[WMT] Walmart: Q3 Earnings Preview, Can Price Rollbacks Hold Traffic Without Tariff Refunds?

Walmart is the largest grocery and general merchandise retailer in the US, reporting through three segments: Walmart U.S., Walmart International and the Sam's Club U.S. warehouse clubs, with total revenues of $713.163 billion in fiscal 2026 [1]. Third quarter fiscal 2027 (three months ended October 31, 2026) results are scheduled for release on 2026-11-19, and this Walmart Q3 earnings report covers August through October 2026 [2]. In the latest disclosed quarter, the second quarter of fiscal 2027 (ended July 31, 2026), revenues rose 5.9% to $187.937 billion and operating income rose 28.8% to $9.383 billion, helped by about $2.9 billion of tariff refunds recorded as a reduction to cost of sales; Walmart U.S. comparable sales grew 2.6%, with transactions up only 1.5% [3]. On August 20, Walmart guided third-quarter adjusted EPS to $0.62-$0.64, constant-currency net sales growth to 3.0%-3.75% and constant-currency operating income growth to 2%-4%, and set full-year adjusted EPS guidance at $2.80-$2.87 [3]. As compiled by Drillr on October 22, the consensus of 23 analysts for third-quarter EPS is $0.637, and the consensus of 19 analysts for total revenues is $187.30 billion; the revenue figure is at actual exchange rates and includes membership income, so it is not on the same basis as the company's constant-currency net sales guidance [4].

The upcoming third-quarter results can test three things. The first is whether price cuts can hold traffic once the tariff refund is gone: in the second quarter Walmart put most of the refund into grocery and general merchandise price cuts, lifting rollbacks from 7,200 items at the end of the first quarter to more than 11,000 [5], yet Walmart U.S. transaction growth slowed from 3.0% to 1.5% over the same period [3][6], so third-quarter transactions and gross margin together will show whether that investment bought durable traffic. The second is whether advertising and membership fees can keep outrunning rising costs: in the second quarter Walmart Connect (excluding VIZIO) grew 43% and global membership fee revenue grew about 17%, but the Walmart U.S. operating expense rate rose 72 basis points year over year [3][7], so whether segment operating income can still grow without a refund depends on the net of those two forces. The third is whether free cash flow can catch up: first-half capital expenditures were $14.181 billion, $2.772 billion more than a year earlier, and free cash flow was $5.529 billion, $1.414 billion less [7], while the company still expects double-digit free cash flow growth for the full year [5]; whether the nine-month gap narrows or widens will show how firm that commitment is.

Company Background and Business Structure

Walmart is an omnichannel retailer built around its store network, and its US operations dominate the business. The company is headquartered in Bentonville, Arkansas, was founded in 1945 and changed its name from Wal-Mart Stores, Inc. to Walmart Inc. in 2018; in fiscal 2026 the Walmart U.S. and Sam's Club U.S. segments together generated about 82% of consolidated net sales [1]. At the end of the second quarter of fiscal 2027 (July 31, 2026), the company operated about 11,000 stores and clubs worldwide with about 1.058 billion square feet of retail space [7]. Its fiscal year ends on January 31, so fiscal 2027 runs from February 2026 to January 2027 [1].

The three segments have very different revenue profiles, and Walmart U.S. alone produced 68.4% of fiscal 2026 net sales. Walmart U.S. operates supercenters, neighborhood markets and walmart.com; in fiscal 2026 its grocery net sales (including consumables) were $285.482 billion, general merchandise $115.060 billion, health and wellness (including pharmacy) $69.547 billion and other $12.886 billion, and it also runs the Walmart Connect advertising business for brands, the Marketplace platform and fulfillment services for third-party sellers, and the Walmart+ membership program [1]. Walmart International operates in Mexico and Central America (Walmex), China, Canada, India through Flipkart and other markets, with fiscal 2026 net sales of $130.423 billion; Sam's Club U.S., the warehouse club, had fiscal 2026 net sales of $93.015 billion including fuel [1]. Sam's Club offers Club and Plus memberships, and effective May 1, 2026 their annual fees rose from $50 and $110 to $60 and $120, with the new fees recognized ratably over the one-year membership term [8].

