Walmart Inc. (WMT) Q3 2026 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

Walmart's earnings call reflects a positive sentiment with raised sales growth guidance, strong e-commerce and membership growth, and AI investments. The Q&A highlighted optimism for the holiday season and effective cost management. Although some uncertainties exist, such as the impact of fair pricing legislation, the overall outlook is positive, driven by strategic initiatives and market confidence.

Key Financial Performance

Sales Growth Sales grew 5.9% overall in constant currency, with adjusted operating income growing faster at 8%. This growth was driven by positive transaction counts, unit volumes, and market share gains in grocery and general merchandise, especially among higher-income households.

E-commerce Growth E-commerce sales increased by 27% globally, with each segment delivering growth above 20%. This was supported by faster delivery speeds and improved execution.

Advertising Revenue Advertising revenue grew 53% globally, including contributions from VIZIO. Walmart Connect in the U.S. grew 33%, and international advertising grew 34%, led by Flipkart.

Membership Income Membership income increased by 17% globally, with 34% growth in international markets, primarily due to Sam's Club China. Walmart+ membership income in the U.S. grew at a double-digit pace.

International Sales International sales increased by 11.4% in constant currency, with adjusted operating income growing 16.9%. This was driven by business mix changes, lower e-commerce losses, and market share gains.

Walmart U.S. Comp Sales Comp sales grew 4.5%, with e-commerce sales increasing by 28% and marketplace sales growing 17%. Growth was driven by healthy transaction and unit growth, faster delivery speeds, and share gains in grocery, health and wellness, and general merchandise.

Sam's Club U.S. Comp Sales Comp sales grew 3.8%, driven by transaction counts and market share gains in grocery and general merchandise. E-commerce sales grew 22%, supported by digital engagement and improved delivery options.

Gross Profit Gross profit was relatively flat year-over-year. Walmart U.S. saw a 19 basis point increase due to disciplined inventory management and favorable business mix, while international gross profit faced pressure from channel and format mix.

Operating Income Enterprise adjusted operating income increased by 8% in constant currency, with international operating income growing nearly 17%. This was supported by improved e-commerce economics, business mix, and membership income growth.

Cash Flow Year-to-date operating cash flow was $27 billion, up $4.5 billion compared to last year. This increase was attributed to strong cash flow generation and efficient inventory management.

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Operating Highlights

E-commerce growth: E-commerce sales grew 27% in total, with each segment delivering growth above 20%. Walmart U.S. e-commerce grew 28%, driven by marketplace sales growth of 17%.

AI and technology integration: Walmart is adopting AI across the company, including for software development, where over 40% of new code is AI-generated or AI-assisted. The company is also enhancing e-commerce experiences with AI, including personalized and multimodal interactions.

OpenAI partnership: Walmart announced a partnership with OpenAI to allow customers to purchase items directly through ChatGPT, starting with checkout processes.

Market share gains: Walmart gained market share in grocery and general merchandise, particularly in the U.S. and international markets like China and Canada.

International growth: International sales increased 11.4% in constant currency, with strong performance in China (22% growth) and India (Flipkart's Big Billion Days event).

Inventory management: Walmart U.S. inventory increased by only 2.6%, reflecting disciplined inventory management and reduced markdown risks.

Supply chain automation: Over 60% of Walmart U.S. stores now receive freight from automated distribution centers, and over 50% of e-commerce fulfillment center volume is automated, improving efficiency.

Leadership transition: Doug McMillon is stepping down as CEO, with John Furner taking over as President and CEO starting February 1, 2026.

NASDAQ listing: Walmart announced its stock listing will move to NASDAQ, aligning with its tech-powered strategy.

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Risk or Challenges

Regulatory and Legal Risks: The transcript mentions forward-looking statements subject to risks and uncertainties, including factors identified in Walmart's SEC filings. This implies potential regulatory and legal challenges that could impact operations or financial performance.

Economic Pressures on Lower-Income Customers: Lower-income families are under additional financial pressure, which could affect Walmart's sales and profitability in this customer segment.

Merchandise Category Mix Challenges: Sales growth in grocery and health and wellness outpaced general merchandise, creating a headwind for merchandise category mix and potentially impacting profit margins.

International Market Risks: The international segment faces challenges such as price investments in Mexico and channel/format mix pressures in markets like Flipkart during events like Big Billion Days.

Supply Chain and Inventory Management: While inventory management is improving, the dynamic environment and higher costs from tariffs pose ongoing risks to supply chain efficiency and cost control.

AI and Technology Integration Risks: The adoption of AI and automation, while beneficial, carries risks related to implementation, cost, and potential disruptions in operations.

Currency Exchange Rate Volatility: Currency fluctuations could impact reported sales and operating income, as noted in the guidance for Q4.

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Guidance & Outlook

Full Year Sales Growth: Expected to grow between 4.8% and 5.1% in constant currency, up from the prior guidance of 3.75% to 4.75%.

Fourth Quarter Sales Growth: Guidance for growth of 3.75% to 4.75% in constant currency.

