Walmart's Q4: Strong Flow vs. Weak Guidance

The core financial performance for the quarter was robust, with revenue coming in at $190.7 billion, just meeting expectations. More importantly, operating income grew at a faster clip, up 10.8% year-over-year. This acceleration in profit relative to sales is the primary driver behind the stock's strong run, overshadowing the cautious outlook.

The growth engine was digital. Global eCommerce sales surged 24% and now represent 23% of overall sales. This segment's momentum is critical, as it continues to expand its share of the total mix. The advertising business is a key lever here, with global advertising revenue growing significantly in 2025 and Walmart Connect in the U.S. grew 41% in the quarter alone.

This flow of digital revenue is directly fueling operating income growth. The company's strategy of deploying capital toward higher-return areas like digital and advertising is paying off, allowing it to manage costs and inventory while driving sales. The result is a business model demonstrating resilience and a clear path to higher returns.

The Guidance Gap: A Conservative Bar or a Warning?

The market's immediate reaction was a clear signal. After the earnings release, shares fell as much as 3.6% in the premarket. The reason was straightforward: the full-year adjusted EPS guidance of $2.75 to $2.85 missed the consensus expectation of $2.97 per share. This miss, coming on the heels of a strong quarter, created a moment of doubt.

Analysts, however, quickly interpreted the gap as intentional. They view the guidance as a classic case of conservative bar-setting, a tactic Walmart has used before. The CFO cited slow hiring and trade uncertainty as reasons for caution, but the prevailing view is that this creates a beatable target for future quarters. The stock's recovery to trade higher by the close confirms this sentiment.

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The key implication for flow is that the market is pricing in a beatable bar, not a fundamental warning. The setup suggests that any weakness in the guidance should be bought, as the company has a history of outperforming its initial outlook. This dynamic shifts the focus from the current guidance to the execution path, where the company's digital momentum and advertising growth provide a clear runway to clear the lowered hurdle.

Catalysts and Risks: What to Watch for Flow

The immediate test for the bullish thesis is the first quarter. The company's Q1 2027 guidance of $0.61 EPS sets a clear, low bar. The market's reaction suggests this is a beatable target. The stock's path will hinge on whether the company can deliver a beat, confirming the "conservative bar" narrative, or if execution falters.

The most critical flow metric to watch is advertising growth. While still strong, the trajectory is slowing. Global advertising revenue grew 46% in 2025, but the quarterly pace decelerated to 37% in Q4 from 53% in Q3. This is classic law-of-large-numbers pressure. The key will be whether growth can stabilize above 30% as the base expands, or if it continues to decelerate, threatening the high-margin revenue stream that is central to the digital thesis.

Capital allocation is another flow catalyst. The board's authorization of a $30 billion share repurchase program is a significant signal of confidence. The pace of buybacks will determine the near-term impact on per-share metrics and cash flow. Combined with the company's focus on inventory discipline and automation, this program shapes the capital flow that supports the elevated valuation.