How Walmart buys, moves and collects for its goods determines its cost structure and working-capital rhythm. The company buys in large volumes from domestic and foreign suppliers, mostly branded goods, alongside private brands such as Great Value, Equate and Marketside; imports account for less than one third of what it sells in the US, mainly from China, Vietnam, Mexico, India and Canada [1]. It has 192 distribution facilities in the US, began folding the Sam's Club supply chain into Walmart U.S. in fiscal 2026, and uses its stores as fulfillment nodes for online orders, with stores handling about 80% of US e-commerce orders and all fast deliveries [1][5]. Customers pay at the store or online almost immediately while suppliers are paid on terms, so working capital is driven mainly by the timing of inventory and accounts payable; net income attributable to Walmart is also affected by fair-value changes in equity investments, which run through other gains and losses and swing far more than operating income [1].

Financial History and Current Position

The annual record shows steady revenue growth, with operating income reaching close to $30 billion in both fiscal 2025 and fiscal 2026. Total revenues grew from $572.754 billion in fiscal 2022 to $713.163 billion in fiscal 2026; operating income was $20.428 billion in fiscal 2023, $29.348 billion in fiscal 2025 and $29.825 billion in fiscal 2026, and net income attributable to Walmart was $21.893 billion in fiscal 2026 [1]. Excluding items such as restructuring and legal matters, fiscal 2026 adjusted operating income was $31 billion and adjusted EPS was $2.64 [1].

Fiscal 2026 cash flow was large enough to fund both capital spending and shareholder returns. Operating cash flow was $41.565 billion, capital expenditures were $26.642 billion and free cash flow was $14.923 billion, up from $12.660 billion in fiscal 2025; the company paid $7.507 billion in dividends and repurchased $8.088 billion of stock that year [1]. In February 2026 the board approved a new $30 billion repurchase program, of which $25.1 billion remained at the end of July [7].

Revenues kept growing in the first two quarters of fiscal 2027, but second-quarter profit growth came largely from a one-time tariff refund. In the first quarter (ended April 30, 2026), revenues rose 7.3% to $177.751 billion, operating income rose 5.0% to $7.493 billion and adjusted EPS was $0.66 [6][8]. In the second quarter (ended July 31, 2026), revenues rose 5.9% (5.1% in constant currency) to $187.937 billion and operating income rose 28.8% to $9.383 billion, including about $2.9 billion of tariff refunds recorded as a reduction to cost of sales; constant-currency adjusted operating income was $9.2 billion, up 17.4%, and adjusted EPS was $0.81 [3][7]. Because the quarter carried $1.200 billion of other losses against $2.708 billion of other gains a year earlier, net income attributable to Walmart fell 9.4% to $6.366 billion and diluted EPS was $0.80 [3].

First-half cash flow shows capital spending growing faster than operating cash flow, with buybacks partly funded by borrowing. In the first half of fiscal 2027, operating cash flow was $19.710 billion, capital expenditures were $14.181 billion and free cash flow was $5.529 billion, down from $6.943 billion a year earlier; the company paid $3.945 billion in dividends (declaring $0.99 per share for the half) and repurchased $5.104 billion of stock [7]. Net short-term borrowings rose $3.923 billion in the first half and the company issued $4.230 billion of long-term debt; at July 31 it held $11.992 billion of cash and restricted cash, and its $15 billion US credit facilities were entirely undrawn [7].

Operating Model

Walmart's revenue is driven by transactions and average ticket in each segment, with membership fees and advertising forming a second layer of income on top of that traffic. Consolidated revenue is roughly net sales plus membership and other income, and net sales are roughly the number of store and online transactions in each segment multiplied by average ticket, plus services such as advertising and Marketplace that are recorded in sales; in the second quarter of fiscal 2027, Walmart U.S. net sales were $125.189 billion, Walmart International $35.198 billion and Sam's Club U.S. $25.713 billion including fuel [7]. Membership and other income was $1.837 billion in the second quarter, coming mainly from members multiplied by annual fees recognized monthly, plus other income such as rent, recycling and gift cards [7]. E-commerce net sales grew 23% in the second quarter and made up 24% of total net sales, while international revenue also moves with currency, which contributed $1.5 billion in the quarter [3]. Transactions hit net sales in the same quarter, but annual fees are deferred and recognized over the membership term, so fee increases and new members take several quarters to show up fully in membership income [8].