Currency Exchange Impact: If exchange rates remain stable, a $1.1 billion benefit to reported sales growth is expected in Q4.

Full Year Operating Income Growth: Expected to grow between 4.8% and 5.5% in constant currency.

Fourth Quarter Operating Income Growth: Guidance for growth in a range of 8% to 11% in constant currency.

Adjusted EPS for Full Year: Expected to be in a range of $2.58 to $2.63.

Adjusted EPS for Fourth Quarter: Expected to be in a range of $0.67 to $0.72.

E-commerce Growth: Continued strong momentum with 27% growth in Q3 and consistent growth across markets.

Business Mix and Margins: Business mix will continue to be a margin benefit, while merchandise category mix is expected to remain a headwind.

Consumer Environment: The environment remains dynamic, with monitoring of customer and member behavior alongside macroeconomic conditions.

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Shareholder Return Plan

Year-to-date dividends: Nearly $13 billion returned to shareholders through dividends and share repurchases.

Share repurchase program: Part of the $13 billion returned to shareholders includes share repurchases.

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Key Q&A

Q:Do you think agentic will supercharge Walmart's e-commerce growth?

A:Doug McMillon expressed excitement about the potential of agentic AI to enhance Walmart's e-commerce growth. He highlighted Walmart's advantages, including a broad assortment, proximity to customers, delivery speed, and everyday low prices. John Furner added that their digital agent, Sparky, is improving customer engagement and capabilities, while Kathryn McLay shared insights from international trials like 'Carrito listo' in Chile, which has already become 20% of their e-commerce business there.

Q:Do you have enough read from Q3 and Q4 to predict how the consumer may perform over the holiday?

A:John Rainey stated that the environment feels consistent, with some pockets of moderation. He noted that early indicators like back-to-school and Halloween sales were positive, making them optimistic about the holiday season. However, he mentioned that maximum fair pricing legislation in January will impact their health and wellness business.

Q:What are the constraints to growing Walmart+ membership even faster?

A:John Furner highlighted delivery speed, accuracy, and the launch of the OnePay credit card as key drivers of Walmart+ growth. He noted that 35% of deliveries are under 3 hours, with the fastest growth channel being under an hour. He also mentioned the addition of a streaming option and emphasized their focus on flexibility and value for members.

Q:How has Walmart managed higher costs through price increases, and what elasticity impacts have been observed?

A:John Furner explained that inflation is in the low 1% range, with slightly higher rates in general merchandise. He credited disciplined inventory management and mix adjustments for maintaining margins. He noted that unit growth in categories like fashion has been strong, allowing flexibility in pricing without significant markdowns.

Q:How is Walmart achieving operating leverage in Q4, and how are tariffs impacting the business?

A:John Rainey attributed operating leverage improvements to automation in fulfillment centers, which has reduced shipping costs. He noted that tariffs have had less impact than expected, with relief in key food categories. Walmart has maintained strong price positions and continues to focus on value and convenience.

Q:What is Walmart's strategy for merchandise category mix and gross margin improvement?

A:John Rainey and John Furner explained that the merchandise category mix pressure is largely due to macroeconomic factors, with more consumer dollars going to necessities. They highlighted growth in categories like apparel and the shift of e-commerce from loss to profitability as positive developments.

Q:What is Walmart's approach to capital investments and operational investments?

A:John Furner emphasized a disciplined approach to capital investments, focusing on remodels, supply chain improvements, and ensuring returns for shareholders. John Rainey added that the management team is aligned on financial metrics and committed to increasing ROI annually.

Q:How is Walmart addressing elasticity and marketplace growth?

A:John Rainey noted that elasticity varies by category, with higher AURs in electronics, toys, and seasonal items. John Furner stated that Walmart's marketplace has over 500 million SKUs and is focused on using AI to identify assortment gaps and ensure a broad, high-quality selection for customers.

Q:How sustainable is the top-line momentum in Walmart's international markets?

A:Kathryn McLay expressed confidence in the sustainability of international growth, citing investments in convenience, speed, and price. She highlighted high-growth markets like India and China and the maturation of omni-channel strategies in markets like Mexico, Canada, and Chile.

Q:What is Walmart's response to concerns about leadership succession signaling a shift in strategy?

A:John Furner and John Rainey reassured that there is no dramatic shift in strategy. They emphasized continuity in disciplined capital investments and operational strategies, with a focus on ROI and shareholder returns.

Q:How is Walmart managing grocery pricing and category mix?

A:John Furner stated that Walmart focuses on everyday low prices and unit growth in food categories. He noted that unit share growth has been strong, even as dollar share growth moderates. He mentioned deflation in eggs and inflation in beef as factors affecting pricing.

Q:What is Walmart's outlook on health and wellness sales given the maximum fair pricing change?

A:John Rainey stated that the health and wellness business will continue to grow despite the maximum fair pricing change in January. He noted that the specific impact is still being assessed as more information becomes available.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the impact of maximum fair pricing legislation on health and wellness sales, stating that more information is needed to assess the impact.

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Earnings Word Cloud

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