01 — Executive summaryA great operator, a one-off quarter, and a multiple that prices both
Walmart Inc. closed fiscal 2026 on 31 January 2026 with $713.2 billion of total revenue, up 4.7%, and $29.8 billion of operating income, up 1.6% — an operating margin of 4.18%, against 4.27% eight years earlier. In between, revenue grew by $199 billion and the margin moved nine basis points in the wrong direction. That fact frames this report: Walmart is the most efficient distribution machine ever built, and distribution scale alone has never produced operating leverage for it.
What produces leverage is the second business inside the first. In the quarter ended 31 July 2026, global e-commerce grew 23% (the seventeenth straight double-digit quarter), global advertising grew 38%, and membership fee revenue grew 17% to an all-time high — capital-light, high-margin streams attached to customers Walmart already owns, and still, combined, under 2% of net sales. The bull case is that this mix shift eventually moves a 4.18% consolidated margin. The claim is plausible. It is also slow.
The same quarter carried the largest one-off in Walmart's modern disclosure: roughly $2.9 billion of refunds on tariffs collected under the International Emergency Economic Powers Act, booked as a reduction of cost of sales. Reported operating income rose 28.8%; adjusted and at constant currency, 17.4%. Both numbers are in the company's own release. The first makes headlines; the second is what a valuation should use — and management said so, guiding investors to judge Q2 and Q3 together.
Then there is the price. At $111.35 the shares trade at 40.3 times trailing GAAP earnings and 39.3 times the midpoint of fiscal 2027 guidance — an earnings yield of 2.48% against a 5.24% ten-year Treasury, and a 17% de-rating from the February peak of $134.84 already behind it. On our math, that is not enough. We rate the shares Neutral with a twelve-month target of $112 — 36.6 times our fiscal 2028 adjusted EPS estimate of $3.06 — for a total expected return of about 1.5% including the dividend, 12% below the $126.78 Street mean. Our probability-weighted scenario value, $111.50, sits within two tenths of a percent of the current price: the market has already priced the base case.
Walmart grew revenue 4.7% in fiscal 2026 and operating income 1.6%. The latest quarter printed 28.8% profit growth, of which roughly eleven points were a tariff refund that will not recur. The mix shift into advertising, membership and marketplace is genuinely compounding — but at under 2% of net sales it cannot move consolidated margin quickly, and every yield the stock offers sits below the 5.24% risk-free rate. Great company. Fairly priced. Neutral.
02 — Company & business modelThree segments, 2.1 million associates, and a toll booth under construction
Walmart reports three segments: Walmart U.S. (the supercenter estate plus walmart.com and its delivery, marketplace, advertising and financial-services layers), Walmart International (Walmex, Canada, China, Chile, Africa, and India's Flipkart and PhonePe) and Sam's Club U.S. The company employed roughly 2.1 million associates — the largest private workforce on earth — ran about 10,900 stores in 19 countries, and served ~280 million customers a week.
The model is best read as three stacked layers. The store: a fixed-cost distribution asset earning a mid-twenties gross margin through volume — mature, with U.S. comps of 2.6-4.6% for six quarters, half of that now digital orders the store fulfills. The network: about $26.6 billion of fiscal 2026 capex turned 4,600-plus stores into delivery nodes; the output is speed — 35% of store-fulfilled orders inside three hours. The toll booth: advertising, marketplace commissions, membership fees and fulfillment services sold against the traffic the first two layers generate — small, high-margin, growing three to ten times faster than the core.
The structure matters because the toll booth is not a segment: advertising lives inside Walmart U.S. and International, membership income across all three. That is why Walmart U.S. — where the toll booth is largest relative to the cost base — is the only segment whose margin is rising. One reporting note: total revenues exceed net sales by membership and other income ($6.8 billion in fiscal 2026), and International comparisons require constant currency. We have tried not to mix the bases.
03 — The financial record$199 billion of new revenue, nine basis points of margin
The eight-year record is the whole debate in one chart. Revenue compounded at 4.8% a year, from $514.4 billion in fiscal 2019 to $713.2 billion in fiscal 2026; operating income at 4.4%, from $22.0 billion to $29.8 billion. The margin oscillated inside a 120-basis-point band and ended at 4.18%, thirteen basis points below fiscal 2025.
