Walmart (WMT)

Retail behemoth Walmart (NYSE:WMT) met Wall Street’s revenue expectations in Q4 CY2025, with sales up 5.6% year on year to $190.7 billion. On the other hand, next quarter’s revenue guidance of $172.2 billion was less impressive, coming in 1.3% below analysts’ estimates. Its non-GAAP profit of $0.74 per share was 1.8% above analysts’ consensus estimates.

Company Overview

Known for its large-format Supercenters, Walmart (NYSE:WMT) is a retail pioneer that serves a budget-conscious consumer who is looking for a wide range of products under one roof.

Big-box retailers operate large stores that sell groceries and general merchandise at highly competitive prices. Because of their scale and resulting purchasing power, these big-box retailers–with annual sales in the tens to hundreds of billions of dollars–are able to get attractive volume discounts and sell at often the lowest prices. While e-commerce is a threat, these retailers have been able to weather the storm by either providing a unique in-store shopping experience or by reinvesting their hefty profits into omnichannel investments.

Scaled competitors that sell general merchandise and/or groceries to US consumers include Amazon.com (NASDAQ:AMZN), Costco (NYSE:COST), and Dollar General (NYSE:DG).

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $713.2 billion in revenue over the past 12 months, Walmart is a behemoth in the consumer retail sector and benefits from economies of scale, giving it an edge in distribution. This also enables it to gain more leverage on its fixed costs than smaller competitors and the flexibility to offer lower prices. However, its scale is a double-edged sword because there are only a finite number of places to build new stores, making it harder to find incremental growth. To expand meaningfully, Walmart likely needs to tweak its prices or enter new markets.

As you can see below, Walmart’s sales grew at a tepid 5.3% compounded annual growth rate over the last three years, but to its credit, it opened new stores and increased sales at existing, established locations.

This quarter, Walmart grew its revenue by 5.6% year on year, and its $190.7 billion of revenue was in line with Wall Street’s estimates. Company management is currently guiding for a 4% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 4.9% over the next 12 months, similar to its three-year rate. This projection is particularly healthy for a company of its scale and indicates the market is baking in success for its products.

Number of Stores

Over the last two years, Walmart has generally opened new stores, averaging 1.4% annual growth. This was faster than the broader consumer retail sector.

When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.

Note that Walmart reports its store count intermittently, so some data points are missing in the chart below.

Same-Store Sales

A company's store base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales gives us insight into this topic because it measures organic growth for a retailer's e-commerce platform and brick-and-mortar shops that have existed for at least a year.

Walmart has been one of the most successful retailers over the last two years thanks to skyrocketing demand within its existing locations. On average, the company has posted exceptional year-on-year same-store sales growth of 4.6%. This performance suggests its measured rollout of new stores is beneficial for shareholders. We like this backdrop because it gives Walmart multiple ways to win: revenue growth can come from new stores, e-commerce, or increased foot traffic and higher sales per customer at existing locations.

In the latest quarter, Walmart’s same-store sales rose 4.6% year on year. This performance was more or less in line with its historical levels.

At StockStory, we prefer high gross margin businesses because they indicate pricing power or differentiated products, giving the company a chance to generate higher operating profits.

Walmart has bad unit economics for a retailer, signaling it operates in a competitive market and lacks pricing power because its inventory is sold in many places. As you can see below, it averaged a 24.9% gross margin over the last two years.

Non-discretionary retailers, however, must be viewed through a different lens because they compete on the lowest price, sell products easily found elsewhere, and have high transportation costs to move goods. These dynamics lead to structurally lower gross margins, so the best metrics to assess them are free cash flow margin, operating leverage, and profit volatility, which account for their scale advantages and non-cyclical demand.

In Q4, Walmart produced a 24.7% gross profit margin, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting it strives to keep prices low for customers and has stable input costs (such as labor and freight expenses to transport goods).

Walmart’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 4.2% over the last two years. This profitability was lousy for a consumer retail business and caused by its suboptimal cost structureand low gross margin.

Analyzing the trend in its profitability, Walmart’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Walmart generated an operating margin profit margin of 4.6%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Walmart’s EPS grew at an unimpressive 8.2% compounded annual growth rate over the last three years. This performance was better than its flat revenue but doesn’t tell us much about its business quality because its operating margin didn’t improve.

In Q4, Walmart reported adjusted EPS of $0.74, up from $0.66 in the same quarter last year. This print beat analysts’ estimates by 1.8%. Over the next 12 months, Wall Street expects Walmart’s full-year EPS of $2.65 to grow 11.6%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Walmart has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2%, subpar for a consumer retail business.

Walmart’s free cash flow clocked in at $6.10 billion in Q4, equivalent to a 3.2% margin. This cash profitability was in line with the comparable period last year and above its two-year average.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Walmart’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 16.9%, slightly better than typical consumer retail business.

Walmart reported $10.73 billion of cash and $67.1 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $45.19 billion of EBITDA over the last 12 months, we view Walmart’s 1.2× net-debt-to-EBITDA ratio as safe. We also see its $1.19 billion of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Walmart beat analysts’ gross margin expectations this quarter. We were also happy its EBITDA narrowly outperformed Wall Street’s estimates. On the other hand, its full-year EPS guidance missed and its EPS guidance for next quarter fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 3.3% to $122.52 immediately after reporting.

Updated: February 19, 2026 at 7:47 AM EST

Before investing in or passing on Walmart, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Walmart isn’t a bad business, but we have other favorites. Although its revenue growth was a little slower over the last three years, its coveted brand awareness makes it a household name consumers consistently turn to. Investors should still be cautious, however, as Walmart’s gross margins make it more challenging to reach positive operating profits compared to other consumer retail businesses.

Walmart’s P/E ratio based on the next 12 months is 42.8x. At this valuation, there’s a lot of good news priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $129.54 on the company (compared to the current share price of $122.52).