Operating income depends on whether gross margin can absorb an expense base dominated by labor, claims and depreciation. Operating income is roughly net sales times gross margin, plus membership and other income, minus operating expenses; gross margin reflects price investment, merchandise and business mix (advertising, Marketplace, private brands), fuel and fulfillment costs, and tariff costs and refunds, and after about $2.9 billion of refunds reduced cost of sales in the second quarter, the consolidated gross profit rate was 25.4%, up 96 basis points [7]. Operating expenses consist mainly of store and distribution wages, associate healthcare, self-insured claims and depreciation, and the consolidated expense rate rose 11 basis points in the second quarter [7]. Adjusted operating income excludes only items such as restructuring and legal matters and does not exclude tariff refunds, so second-quarter adjusted figures also include that one-time benefit [3].

Operating cash flow is roughly net income plus depreciation, adjusted for changes in inventory and accounts payable, and capital spending determines how much free cash flow is left. In fiscal 2026 depreciation was $14.203 billion, operating cash flow $41.565 billion, capital expenditures $26.642 billion and free cash flow $14.923 billion [1]. Capital spending leaves as cash first and then enters operating expenses quarter by quarter as depreciation, so this year's higher investment will weigh on reported profit for years, while the return appears only once automation and the fulfillment network deliver efficiency gains [7]. After capital spending, cash goes to dividends and buybacks; in the first half of fiscal 2027 most buyback funding came from free cash flow, with the remainder covered by short-term borrowing and new long-term debt [7].

The model has several visibility limits that matter when reading third-quarter results. Walmart does not disclose the dollar size or profit of advertising, membership fees or Marketplace, nor the amount of its price investment or the net income contribution of the tariff refunds, and segment transactions and average ticket appear only in quarterly presentation materials [3]. The fourth quarter is the holiday season and third-quarter-end inventory is usually at its high point for the year, so cash flow is strongly seasonal and third-quarter free cash flow cannot be extrapolated directly to the full year [7].

Industry and Competitive Position

Walmart is the largest US grocery and general merchandise retailer, and its main advantage is the delivery speed and traffic monetization that its store density makes possible. It competes with Amazon, Costco, Target, Kroger and regional chains, while Sam's Club competes with Costco in warehouse clubs [1]. Using its stores, Walmart delivered about 37% of store-fulfilled orders in under three hours in the second quarter, processed over 50% of e-commerce fulfillment volume through automated facilities, and now serves 3,100 US stores with automated freight [3][5]. Its advertising business is one of the fastest-growing retail media operations in the US, with Walmart Connect (excluding VIZIO) up 43% in the second quarter [3].

Management says share gains spanned categories and income tiers but were led by upper-income households, and the available material cannot quantify this advantage against competitors. Second-quarter share gains were led by higher-income households, while management also noted that lower-income households made clear trade-offs in June once gasoline topped $4 a gallon [3][5]. The available information covers only Walmart's own description of share and its fulfillment metrics, with no competitor comparable sales, price gaps or advertising scale for the same period, so continued share gains remain the company's own account and cannot be checked against third-party data [5].

Core Debates

Walmart put its second-quarter tariff refunds into more than 11,000 price rollbacks; with no refund in the third quarter, can traffic and profit hold?

This debate determines whether Walmart's core business can deliver third-quarter growth that does not rely on a one-time gain. Walmart U.S. produced 68.4% of fiscal 2026 net sales and most of the operating income [1]. In the second quarter of fiscal 2027, about $2.9 billion of tariff refunds reduced cost of sales and lifted consolidated operating income 28.8%, but the company spent most of the refund on price cuts and said that price investment would continue through the second half [3][7]. Third-quarter guidance for constant-currency operating income growth is only 2%-4%, making it the first quarter to test whether price cuts can buy durable traffic [3].