The fiscal 2026 slippage deserves a direct look, because it happened in the year the mix shift should have shown up: advertising grew 46%, membership double digits, e-commerce 24% — and margin narrowed. The growth was paid for: price cuts, tariff costs absorbed before the refunds arrived, a pharmacy reimbursement hit, wage and delivery investment. All defensible; all expenses that arrive before the revenue they are meant to produce. Note also what the band says: operating income is a small residual of an enormous revenue number, so profit fell 21.3% in fiscal 2023 on a 6.7% revenue increase and rose 32.2% in fiscal 2024 on a 6.0% one. The stability is in the revenue; the volatility is in the residual. Investors paying 40 times that residual should know which of the two they are buying.
04 — Segment: Walmart U.S.68% of revenue, 77% of profit — and a comp that just halved
Walmart U.S. generated $483.0 billion of fiscal 2026 net sales, up 4.4%, and $25.2 billion of operating income, up 5.3% — a margin of 5.21%, up five basis points, the only segment to expand. Three tailwinds do the work: Walmart Connect advertising grew 43% in the latest quarter at near-100% incremental margin; U.S. membership and other income reached $750 million, up 15.6%, with record net adds; and store-fulfilled delivery grew about 40% from stores that already exist and are already staffed.
Against that, the headline comp is deteriorating: 2.6% in the second quarter of fiscal 2027, down from 4.6% two quarters earlier. Roughly 125 basis points of the shortfall came from Maximum Fair Pricing pressure in pharmacy — a traffic category, so the squeeze is a footfall problem too — and even excluding health and wellness, comps of 3.4% are a deceleration. With e-commerce at ~23% of segment sales, a quarter of the segment grows at 24% while the rest grows at low single digits: the blended comp is levered to digital as never before.
05 — Segment: Walmart InternationalThe fastest-growing revenue, the fastest-shrinking profit conversion
Walmart International produced $130.4 billion of fiscal 2026 net sales, up 7.0% as reported and 9.3% at constant currency, and $5.1 billion of operating income; the margin fell 60 basis points to 3.91%. The segment holds at least four different businesses: Walmex, the mature Mexican leader; Flipkart, India's largest e-commerce platform, re-domiciled to India in March 2026 — the standard IPO precondition; PhonePe, whose share-based charge is the largest item in the $2.9 billion corporate expense line; and Sam's Club China, the best per-store performer in the portfolio.
The chart is the section. Constant-currency sales growth has held between 7.5% and 11.4% for four quarters; constant-currency operating income growth has fallen from 26.5% to 5.7%. The benign reading is deliberate investment ahead of a possible 2026-27 Flipkart listing, and management's commentary supports it — "eCommerce economics improvements led by China, India, and Canada." The less benign reading is structurally lower-margin channels. The evidence leans benign; the trend should not be assumed to reverse on its own. The hidden asset question is what Flipkart and PhonePe are worth separately: reported private marks of $35-40 billion and $12-15 billion would together be 5-6% of Walmart's market cap. A listing would crystallize value and produce cash. It would not change the consolidated margin.
06 — Segment: Sam's Club U.S.A 2.6% margin by design, quietly out-comping the core
Sam's Club U.S. generated $93.0 billion of fiscal 2026 net sales, up 3.1%, and $2.4 billion of operating income — a margin of 2.63%. That margin is not a failure; it is the design. A warehouse club sells merchandise at close to cost and earns its economics on the membership fee, which makes renewal rates and member counts the real income statement.
Two things stand out. The club now out-grows the core banner: comps excluding fuel were 4.4% in the latest quarter against Walmart U.S.'s 2.6%, and club e-commerce grew 26% — the fastest in the company. But Sam's is not closing the gap with Costco, whose U.S./Canada renewal rate has sat above 90% for years; Walmart does not disclose the Sam's renewal rate at all, which is itself a data point. At 13% of net sales and 7.5% of segment profit, the club is too small to move the consolidated numbers on which the multiple is set.
07 — E-commerce and deliverySeventeen quarters of double digits, and the store is the fulfillment center
Global e-commerce grew 23% in the latest quarter, adding $8.2 billion of net sales in one quarter. In the U.S., e-commerce is a record ~23% of Walmart U.S. net sales and contributed about 510 basis points of the segment's 2.6% comp — without digital, the comp was slightly negative. The growth engine of the world's largest brick-and-mortar retailer is no longer the store; it is the store used as a warehouse.
The mechanism matters more than the rate. Store-fulfilled delivery grew roughly 40-50% through the last three reported quarters, with 35% of orders inside three hours. Because the marginal delivery leaves from a store that already exists, with inventory and labor already paid for, the incremental cost to serve is far below purpose-built fulfillment — the one place Walmart holds a structural edge over Amazon rather than the reverse. Management says U.S. e-commerce is profitable; it does not disclose the margin, and we have not assumed one. The embedded risk is concentration: if digital carries the entire comp, anything that slows digital slows the whole segment.
