Walmart Earnings Summary: The ‘Flywheel’ Levers are Beginning to Turn

Walmart (NYSE:) reported their fiscal Q3 ’25 financial Tuesday morning, and if the quarter could be summarized in one sentence, it could be summarized best by Jeffries analyst, Corey Tarlowe, who wrote at the bottom of his report, about what Jeffries did NOT like about the quarter: “Nothing. This was a strong print.”

To summarize important points from the conference call:

• Revenue grew 6.1% (cc) and operating profit grew 9.8% (y-o-y).
• Comp’s rose 5.3% and “average ticket” and traffic rose as well. (One story read on Walmart pre-earnings was that slowing inflation would impact the retail giant negatively, but don’t kid yourself, Walmart retains enormous pricing power and knows how to lever “ticket” effectively to manage the quarter);
• Walmart revenue, operating income and EPS exceeded the top end of guidance;
• There was almost no “like-for-like” inflation;
• General merchandise (general merch) “inflected positively” with low-single-digit (LSD) comp’s;
• Despite a US port strike, two large hurricanes and resultant flooding, Walmart inventory ended the quarter in very good shape;
• Store-fulfilled delivery is at a $30 billion annual run rate, $2.5 billion per month, still a small amount (2% ish) relative to the $700 bl in sales expected in calendar ’25;
• Ecommerce sales increased 43% (my comment: ecommerce is still unprofitable, so when that turns profitable it’s hard not to conclude it will be a contributor to Walmart’s bottom line);
• Walmart noted that ecommerce losses narrowed considerably in Walmart US, so from reading between the lines, profitability is still an issue in non-US markets;
• Gross margin improved 21 bp’s this qtr, while the operating margin (which is what I think is the critical metric) improved 10 bp’s y-o-y to 4.7%;
• Walmart made an interesting point on the conf call: 50% of the fulfillment center volume is now automated, which is twice last years level at this time. This has the benefit of lowering per unit cost of delivery. (WMT management comments, not mine.)
• Walmart advertising – a new revenue stream – grew 28% y-o-y in Q3 ’25, w/ 50% growth from int’l. (As readers might not understand, Walmart isn’t giving out dollar numbers just yet. Not sure how relative that is to total Walmart revenue.)

The key comment from the conference call, which supports our ownership and thesis for the stock as detailed earlier this week in terms of the WMT earnings , was the statement, “compared to our guidance that we provided at the start of the year, we now expect operating income to grow nearly 400 bp’s more at the mid-point” (for full-year fiscal ’25) ending January ’25.

Walmart earnings summary / conclusion:

As a former analyst before becoming an investment advisor / portfolio manager, my first love was always valuation work, and the “analytical” part of the investment process.

As the above links show, Walmart’s operating margin and really both gross and operating margins will be the big beneficiaries of the fulfillment costs being lowered by AI, and the additional revenue streams that will enhance margins at Walmart away from, but related to, the core retail business.

That last statement before the conclusion proves the Walmart thesis, and it what this blog has been telling readers for some time.

Walmart is holding an investment conference in early April ’25. I’m hoping I can get to it this year.

Without going too overboard, the stock has underperformed for years since it’s a consumer staple, and for good reason, but they have gradually fought back against Amazon’s formidable e-commerce muscle, and like all great companies have continued to innovate from the core retail business. A longer article is being prepared that will talk about the retail giants together.

At the time of writing, Walmart was +67% YTD in terms of it’s trailing return, well ahead of the SP 500.

I was hoping it would pull back in price and allow investors to buy more, but it really hasn’t come in much, even when the market has turned south for a spell. The relative strength of the stock is quite strong, which is a good sign.

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None of this is a recommendation or advice, but only an opinion. Past performance is no guarantee or even suggestion of future results. Investing can and does involve the loss of principal, even over short periods of time. Markets can change and change quickly. Readers should gauge their own comfort with portfolio volatility and adjust accordingly.