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Walmart Inc. WMT reported stronger-than-expected first-quarter fiscal 2026 results. However, the market responded cautiously with shares falling 0.5% on Thursday after the earnings announcement. Despite year-over-year growth in both revenues and earnings that surpassed forecasts, management cautioned that rising tariffs will lead to higher prices as the retailer passes on increased costs to customers.
Walmart’s Q1 Earnings Recap
Walmart’s fiscal first-quarter results reinforced its position as a leading omnichannel retailer. Total revenues rose 2.5% year over year to $165.61 billion, while adjusted earnings per share (EPS) came in at 61 cents, surpassing the Zacks Consensus Estimate of 57 cents. (Read: Walmart Q1 Earnings Beat Estimates, E-Commerce Growth Supports Sales)
The company’s e-commerce segment was the standout performer, growing 22% globally. Growth was fueled by strong demand for store-fulfilled pickup, delivery, and marketplace services. Walmart’s emphasized that its omni-channel strategy continues to gain relevance in today’s dynamic retail environment. By the end of the quarter, Walmart U.S. had expanded sub-three-hour delivery options to 93% of households. Retail giants such as Kroger KR, Target TGT and Costco COST are also advancing in omnichannel strategies, underscoring the industry’s pivot toward this model.
Coming back to Walmart, it is also making significant progress in high-growth revenue streams. Advertising revenues soared 50%, and membership income climbed 14.8% in the fiscal first quarter. These segments — alongside marketplace services — helped lift the consolidated gross profit margin by 12 basis points (bps) to 24.2%. The margin gains were primarily driven by Walmart U.S., supported by improved inventory management, fewer markdowns, and a more profitable product mix.
However, currency headwinds remain a persistent drag on performance. In the fiscal first quarter alone, unfavorable foreign exchange rates reduced reported sales by $2.4 billion. If these exchange rates hold, management expects a 120 basis-point hit to reported revenue growth in the fiscal second quarter.
Walmart’s Fiscal 2026 Outlook: Confidence Meets Caution
Despite a strong start to the year, Walmart acknowledged potential hurdles in the coming quarters. The company withheld the EPS guidance for second-quarter fiscal 2026, citing ongoing uncertainty, especially related to tariffs and a highly fluid economic environment. These tariff costs, even at reduced levels, are expected to push prices higher in the near term.
Nevertheless, Walmart reaffirmed its full-year guidance. The company expects fiscal 2026 revenues to grow by 3% to 4% (at constant currency), and adjusted operating income to rise between 3.5% and 5.5%. Adjusted EPS is forecasted in the range of $2.50 to $2.60, compared with last year’s $2.51.
Although short-term challenges, such as tariffs and foreign exchange fluctuations, may impact Walmart’s near-term results, the company’s growing e-commerce presence, strong value proposition, and expansion into high-margin areas, including advertising and memberships, position it strongly in the retail sector. Walmart’s long-term fundamentals remain robust, even as its short-term outlook faces some uncertainty.