08 — Advertising & membershipThe toll booth is real; it is also 1.9% of net sales
Global advertising reached nearly $6.4 billion in fiscal 2026, up 46% including VIZIO, and grew a further 38% in the latest quarter. Retail media is the highest-quality revenue Walmart has ever touched: the audience is the existing shopper, the inventory is the existing digital real estate, the incremental margin close to 100%. Membership and other income reached $6.8 billion in fiscal 2026, and global membership fee revenue grew 17% in the quarter to an all-time high with record U.S. net adds.
Now the discipline. Combined, the two streams were about 1.9% of fiscal 2026 net sales. Even if advertising doubles again over three years — aggressive but not absurd — it adds roughly 90 basis points of consolidated operating margin. Meaningful, not transformative; and the market is pricing something closer to transformative. Watch the deceleration too: global advertising growth has stepped down from 46% to 38% in a retail-media market where a dozen funded competitors sell the same shopper data to the same advertisers. The flywheel logic — membership makes delivery stickier, delivery makes data richer, data makes ads more valuable — is sound. The arithmetic of a $706 billion net-sales base is unforgiving.
09 — Anatomy of one quarterWhat actually happened in Q2 FY2027
Revenue rose 5.9% to $187.9 billion (5.1% cc). The gross profit rate expanded 96 basis points, driven primarily by roughly $2.9 billion of refunds on IEEPA tariffs booked as a reduction of cost of sales. Operating expenses deleveraged 11 basis points on liability claims, depreciation and healthcare. Operating income rose 28.8% to $9.4 billion; adjusted and at constant currency, 17.4% — the top end of guidance. GAAP EPS fell to $0.80 from $0.88 as equity investments swung from a $2.7 billion gain to a $1.2 billion loss below the operating line; adjusted EPS of $0.81 excluded a $0.12 investment loss and a $0.11 tax benefit. The remaining refunds go back into price investments in the second half.
Guidance rose with the print: fiscal 2027 net sales growth to 4.0-5.0% constant currency (from 3.5-4.5%), adjusted operating income growth to 7.0-8.5% (from 6.0-8.0%), adjusted EPS to $2.80-$2.87 (from $2.75-$2.85). The raise is genuine. So is the base effect: Q2 of fiscal 2028 laps a refund-inflated comparison, and reported profit growth that quarter will look poor regardless of performance.
10 — Quality of earningsGood cash, noisy income statement
Three features define earnings quality right now. First, the gap between operating and net results: operating income rose 28.8% in the latest quarter while net income fell 9.4% to $6.4 billion on equity-investment marks below the operating line — noise that makes GAAP EPS a poor quarterly guide to this company. Second, cash conversion is genuinely strong: operating cash flow was $19.7 billion in the first half, up $1.4 billion, after $41.6 billion for fiscal 2026.
Third, two soft spots. Inventory grew 6.7% to $61.6 billion against 5.9% revenue growth, and free cash flow fell $1.4 billion in the half to $5.5 billion because capex rose $2.8 billion. The earnings are real. They are also increasingly pre-committed to the automation program — the subject of the next section.
11 — Cash flow & capital allocation$41.6 billion in, $26.6 billion back into the ground
Walmart produced $41.6 billion of operating cash flow in fiscal 2026 and spent $26.6 billion of it on capital projects, leaving $14.9 billion of free cash flow. The four-year pattern is the point: operating cash flow rose $17.4 billion from fiscal 2022 and capex absorbed $13.5 billion of the increase, so free cash flow has been range-bound at $11-15 billion throughout — and management has raised fiscal 2027 capex guidance to about 4.0% of net sales, call it $29 billion. That is 73% more capital intensity than four years ago, with the margin payoff still a promise rather than a print.
What reaches shareholders should be read against the price. The dividend was raised to $0.99 in February 2026 — the 53rd consecutive annual increase — a ~35% payout yielding 0.89%. Buybacks were $8.1 billion in fiscal 2026 and $5.1 billion in the first half of fiscal 2027, with $25.1 billion left on a $30 billion authorization. The catch is arithmetic: at 39 times forward earnings the company retires stock at a 2.6% earnings yield, roughly half its own cost of debt. A statement of confidence, not an EPS engine.
12 — Balance sheetThe strongest part of the story, and the least interesting
There is no balance-sheet case against Walmart. At 31 July 2026 the company held $11.5 billion of cash against $57.2 billion of total debt — about 1.3 times trailing EBITDA — with $98.2 billion of equity. The 0.77 current ratio alarms only outside retail: Walmart collects immediately and pays suppliers later, so negative working capital is a feature. Return on investment was 15.4% in the latest quarter, ROE 22%, the credit profile comfortably double-A.
