Walmart Q1: Strong Revenue of $175.7 Billion Overpowered by Margin Pressures and Conservative Guidance

May 25, 2026 — Walmart Inc. (NYSE: WMT) today announced its financial results for the first quarter of fiscal year 2026. While the retail giant capitalized on ongoing trading-down trends to deliver a consensus-beating revenue of $175.7 billion, its profitability margins fell short across multiple core metrics. Coupled with conservative full-year guidance that missed Wall Street expectations, investment firm Goldman Sachs raised concerns over short-term execution, prompting a post-earnings market correction.

Core Financials: Robust Sales vs. Margin Compression

Walmart’s Q1 revenue rose 6.1% year-over-year, outperforming the market expectation of $174.9 billion. However, underlying profitability metrics underperformed under a cocktail of shifting product mix and rising operational costs.

The gross margin for the quarter came in at 24.3%, missing the 24.5% consensus estimate. Concurrently, the Selling, General, and Administrative (SG&A) expense ratio escalated to 21.1%, exceeding the expected 20.8% due to upfront investments in supply chain automation and e-commerce fulfillment centers. Consequently, Earnings Before Interest and Taxes (EBIT) landed at $76.74 billion, trailing the $77.05 billion Wall Street forecast.

Inventory management emerged as another key headwind. Walmart’s inventory grew by +8.9% year-over-year, outpacing its sales growth of +7.3%. This divergence signals a potential bottleneck in inventory turnover, escalating the risk of promotional markdowns in upcoming quarters.

Conservative Guidance and Macroeconomic Headwinds

According to a Goldman Sachs equity research report, Walmart management issued full-year FY2026 projections that significantly lagged behind bullish consensus expectations:

• Net Sales Growth Guidance: Projected at 3.5%–4.5% (below Goldman Sachs’ 4.0% and consensus of 3.8%).

• Adjusted EPS Guidance: Projected at $2.75–$2.85 (below the market consensus of $2.91–$2.92).

Management noted that while inflationary pressures continue to drive high-income households to Walmart, consumer spending has heavily tilted toward low-margin grocery essentials over high-margin discretionary items. Additionally, elevated global fuel costs added roughly $175 million in unexpected headwinds to the logistics network.

Digital Transformation: E-Commerce & Advertising Scale Up

Despite near-term brick-and-mortar margin compression, Walmart’s high-margin digital ecosystem demonstrated exceptional resilience:

• Global E-Commerce: Net sales surged 26% globally, fueled by a near 50% spike in the U.S. Third-Party Marketplace, which successfully expanded cross-border footprints into Canada and Mexico.

• Advertising Momentum: Walmart Connect, the company’s retail media arm, recorded a 30%+ increase in global ad revenue, establishing itself as a key driver for long-term margin optimization.

• Membership Fee Income: Revenue from memberships advanced 17%, with Walmart+ subscribers reaching an all-time Q1 high, highlighting strong customer retention.

Market & Institutional Outlook

Analysts at Goldman Sachs noted that while Walmart’s near-term execution has temporarily deviated from targets due to inventory and cost fluctuations, the retailer’s competitive moat remains intact. Long-term structural tailwinds from supply chain automation, AI-driven logistics optimization, and high-margin services are expected to stabilize performance.

Investors remain sensitive to the conservative profit outlook. For real-time stock updates and continuing institutional analysis, please monitor leading financial platforms such as Futu Bull.

About Walmart

Walmart Inc. (NYSE: WMT) is a people-led, tech-powered omnichannel retailer helping millions save money and live better anytime and anywhere.