Second-quarter data show slowing traffic growth and a gross margin gain that came mainly from the refund. Walmart U.S. comparable sales grew 2.6% in the second quarter, with transactions up 1.5% and average ticket up 1.1%, down from 4.1% in the first quarter when transactions grew 3.0%; excluding health and wellness, which was hit by deflation from maximum fair price (MFP) drug pricing, comparable sales grew 3.4% [3][6][7]. Like-for-like inflation was 1.4% in the second quarter (1.2% in the first), with grocery at 1.3% and general merchandise at 1.7% [3][6]. The Walmart U.S. gross profit rate was 29.4%, up 158 basis points, mainly because of the tariff refunds and partly offset by price cuts and fuel costs; the first-quarter rate was 27.8%, up only 29 basis points; meanwhile the operating expense rate rose 72 basis points [7][8].

The path from refund to price cuts to profit is clear, but there are two readings of the return on that investment. About $2.9 billion of IEEPA tariff refunds first reduced cost of sales, and the company then put most of the refund into grocery and general merchandise price cuts, raising rollbacks from 7,200 items at the end of the first quarter to more than 11,000 in the second quarter to lift transactions, units and share; in the third quarter the full-quarter cost of those cuts lands without a refund to offset it, pressuring gross margin year over year, which is why management guided operating income growth to only 2%-4% and asked investors to view the second and third quarters together, with average quarterly growth of about 10% across the two [5][3]. Management says price elasticity is already visible on rollback items, that share gains lag but are durable, and that rollbacks clearing return hurdles will become permanent prices [5]. The other reading notes that transaction growth slowed from 3.0% to 1.5% just as rollbacks expanded, and that lower-income households made clear trade-offs in June once gasoline topped $4 a gallon; on that reading, gross margin could fall year over year without the refund in the third quarter and profit growth would land only at the low end of guidance [5]. The third-quarter base for adjusted operating income is $7.3 billion from a year earlier [3].

Three third-quarter checks can separate these readings. First, whether Walmart U.S. transaction growth exceeds the second quarter's 1.5% and comparable sales excluding health and wellness stay at or above 3.4%; second, how the Walmart U.S. gross margin changes year over year without tariff refunds, and what management says about the scale of price investment; third, whether consolidated constant-currency adjusted operating income lands within the 2%-4% guidance and whether full-year EPS guidance of $2.80-$2.87 is maintained [3]. If transactions slow while gross margin falls year over year, the price cuts did not buy traffic; if transactions accelerate while gross margin holds or rises, the evidence supports price investment turning into durable share.

With advertising growing by roughly 40% and membership fees by nearly 20%, can these high-margin streams keep outrunning rising depreciation, claims and associate healthcare costs?

This debate determines whether Walmart U.S. profit can keep growing on business mix in a third quarter without the refund. Management says membership, advertising and Marketplace already account for nearly half of profit growth, and that US e-commerce incremental margins have held in the high single digits to low double digits for six quarters [5]. At the same time, the Walmart U.S. operating expense rate rose 56 and 72 basis points year over year in the first and second quarters [8][7]. With no tariff refund in the third quarter, profit growth depends on the net of these two forces.

High-margin income is still growing fast, but the expense rate is rising as well. In the second quarter of fiscal 2027, Walmart U.S. advertising revenue grew 38% (36% in the first quarter), including 43% growth at Walmart Connect excluding VIZIO (44% in the first quarter), Marketplace sales grew 52%, and Walmart+ fee revenue grew at a double-digit rate with record second-quarter net adds [3][6]. Global membership fee revenue grew about 17% (17.4% in the first quarter), and Sam's Club U.S. membership fee revenue grew about 6% [3][8]. Walmart U.S. operating income was $8.120 billion in the second quarter, up 20.6%, but that figure includes tariff refunds; in the first quarter the segment earned $5.897 billion, up only 3.5% [7][8]. On the cost side, the second-quarter expense rate rose to 23.5% because of higher self-insured general liability claims, depreciation and associate healthcare costs, partly offset by better labor productivity [7].