The balance sheet matters here for one reason: it bounds the downside. Whatever goes wrong in the operating story, Walmart will not be forced into a distressed raise, a dividend cut or a fire sale. The case against the stock is about expected return at 40 times earnings, not solvency — two questions the market routinely prices as one.
13 — The competitive mapThe year Amazon got bigger — and why it matters less than it looks
February 2026 produced a genuine milestone: Amazon's annual revenue passed Walmart's for the first time, $716.9 billion to $713.2 billion. The comparison is imperfect — much of Amazon's revenue is cloud and services — but the playbook convergence is real: Amazon is building grocery and same-day delivery; Walmart is building advertising, marketplace and membership.
Walmart's defense rests on three assets Amazon cannot quickly replicate: a grocery franchise that is more than half of U.S. sales and drives weekly traffic; 4,600 stores within ten miles of 90% of the population, making store-fulfilled delivery structurally cheap; and a price reputation that converts into trade-down share gains whenever the consumer weakens. The underappreciated rival for the marginal investor dollar, though, is no longer another retailer: it is the 5.24% risk-free rate. Defensiveness used to be free when bonds yielded nothing; now it has to be paid for with growth, and 4.8% revenue growth on a flat margin is not obviously enough.
14 — The K-shaped consumerWinning the top of the income distribution, watching the bottom
Management is unusually candid about its customer base: spending between the highest- and lowest-income cohorts has, in the CFO's words, "gapped out a little bit." Walmart is gaining share across all income groups, but the largest gains are upper-income — in fashion, nearly all of Q4's mid-single-digit growth came from households earning over $100,000 — while the lowest-income cohort buys necessities and little else. For Walmart that is close to a free option: trade-down customers historically stay, because the price advantage is structural and convenience keeps improving. U.S. inflation at Walmart was just above 1% in the fourth quarter — a normalized environment that favors the price leader.
The caution is mix. A grocery-and-necessities basket is resilient but low-margin; the general-merchandise wallet is where the margin lives, and that is the wallet the pressured consumer closes first. The K-shape helps Walmart's traffic and hurts its basket — which is why the comp is transaction-led rather than ticket-led.
15 — Tariffs, pharmacy, costsTwo policy variables and a grinding cost stack
Two policy decisions Walmart did not make shaped its fiscal 2027. First, tariffs. Less than a third of U.S. merchandise is imported — mainly from China, Vietnam, Mexico, India and Canada — and the company absorbed tariff costs through fiscal 2026 before the IEEPA refunds arrived in Q2 of fiscal 2027. The refunds are a one-off by definition; what remains is management's decision to pass them back through price investment — good for share, bad for near-term margin — and a fiscal 2028 comparison that laps an inflated base.
Second, drug pricing. Maximum Fair Pricing knocked roughly 125 basis points off the U.S. comp in the latest quarter, and pharmacy is a traffic category; further action on drug pricing or PBMs compounds the pressure. Beneath both sit the grinding lines — liability claims, depreciation on the automation build-out, associate healthcare — which together deleveraged the expense ratio 11 basis points in the quarter. Scale absorbs these better than any competitor's; it does not make them disappear.
16 — The Furner eraContinuity with a different signature, and an AI strategy still finding its shape
John Furner became Walmart's fourth CEO on 1 February 2026, succeeding Doug McMillon after a twelve-year tenure that quadrupled the stock. A three-decade company man who ran Walmart U.S. — the segment producing 77% of profit — Furner has been deliberately continuous: same strategy, same bench, same capital priorities, with CFO John David Rainey still the public face of the financial story. The early evidence is competent: a guidance raise in his second quarter, no surprises, and disclosure candid enough to show both the 28.8% and the 17.4% versions of the same number.
Two corporate events frame the era. The listing moved from the NYSE to Nasdaq in December 2025 — a bid to be valued as a technology-enabled retailer — and the market cap briefly crossed $1 trillion in early February 2026 before de-rating 17% to today's $883 billion. And the AI strategy has already had its first correction: the October 2025 partnership to sell through ChatGPT's Instant Checkout underperformed, and by March 2026 Walmart had pivoted to embedding its own Sparky assistant as the primary AI surface. The lesson: agentic commerce is arriving slower than the press releases, and Walmart's AI value is likelier to show up in its cost stack than in a chatbot.
