Walmart Q4 FY25 Earnings: Strong Performance Overshadowed by Weak Guidance

Walmart (WMT) posted better-than-expected earnings and revenue for Q4 FY25, but its stock plunged 8% following the report due to weaker-than-anticipated guidance. The retail giant reported adjusted earnings per share (EPS) of $0.66, surpassing analysts' expectations of $0.64. Revenue came in at $180.6 billion, slightly above the consensus estimate of $180.3 billion, reflecting a 5.3% year-over-year (YoY) growth on a constant currency basis.

Despite the earnings and revenue beat, Walmart’s cautious outlook for fiscal 2026 weighed on investor sentiment. The company projected net sales growth of 3.0% to 4.0% and adjusted EPS between $2.50 and $2.60, both of which were below Wall Street forecasts. Management cited ongoing consumer pressures, unfavorable product mix trends, and macroeconomic uncertainty as key reasons for the muted guidance.

Key Metrics: Operating Margins, Same-Store Sales, and Inventories

Walmart’s same-store sales in the U.S. rose 4.6% YoY, driven by a 2.8% increase in transactions and a 1.8% rise in average ticket size. The strong performance in grocery and health & wellness categories offset softness in discretionary spending, particularly in general merchandise.

The operating margin for the quarter stood at 4.4%, reflecting an 8 basis-point decline YoY. The margin compression was due to higher operating expenses, including variable pay, utilities, and marketing investments, as well as costs associated with the acquisition of Vizio.

On the inventory front, Walmart maintained disciplined management, with inventory levels increasing by 3.0% YoY while sustaining strong in-stock positions. The retailer emphasized that it had lower markdowns and improved business mix, which contributed to its profitability despite macro headwinds.

E-commerce and Advertising Continue to Drive Growth

A key bright spot in Walmart’s results was the continued expansion of eCommerce, which posted 16% YoY growth. The company’s omnichannel strategy remains a major driver of sales, with store-fulfilled pickup and delivery services gaining traction. Walmart’s digital advertising business, Walmart Connect, surged 24% YoY, reflecting the growing profitability of its retail media segment.

Sam’s Club also posted strong eCommerce momentum, with digital sales growing 24% and membership income rising 12.5%. Meanwhile, international sales increased 5.7% on a constant currency basis, led by strength in China, Mexico, and Canada.

Consumer Trends and Walmart’s Macro View

As the world’s largest retailer, Walmart’s insights on consumer behavior provide valuable macroeconomic signals. Management noted that high-income households continue to trade down to Walmart for value, while lower-income consumers remain price-sensitive. The retailer’s private label sales grew, suggesting that shoppers are actively seeking savings amid economic uncertainty.

While grocery sales remained strong, discretionary spending was mixed, with soft demand for electronics and apparel but healthy growth in hardlines, toys, and home goods. Walmart also observed that customers are increasingly opting for faster delivery services, reflecting a shift in convenience-oriented shopping behavior.

However, management cautioned that while inflation has moderated, consumers are still budget-conscious, and retail demand remains choppy across categories. The company expects continued pressure on general merchandise sales in the near term.

FY26 Guidance: Cautious Outlook Amid Global Uncertainty

For fiscal 2026, Walmart provided muted guidance, expecting:

- Net sales growth of 3.0% to 4.0%

- - Adjusted operating income growth of 3.5% to 5.5%

- Adjusted EPS between $2.50 and $2.60, below analyst estimates

- Capital expenditures of approximately 3.0% to 3.5% of net sales

Management attributed the conservative outlook to factors such as lapping a strong prior-year performance, mix headwinds from grocery vs. general merchandise, and incremental costs related to expansion initiatives. The Vizio acquisition is expected to be a near-term drag on margins, though Walmart sees long-term benefits in scaling its connected TV advertising ecosystem.

Stock Reaction: A Sharp Pullback After a Big Run

Despite delivering a solid quarter, Walmart’s stock dropped 8% in premarket trading, reflecting investor disappointment in the company’s subdued guidance. This reaction comes after a significant run-up in shares over the past 12 months, with Walmart having gained more than 80% leading into the earnings report.

At its peak, Walmart’s stock was trading at historically high valuations, reflecting elevated expectations. However, with the forward price-to-earnings (P/E) multiple hovering around 39x, concerns about valuation relative to growth weighed on sentiment. The sell-off suggests that the market was pricing in stronger guidance, and Walmart’s cautious commentary on the consumer environment spooked investors.

Conclusion: Strong Execution, but a More Cautious Road Ahead

Walmart’s Q4 FY25 earnings demonstrated strong execution, with revenue and EPS exceeding expectations, solid same-store sales growth, and continued eCommerce and advertising momentum. However, the company’s conservative outlook and concerns over consumer spending trends overshadowed the otherwise robust results.

The stock’s sharp decline post-earnings highlights the risks of elevated valuations, especially in a macro environment where consumer behavior remains unpredictable. While Walmart remains a defensive retail leader, investors will be watching closely to see how its pricing strategy, digital expansion, and cost controls play out in the coming quarters.