High-margin income and cost pressure offset each other on the same income statement, and Walmart does not disclose enough to measure the former on its own. The store and fulfillment network brings traffic, so brands buy advertising on Walmart Connect, third-party sellers sell through Marketplace, and Walmart+ and Sam's Club members pay annual fees; this income lifts the gross margin mix and adds to membership and other income [1]. At the same time, capital spending pushes up depreciation and self-insured general liability claims and associate healthcare costs are rising; if high-margin income growth slows while the expense rate keeps climbing, the Walmart U.S. operating margin falls [7]. The other reading holds that second-quarter profit growth came mainly from the one-time refund, that the scale of high-margin income is still not disclosed separately, and that without a refund in the first quarter segment operating income grew only 3.5%, suggesting cost pressure and high-margin income roughly cancel out [8].

Three third-quarter data points can test whether the profit mix is really improving. First, whether Walmart Connect and global membership fee growth stay near the second quarter's 43% and about 17%; second, whether the year-over-year rise in the Walmart U.S. operating expense rate exceeds the second quarter's 72 basis points; third, whether Walmart U.S. operating income still grows year over year without tariff refunds [3][7]. If the expense rate keeps widening while advertising slows, high-margin income is not enough to offset costs; if the rise in the expense rate narrows and segment profit grows in a quarter without refunds, the evidence supports an improving profit mix.

With capital spending raised to about 4% of sales and first-half free cash flow down $1.4 billion, can the second half catch up to deliver double-digit growth for the year?

This debate determines how Walmart funds shareholder returns and when its automation investment starts to raise returns. Fiscal 2026 free cash flow of $14.923 billion supported $7.507 billion of dividends and $8.088 billion of buybacks [1]. Of the new $30 billion repurchase program approved in February 2026, $25.1 billion remained at the end of July [7]. Higher capital spending and lower free cash flow directly affect whether those returns are funded mainly by operating cash or by borrowing.

The first-half free cash flow gap came mainly from higher capital spending and cash tied up in inventory. In the first half of fiscal 2027, operating cash flow was $19.710 billion, up $1.358 billion; capital expenditures were $14.181 billion, up $2.772 billion; free cash flow was $5.529 billion, down $1.414 billion; and inventory changes used $2.660 billion of cash versus $659 million a year earlier [7]. In August the company raised full-year capital spending from about 3.5% to about 4% of net sales but still expects double-digit free cash flow growth for the year [3][5]. Second-quarter depreciation and amortization was $3.925 billion, up 12.6%, and $7.746 billion for the half, up 13.0%; Walmart U.S. inventory at the end of the second quarter was up 6.3% year over year (8.0% at the end of the first quarter), faster than the segment's 3.5% net sales growth [7][8][3].

Automation spending first lowers cash flow and then lowers profit through depreciation, so the second half needs clearly stronger operating cash flow to meet the full-year commitment. Walmart is directing capital spending to supply-chain automation, e-commerce fulfillment centers and store remodels; more than 50% of e-commerce fulfillment volume already passes through automated facilities, and 3,100 US stores are served by automated freight [5]. Working from guidance, second-half capital spending comes out close to the $15.233 billion of the second half of fiscal 2026, meaning this year's increase is concentrated in the first half [1][3]. The other reading notes that the second half needs about 36% more free cash flow than a year earlier, which depends on holiday inventory sell-through and the timing of payables; if inventory keeps outgrowing sales, the full-year target could be missed and buybacks would rely more on short-term borrowing, which already rose $3.923 billion net in the first half [7].

The third-quarter cash flow statement can show early how hard the full-year target is. First, whether the year-over-year free cash flow gap for the first nine months is smaller than the first half's $1.414 billion; second, whether capital spending stays at about 4% of net sales and what management says about the peak in automation investment; third, whether the gap between inventory growth and sales growth narrows at the end of the third quarter [7][3]. If the nine-month gap widens, double-digit growth for the year would require a large fourth-quarter catch-up; if the gap narrows while capital spending holds at 4%, the evidence supports the full-year cash commitment.