17 — ValuationEvery yield the stock offers is below the yield on the bond
At $111.35 (9 October 2026) Walmart trades at 40.3 times trailing GAAP earnings of $2.76 and 39.3 times the $2.835 midpoint of fiscal 2027 guidance. The market cap is $883 billion; enterprise value of ~$940 billion is ~21 times trailing EBITDA, and trailing free cash flow of ~$13.5 billion puts the stock near 65 times free cash flow. Each multiple would be demanding for a company compounding earnings at 20%. Walmart's own guidance is 7.0-8.5%.
The cleanest statement of the problem is the chart above: trailing earnings yield 2.48%, free cash flow yield ~1.5%, dividend yield 0.89% — against a 5.24% ten-year Treasury. An investor is paid less than the risk-free rate to wait for the mix shift to compound: the single strongest argument against the shares here, requiring no forecast about the business. The counterpoint is that the market has already done some of the work — the shares are down ~17% from the $134.84 February peak, and the five-year return of ~155% shows the mix shift has paid before. The question is whether it can keep paying from a 40-times starting point.
Our framework: grow the $2.835 guidance midpoint 8% — the top of the company's own range — to fiscal 2028E adjusted EPS of $3.06, and apply 36.6 times, between Walmart's pre-2024 range (low-to-mid 20s) and its post-2024 mix-shift range (high 30s to mid 40s). That yields the $112 target. The grid shows how much of the outcome is the multiple rather than the earnings: plausible inputs span $80 to $140.
| FY28E EPS \ P/E | 28× | 32× | 36.6× | 40× | 44× |
|---|---|---|---|---|---|
| $2.85 (guidance low, no growth) | $80 | $91 | $104 | $114 | $125 |
| $3.06 (base) | $86 | $98 | $112 | $122 | $135 |
| $3.19 (bull) | $89 | $102 | $117 | $128 | $140 |
Two cross-checks. The scenario-weighted value — 25% × $137, 50% × $112, 25% × $85 — is $111.50, almost exactly the current price. And the Street is more constructive than we are: a $126.78 mean target, 27 Buys, 5 Holds, no Sells. Our target is 12% below consensus, and that gap is the whole debate: consensus is paying for the mix shift arriving on schedule; we want one more quarter of evidence first.
18 — The bull caseSix arguments we take seriously
1. The delivery network is a genuine, hard-to-replicate moat. Store-fulfilled delivery growing 40-50%, 35% of orders inside three hours, from stores within ten miles of 90% of Americans. Amazon has to build the last mile; Walmart owns it.
2. The mix shift is real, high-margin and annuity-like. Advertising +38%, membership fees +17% to an all-time high, marketplace faster than either — near-100% incremental margin on a customer relationship Walmart already owns.
3. Trade-down is a durable tailwind. Share gains across all income cohorts, largest among $100,000-plus households; customers acquired in a soft patch tend to stay, at zero acquisition cost.
4. The balance sheet is unassailable. $41.6 billion of operating cash flow, 1.3× leverage, double-A profile, 53 consecutive dividend increases. Downside is bounded by cash generation, not solvency.
5. The stock has already de-rated. Down ~17% from the peak, forward multiple compressed from mid-40s to high-30s, priced within 0.2% of our probability-weighted value — and FY27 guidance has already been raised once.
6. There are hard catalysts. A Flipkart listing and a PhonePe offer-for-sale would crystallize $45-55 billion of value — 5-6% of the market cap — the group price currently obscures.
19 — The bear caseSeven arguments we cannot dismiss
1. The earnings yield is below the risk-free rate. 2.48% against 5.24%. Walmart must grow earnings faster than 5.24% merely to match a government bond, before any risk premium. The whole bear case in one sentence, no forecast required.
2. The comp is decelerating and digital is carrying all of it. U.S. comps halved to 2.6% in two quarters; e-commerce contributed ~510bps of that, so the store-only comp is negative. The segment is levered to one engine.
3. Advertising is decelerating and tiny. From 46% to 38% growth, at 0.9% of net sales, in a crowded retail-media market. Doubling again adds ~90bps of margin over three years.
4. International profit conversion is collapsing. Constant-currency operating income growth fell from 26.5% to 5.7% in four quarters while sales growth held. Lower-quality growth or a longer, pricier investment cycle — both are negative for the multiple.
5. Capital intensity keeps rising with no margin payoff yet. Capex up 73% as a share of sales in four years, guided to ~4.0%, while free cash flow has been flat at $11-15 billion and fell again in the latest half.
6. The latest headline was flattered by a one-off. ~$2.9 billion of tariff refunds drove about eleven points of the 28.8% profit growth, and the fiscal 2028 comparison laps that base — a setup for a sentiment air-pocket.
