Walmart Q2 Revenue Rises 5.9% YoY, But Shares Tumble 10% as Full-Year EPS Guidance Misses Expectations

TradingKey - Walmart (WMT) reported second-quarter sales before the U.S. market open that exceeded Wall Street expectations and raised its full-year performance outlook. However, full-year EPS guidance fell short of expectations, sending the stock down about 10%.

During the period, Walmart's second-quarter revenue grew 5.9% year-over-year (up 5.1% on a constant currency basis) to $187.937 billion, slightly above market expectations of $186.77 billion. By segment, Walmart U.S. net sales grew 2.6% year-over-year, well below market expectations of 3.5%, marking a slowdown in growth for the second consecutive quarter, partly due to federal drug price negotiations weighing on pharmacy revenue.

[Source: TradingView]

On the profitability side, under GAAP, net income attributable to Walmart was $6.366 billion, down 9.4% year-over-year; diluted EPS was $0.80, down 9.1% year-over-year.

It is worth noting that the decline in profit was mainly driven by net losses recorded on equity and other investments, compared to net gains in the same period last year, rather than weakness in core operations.

Adjusted EPS, which better reflects operational performance, came in at $0.81, up 19.1% year-over-year and well above market expectations of $0.74; this metric excludes net losses on equity and other investments ($0.12 per share impact) and a net gain from a tax item ($0.11 per share).

[Source: Walmart Q2 FY27 Earnings]

In terms of profitability, gross margin expanded by 96 basis points year-over-year to 25.4%; operating income grew 28.8% year-over-year to $9.383 billion (up 17.4% on a constant currency basis). The company disclosed that it recognized the impact of tariff refunds during the period, which was partially offset by price investments made in the quarter; excluding this net impact, underlying operating income growth was at the high end of the guidance range, and the company plans to continue prioritizing remaining tariff refunds for price strategy investments.

Regarding guidance, the company expects third-quarter net sales (constant currency) to grow 3.0% to 3.75%, adjusted operating income to grow 2.0% to 4.0%, and adjusted EPS to be $0.62 to $0.64.

Walmart also raised its full-year FY27 guidance: net sales growth (constant currency) was revised up from 3.5%-4.5% to 4.0%-5.0%; adjusted operating income growth was raised from 6.0%-8.0% to 7.0%-8.5%; and adjusted EPS was raised from $2.75-$2.85 to $2.80-$2.87, above its previous expectation of $2.75 to $2.85, but below the FactSet consensus expectation of $2.90,

Overall, this is a solid earnings report characterized by a "beat and raise": the three high-margin growth engines of e-commerce, advertising, and membership fees fired on all cylinders simultaneously; U.S. same-store sales were driven by volume, demonstrating traffic resilience; and all three core full-year guidance metrics were revised upward. The profit decline under GAAP was merely an accounting noise from investment gains and losses, leaving the strength of the core business intact.