains, and AI-enabled efficiencies. But it also leaves little room for disappointment.

What to Track Closely

• Initial fiscal ’26 operating income guidance vs. the 11% consensus.

• Commentary on consumer elasticity and trade-down behavior.

• Advertising growth sustainability above 30%.

• E-commerce profitability in the U.S.

• Margin outlook amid automation investments and cost pressures.

• CEO tone and capital allocation priorities.

Bottom Line

Walmart enters earnings with strong momentum, proven resilience, and expanding high-margin revenue streams. But the stock’s premium valuation and high expectations create asymmetric risk. A conservative 2026 guide—even within the company’s historical framework—could trigger a pullback. Conversely, reaffirmed momentum in comps, digital growth, and advertising could justify the elevated multiple.

As retail’s bellwether, Walmart’s outlook will likely shape sentiment not just for consumer staples, but for the broader read on U.S. household spending in 2026.