7. Multiple compression is the base case, not the tail. A re-rating to 30 times — the high end of Walmart's own pre-2024 range — is worth $85 even if earnings grow as guided. The bear case does not require anything to go wrong; it requires the multiple to stop being generous.
20 — Risk matrixTwelve risks, ranked by probability times impact
Probability and impact are scored one to five; the score is the product. Sixteen or above means the risk is both likely and consequential and should already be in the price.
| # | Risk | P | I | Score | Assessment |
|---|---|---|---|---|---|
| R2 | Multiple compression while long rates stay high | 4 | 5 | 20 | Earnings yield 2.48% vs 5.24% risk-free. A de-rating to 30× is worth ~$85. |
| R1 | U.S. comps keep decelerating | 4 | 4 | 16 | 4.6% to 2.6% in two quarters; store-only comp already negative. |
| R3 | Advertising growth fades toward market rate | 4 | 4 | 16 | 46% → 38% already; crowded retail-media market. |
| R4 | International margin keeps falling | 3 | 4 | 12 | cc operating income growth 26.5% → 5.7% in four quarters. |
| R5 | Pharmacy reimbursement pressure deepens | 4 | 3 | 12 | Already ~125bps of U.S. comps; pharmacy drives store traffic. |
| R6 | Low-income consumer weakens further | 4 | 3 | 12 | K-shaped spending; general merchandise is where the margin is. |
| R10 | Wage/healthcare inflation outruns productivity | 3 | 4 | 12 | 2.1m associates; opex deleveraged 11bps in Q2. |
| R7 | Tariff-refund base makes FY2028 optics ugly | 3 | 3 | 9 | ~$2.9bn one-off in Q2 FY27 laps in Q2 FY28. |
| R8 | Capex stays ≥4% of sales, FCF stays flat | 3 | 3 | 9 | Guidance already raised once; FCF down in H1 FY27. |
| R9 | Inventory outgrows sales into markdowns | 3 | 3 | 9 | Inventory +6.7% vs revenue +5.9% in Q2 FY27. |
| R11 | Privacy or antitrust limits on retail media | 2 | 4 | 8 | Would hit the highest-margin business directly. |
| R12 | Flipkart/PhonePe listing delayed or discounted | 3 | 2 | 6 | Value crystallization is optionality, not thesis. |
Two observations. First, the three highest-scoring risks are valuation risks, not solvency risks — Walmart will not run out of money or cut its dividend; what can happen is that 40 times earnings proves too high a price for 4.8% growth. Second, the risks are correlated: R1, R3 and R4 are the same underlying question — does the mix shift scale fast enough to move consolidated margin? If yes, all three resolve well and R2 never fires; if no, they deteriorate together. That is why the $85 bear case carries a 25% weight rather than sitting in the tail.
21 — CatalystsWhat we are watching, and when
Q3 FY2027 results — 19 November 2026
The key near-term print. Do U.S. comps stabilize at or above 3%? Does global advertising hold in the thirties — a second straight deceleration validates the bear case? Guidance: net sales +3.0-3.75% cc, adjusted EPS $0.62-$0.64, with a 100-plus-basis-point headwind from Flipkart's Big Billion Days timing.
The ten-year Treasury
Walmart's valuation is more sensitive to the long end of the curve than to its own earnings. A sustained move below 4.5% mechanically re-rates the shares 15-20%; above 5.75%, the base case comes under pressure regardless of what the company reports.
Flipkart and PhonePe listings
Flipkart re-domiciled to India in March 2026 — the standard IPO precondition — and is reported in early bank talks about a 2026-27 listing; PhonePe is reported as a pure offer-for-sale. A Flipkart print at $40 billion-plus crystallizes ~5% of Walmart's market cap; a delay or discount is a negative signal.
Advertising growth, every quarter
The cleanest single read on the mix shift. Global growth below ~25% materially weakens the case for a premium multiple.
FY2028 capex guidance — February 2027
FY2027 capex was raised to ~4.0% of net sales from 3.5%. A further raise extends the flat-free-cash-flow era; a step down signals the automation returns are arriving.
Pharmacy policy and the price-investment cadence
Maximum Fair Pricing already cost ~125bps of U.S. comp; further drug-pricing or PBM action compounds it. In parallel, the pace at which the remaining tariff refunds are passed back into price sets second-half gross margin.