Risks and Falsifiers

Maximum fair price (MFP) drug regulation is the most direct structural drag on Walmart U.S. comparable sales. The regulation lowers prescription unit prices and pushes branded drugs toward generics, and management expects it to cut about 125 basis points from Walmart U.S. comparable sales in fiscal 2027; if more drugs enter negotiation later, health and wellness revenue would keep deflating [3][5]. The exposed line is the health and wellness category, with fiscal 2026 net sales of $69.547 billion; in the second quarter of fiscal 2027 the category had net sales of $16.942 billion, down $306 million year over year, with roughly 900 basis points of deflation within the category [7]. If prescription volume keeps growing at a mid-single-digit rate in the third quarter and management confirms the full-year MFP drag on comparable sales remains about 125 basis points, this risk has not grown.

Fuel prices both reduce consumer purchasing power and raise delivery costs. Management says unplanned fuel costs this year exceed $2 billion, and that lower-income households made clear trade-offs in June once gasoline topped $4 a gallon [5]. More than $2 billion of fuel costs equals more than 6% of fiscal 2026 adjusted operating income of $31 billion, and the impact is already included in the August 20 full-year guidance [3]. If management does not raise its fuel cost estimate further in the third quarter and lower-income household transactions do not fall, this risk has not moved beyond the assumptions in guidance.

If price investment continues in the third and fourth quarters without a refund to offset it and traffic does not grow in step, gross margin and operating income fall directly. Based on second-quarter consolidated net sales of $186.100 billion, every 10 basis points of gross margin decline cuts quarterly gross profit by about $190 million; third-quarter guidance implies adjusted operating income of about $7.45 billion to $7.59 billion [7][3]. If the Walmart U.S. gross margin is flat or higher year over year in the third quarter and consolidated adjusted operating income grows at least 2.0%, the current concern about the cost of price cuts does not hold.

On the cost side, the risk is that self-insured general liability claims, associate healthcare and depreciation keep rising faster than advertising and membership fees. Based on second-quarter Walmart U.S. net sales of $125.189 billion, every 10 basis points of expense rate increase cuts quarterly operating income by about $125 million, and the second quarter's 72 basis points equals about $900 million [7]. If the Walmart U.S. expense rate rises no more than 50 basis points year over year in the third quarter and segment operating income grows, this risk is receding.

Peak capital spending combined with holiday inventory build could keep fiscal 2027 free cash flow growth below double digits. Growth of 10% for the year requires about $16.4 billion of free cash flow; the first half produced only $5.529 billion, so the second half needs about $10.9 billion [1][7]. If the year-over-year free cash flow gap for the first nine months narrows and management reaffirms double-digit full-year growth in the third quarter, this risk weakens [3].

What to Watch Next

• Price cuts and traffic: Walmart U.S. transactions excluding fuel grew 1.5% in the second quarter (3.0% in the first). Growth above 1.5% without the refund supports the view that rollbacks are buying traffic; further slowing weakens it.
• Price cuts and traffic: the Walmart U.S. gross margin was 29.4%, up 158 basis points including the refund. A flat or higher rate in a quarter without refunds supports the view; a year-over-year decline alongside slower traffic falsifies it. Management's comments on the scale of price investment matter here.
• Price cuts and traffic: consolidated constant-currency adjusted operating income was $9.2 billion in the second quarter (up 17.4%), against a third-quarter base of $7.3 billion. Growth below 2.0%, or a cut to the $2.80-$2.87 EPS guidance, weakens the view.
• High-margin income versus costs: Walmart Connect grew 43% and global membership fees about 17%. A clear slowdown together with a wider expense rate falsifies the view that these streams can carry profit.
• High-margin income versus costs: the Walmart U.S. operating expense rate rose 72 basis points in the second quarter (56 in the first). A rise of no more than 50 basis points with segment profit growth confirms the view.
• Free cash flow: the first-half gap was $1.414 billion. A narrower nine-month gap plus a reaffirmed double-digit target confirms the commitment; a wider gap weakens it.
• Free cash flow: Walmart U.S. inventory grew 6.3% against 3.5% net sales growth, with capital spending at about 4% of sales. A narrower gap between inventory and sales supports the cash commitment; a wider one weakens it.

