Walmart Earnings Prep: A Well Oiled Machine?
WMT has spent three years telling investors that operating income will grow faster than sales. Their argument is that higher-margin businesses like advertising, paid memberships, and third-party marketplace fees will scale much faster than the low-margin retail base. As the revenue mix shifts, the overall operating margin should expand.
But, in fiscal 2026, on a full-year basis, that didn’t happen.
Consolidated gross margin expanded just 8 bps, operating expenses deleveraged 20 bps, and consolidated operating margin contracted 13 bps. The margin expansion showed up only in Q4, when operating income grew 10.8% on sales of 5.6%. When Walmart reports Q1 FY27 next Thursday morning, the question is whether that Q4 result was the machine finally kicking into gear, or whether the full-year shape is the true read.
Walmart generates revenue across three reportable segments: Walmart U.S. ($483B in FY26, supercenters, neighborhood markets, and Walmart.com), Walmart International ($132B in FY26, 18 countries including Flipkart and PhonePe in India), and Sam’s Club U.S. ($93B in FY26, membership warehouse clubs). Underneath the retail layer, three higher-margin businesses have indeed scaled fast: consolidated membership fee revenue hit $4.4B in FY26 (+15.8%), Sam’s Club membership and other income hit $2.5B (+8.7%), and global advertising hit $6.4B (+46%), now anchored by the VIZIO acquisition that closed in late FY25 for $1.9B.
Management has leaned harder on these levers, and their FY27 guide reflects continued confidence in them. The expect net sales +3.5-4.5% (cc), adjusted operating income +6.0-8.0% (cc), adjusted EPS $2.75-$2.85, capex ~3.5% of sales, and a fresh $30B share repurchase authorization announced with Q4 results.
So heading into next Thursday, here’s what we’re watching:
Walmart U.S. Comp Mix. Walmart U.S. comp sales grew 4.3% in FY26, of which eCommerce contributed 4.3 points, meaning physical-store comp contribution rounded to zero for the year. Wall Street consensus is +3.9% comp in Q1. We’re watching for the eCommerce share of comp to hold above 60%, with any positive contribution from brick-and-mortar as upside.
Global Advertising. Global advertising grew 46% to $6.4B in FY26. Walmart Connect (U.S.) grew 41% in Q4 ex-VIZIO, meaning the underlying business is growing nearly as fast as the consolidated number. We’re watching for global advertising at +25% or better and Walmart Connect U.S. (ex-VIZIO) at +30% or above, since Q1 FY27 is the first quarter where VIZIO is partially in the prior-year base.
Membership Fee Revenue. Consolidated membership fee revenue grew 15.8% to $4.4B in FY26, the recurring-revenue floor that anchors the Walmart+ and Sam’s Club Plus subscriber bases. We’re watching for membership fee growth above +12% and any disclosure of Walmart+ subscriber count or attach rate.
The Operating-Leverage Wedge. Q4 FY26 produced operating income +10.8% on sales +5.6%, but the full-year FY26 produced a 13 bps margin contraction.
WMT’s recent announcement that they will lay off or relocate roughly 1,000 corporate workers is a small operational signal but still too small at 0.05% of total headcount to move the FY27 margin math on its own. The Q1 FY27 guide is for op income +4-6% on sales +3.5-4.5%. We’re watching for actual Q1 op income at the high end or above, with commentary on the structural sources of leverage (ad-tech mix, fulfillment economics, membership recurring).
Walmart International Reversal. Walmart International operating margin fell from 4.5% to 3.9% in FY26, and segment op income declined to $5.10B from . This structural twist muddied the consolidated picture. We’re watching for management commentary on what drove this decline and whether it is bouncing back.
Consensus for Q1 FY27 is roughly $165-167B in net sales and adjusted EPS in the $0.63-$0.65 range, in line with company guidance. The number to watch is operating income growth versus sales growth. The Q1 guide is sales +3.5-4.5% and op income +4-6%, a gap of 50 to 150 basis points. If op income lands at the high end and International margin starts to recover, the FY27 +6-8% adjusted operating income guide stays on track. If op income lands at the low end and International margin stays compressed, the FY27 guide is at risk.
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