22 — ConclusionNeutral at $112: the best operator in retail, priced for a mix shift that has not yet arrived
Walmart is an exceptionally well-run company: eight consecutive years of revenue growth, a physical estate converted into a delivery network Amazon cannot easily replicate, a $6.4 billion advertising business built from nothing, $41.6 billion of operating cash flow, 53 consecutive dividend increases. None of that is in question.
What is in question is the price. At $111.35 the shares cost 40.3 times trailing earnings and offer a 2.48% earnings yield against a 5.24% ten-year Treasury. The operating margin is 4.18% and has not moved in eight years. The businesses that justify the premium are under 2% of net sales, and the latest quarter's 28.8% profit growth was about eleven points of one-off. None of that is in question either.
Our twelve-month target is $112 — 36.6 times fiscal 2028E adjusted EPS of $3.06 — for a total expected return of about 1.5% including the dividend. We rate the shares Neutral. The market is paying a growth multiple for a company guiding to 7-8.5% profit growth, and paying it with the risk-free rate at 5.24%. We would rather own the business than the stock at this price.
This is not a short recommendation; the downside is bounded by cash flow and a non-discretionary mix. We would turn constructive below roughly $92 — about 30 times FY2028E earnings, a 3.3% earnings yield — or on two consecutive quarters of U.S. comps ex-wellness above 4% with advertising growth holding above 30%. We would turn negative above $132, where the market would be paying 43 times forward earnings for 5% revenue growth and a flat margin.
Walmart reported 5.9% revenue growth and 28.8% operating income growth in the quarter ended 31 July 2026. Roughly eleven points of that profit growth came from $2.9 billion of tariff refunds. Adjusted and at constant currency, growth was 17.4%. The underlying business is genuinely improving. The headline is a one-off — and at 40 times trailing earnings against a 5.24% risk-free rate, the stock is priced for the headline.
23 — AppendixFinancial summary tables
All figures are from Walmart Inc. filings and earnings releases identified in the sources section, in billions of U.S. dollars unless stated. Fiscal years end 31 January; FY2026 means the twelve months ended 31 January 2026.
| Metric | FY2022 | FY2023 | FY2024 | FY2025 | FY2026 |
|---|---|---|---|---|---|
| Total revenues | 572.8 | 611.3 | 648.1 | 681.0 | 713.2 |
| Net sales | 567.8 | 605.9 | 642.6 | 674.5 | 706.4 |
| Membership & other income | 5.0 | 5.4 | 5.5 | 6.4 | 6.8 |
| Operating income (GAAP) | 25.9 | 20.4 | 27.0 | 29.3 | 29.8 |
| Operating margin | 4.53% | 3.34% | 4.17% | 4.31% | 4.18% |
| Net income attributable to Walmart | 13.7 | 11.7 | 15.5 | 19.4 | 21.9 |
| Diluted EPS (GAAP, $) | 1.62* | 1.42* | 1.91* | 2.41 | 2.73 |
| Operating cash flow | 24.2 | 28.8 | 35.7 | 36.4 | 41.6 |
| Capital expenditure | 13.1 | 16.9 | 20.6 | 23.8 | 26.6 |
| Free cash flow | 11.1 | 12.0 | 15.1 | 12.7 | 14.9 |
| Dividends paid | 6.2 | 6.1 | 6.1 | 6.7 | 7.5 |
| Share repurchases | 9.8 | 9.9 | 2.8 | 4.5 | 8.1 |
* FY2022–FY2024 EPS adjusted for the February 2024 three-for-one stock split.
| Segment | Net sales | YoY | Op. income | Margin | % of sales | % of profit |
|---|---|---|---|---|---|---|
| Walmart U.S. | 483.0 | +4.4% | 25.2 | 5.21% | 68.4% | 76.9% |
| Walmart International | 130.4 | +7.0% | 5.1 | 3.91% | 18.5% | 15.6% |
| Sam's Club U.S. | 93.0 | +3.1% | 2.4 | 2.63% | 13.2% | 7.5% |
| Corporate & support | — | — | (2.9) | — | — | — |
| Consolidated | 706.4 | +4.7% | 29.8 | 4.22%† | 100.0% | 100.0% |
† On net sales. On total revenues the consolidated operating margin is 4.18%.