Conclusion

Walmart's results are driven by traffic through its US store network, while advertising, Marketplace and membership fees turn that traffic into higher-margin income. In fiscal 2026 the company produced revenues of $713.163 billion, operating income of $29.825 billion and free cash flow of $14.923 billion [1]; in the second quarter of fiscal 2027 operating income rose 28.8%, but about $2.9 billion of that came from tariff refunds, Walmart U.S. transaction growth slowed to 1.5%, and first-half free cash flow was $1.414 billion lower than a year earlier [3][7]. The most important unresolved relationship is whether price cuts funded by the refund can turn into traffic in a third quarter without the refund, while advertising and membership fees outrun rising costs.

Outside interpretations broadly agree on the long-term direction but focus on different things. In an email report the day after the second-quarter release, UBS said Walmart's quarter was mixed, raising questions about the growth trajectory of its core US business, but that its new business model may drive long-term growth [9]; that view maps onto the debate over price cuts and traffic, and third-quarter transactions and comparable sales excluding health and wellness will test it. On October 19, Bank of America said Walmart could unlock billions of dollars in advertising revenue by expanding digital advertising, strengthening its connected TV presence and integrating artificial intelligence into shopping [10]; that view supports the more optimistic side of the debate over high-margin income versus costs, but because Walmart does not disclose advertising dollars, it can only be tested indirectly through Walmart Connect growth and the Walmart U.S. gross margin. Both views reached the market through media reports and neither offers checkable figures, so they should be treated as outside interpretations, not as facts or a vote.

If third-quarter transaction growth exceeds 1.5%, the Walmart U.S. gross margin holds or rises without a refund, the rise in the expense rate narrows to within 50 basis points, and the nine-month free cash flow gap is smaller than $1.414 billion, the current understanding that price cuts are buying share while high-margin income supports profit would be clearly strengthened. Conversely, if transactions keep slowing, gross margin falls year over year, the expense rate rises by more than 72 basis points, or the free cash flow gap widens enough to require a large fourth-quarter catch-up, that understanding would be weakened, and the company's $2.80-$2.87 full-year EPS guidance and its double-digit free cash flow growth commitment would come under greater pressure [3].

Sources

[1] WMT FY2026 10-K filed 2026-03-13 · 2026-03-13 · 10-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000104169&type=10-K&dateb=&owner=include&count=40

[2] WMT earnings calendar updated 2026-10-22 · 2026-10-22 · Drillr earnings calendar

[3] WMT Q2 FY2027 8-K filed 2026-08-20 · 2026-08-20 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000104169&type=8-K&dateb=&owner=include&count=40

[4] Drillr analyst estimates WMT Q3 FY2027 retrieved 2026-10-22 · 2026-10-22 · Drillr analyst estimates · https://gateway.drillr.ai/mcp/private

[5] WMT Q2 FY2027 earnings call 2026-08-20 · 2026-08-20 · earnings-call · https://gateway.drillr.ai/mcp/private

[6] WMT Q1 FY2027 8-K filed 2026-05-21 · 2026-05-21 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000104169&type=8-K&dateb=&owner=include&count=40

[7] WMT Q2 FY2027 10-Q filed 2026-08-28 · 2026-08-28 · 10-Q · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000104169&type=10-Q&dateb=&owner=include&count=40

[8] WMT Q1 FY2027 10-Q filed 2026-05-29 · 2026-05-29 · 10-Q · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000104169&type=10-Q&dateb=&owner=include&count=40

[9] UBS view on WMT Q2 FY2027 via AAStocks 2026-08-21 · 2026-08-21 · UBS · https://www.aastocks.com/tc/stocks/news/aafn-con/NOW.1540016/latest-news/AAFN

[10] Bank of America view on Walmart advertising via Benzinga 2026-10-19 · 2026-10-19 · Bank of America · https://www.benzinga.com/analyst-stock-ratings/analyst-color/26/10/62447386/analyst-sees-billions-in-walmarts-next-big-advertising-opportunity