| Metric | Q1 26 | Q2 26 | Q3 26 | Q4 26 | Q1 27 | Q2 27 |
|---|---|---|---|---|---|---|
| Total revenues ($bn) | 165.6 | 177.4 | 179.5 | 190.7 | 177.8 | 187.9 |
| Revenue growth, YoY | +2.5% | +4.8% | +5.8% | +5.6% | +7.3% | +5.9% |
| Operating income ($bn) | 7.1 | 7.3 | 6.7 | 8.7 | 7.5 | 9.4 |
| Adjusted EPS ($) | 0.61 | 0.68 | 0.62 | 0.74 | 0.66 | 0.81 |
| Walmart U.S. comp, ex-fuel | 4.5% | 4.6% | 4.5% | 4.6% | 4.1% | 2.6% |
| Sam's Club comp, ex-fuel | 6.7% | 5.9% | 3.8% | 4.0% | 3.9% | 4.4% |
| Global e-commerce growth | +22% | +25% | +27% | +24% | +21% | +23% |
| Metric | Value | Metric | Value |
|---|---|---|---|
| Price | $111.35 | Trailing P/E (GAAP) | 40.3× |
| Market capitalization | $883bn | P/E on FY27 guide mid | 39.3× |
| Shares outstanding | 7.93bn | P/E on FY28E (Farstar) | 36.4× |
| Dividend (annual) | $0.99 | Dividend yield | 0.89% |
| 52-week range | $98.05 – $134.84 | Earnings yield | 2.48% |
| FY2027 adj. EPS guidance | $2.80 – $2.87 | FY2028 adj. EPS (Farstar est.) | $3.06 |
| Street consensus target | $126.78 | Farstar target | $112 |
| US 10-year Treasury | 5.24% | Farstar rating | Neutral |
24 — SourcesPrimary and secondary references
This report is built from primary disclosure wherever possible.
Primary — company filings and releases
Walmart Inc. Form 10-K for the fiscal year ended 31 January 2026 (filed April 2026), and Form 10-Q for the quarter ended 31 July 2026, including the IEEPA tariff-refund disclosure. Earnings releases furnished on Form 8-K: Q4 FY2026 (19 February 2026), Q1 FY2027 (21 May 2026) and Q2 FY2027 (20 August 2026), with presentations, comp-sales disclosures and call transcripts. Press releases: the $0.99 dividend raise marking the 53rd consecutive annual increase (19 February 2026), and John Furner's appointment as President and CEO (14 November 2025).
Secondary — market data and reporting
stockanalysis.com and Yahoo Finance, WMT price, valuation and analyst data, retrieved 9-11 October 2026. Seeking Alpha, "Treasury Yields Snapshot: October 9, 2026" (10-year at 5.24%). Macrotrends, WMT split-adjusted EPS history. CNBC: "Walmart reports strong holiday growth" and "Amazon revenue passes Walmart" (19 February 2026); "Doug McMillon to retire; John Furner named successor" (14 November 2025). WIRED and trade-press reporting on the Walmart–OpenAI pivot to Sparky, March 2026.
Notes on method
Where a figure is a Farstar estimate rather than a company disclosure it is labelled as such: fiscal 2028 adjusted EPS of $3.06, the scenario probabilities and prices, the sensitivity grid, the trailing free cash flow estimate (~$13.5bn) and the risk scores. Constant-currency figures are as disclosed by the company.
25 — DisclosureConflicts, limitations, and revision policy
Independence
Farstar Capital holds no position in Walmart Inc. or in any security mentioned in this report at the time of publication, and has received no compensation from Walmart Inc. or any affiliate for its preparation. This report was not shown to the subject company before publication.
Sources of information
The report draws on Walmart's public filings, earnings releases, investor communications, and the market-data aggregators named in the sources section. Figures are believed accurate as of the publication date but are not warranted. Fiscal years end 31 January; Q2 FY2027 means the three months ended 31 July 2026.
Valuation methodology
The twelve-month target applies a forward multiple to a Farstar estimate of fiscal 2028 adjusted EPS, cross-checked against a scenario-weighted expected value and a free cash flow yield. The sensitivity grid in section 17 shows a range of outcomes, not a forecast.
Limitations
Public information only — no management interviews, channel checks or primary consumer research. Walmart does not disclose marketplace revenue, Walmart+ or Sam's Club renewal rates, or e-commerce margins; where we have reasoned around those gaps we have said so rather than estimated them.
Rating definitions
Constructive — expected total return above 15% over twelve months. Neutral — expected total return between −10% and +15%. Cautious — expected total return below −10%. Ratings are set on a twelve-month horizon and are not trading recommendations.
Revision policy
This is revision v2.0, a full rewrite published 12 October 2026, superseding v1.0 (8 October 2026): market data updated to 9 October 2026, target rebased from $114 to $112 on an unchanged Neutral rating, structure condensed to 25 sections. The report is revised on any material change to the investment case — a rating or target change, a restatement, a significant transaction, a Flipkart or PhonePe listing, or a material regulatory development.
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