Walmart Stock Analysis: Strong Q3 Results Strengthen Outlook

Walmart Inc. (WMT) announced robust third-quarter results for Fiscal Year 2026, delivering steady revenue growth, strong eCommerce momentum, and improved profitability on an adjusted basis. The report reinforces Walmart’s positioning as one of the most structurally advantaged retailers heading into FY26—supported by rising membership income, accelerating advertising revenue, and disciplined inventory management.

Q3 FY26 Performance

Revenue and Profitability: Total revenue increased 5.8% to $179.5 billion, or 6.0% in constant currency (cc). Adjusted operating income was up an impressive 8.0% (cc), significantly outpacing the 0.2% decline in GAAP operating income, which was affected by a non-cash share-based compensation charge at PhonePe ahead of its potential IPO.

Earnings Per Share (EPS): GAAP EPS was reported at $0.77, while Adjusted EPS was $0.62. The adjusted figure excludes a $0.20 gain on equity and other investments and a $0.02 legal settlement gain, partially offset by $0.07 in PhonePe's incremental share-based compensation expense.

Digital Leadership: Global eCommerce sales surged 27%, with strength noted in storefulfilled pickup & delivery and marketplace performance. The global advertising business, including VIZIO, was a standout, growing 53%.

Margin and Membership: Gross margin rate expanded by 2 basis points (bps), led by Walmart U.S., while membership and other income grew 9.0%, reflecting strong 16.7% growth in membership income, particularly at Sam's Club.

Segment Highlights

Walmart U.S.: The flagship segment saw net sales grow 5.1% to $120.7 billion. Comp sales (ex-fuel) rose 4.5%, driven by a 1.8% increase in transactions and a 2.7% higher average ticket. eCommerce accelerated with 28% growth, with its contribution to comp sales rising substantially by ~440 bps. Inventory increased a controlled 2.6%, approximately half the rate of sales growth, reflecting disciplined inventory management.

Walmart International: Net sales grew 10.8% (11.4% cc) to $33.5 billion, led by strong performance in Flipkart, China, and Walmex. eCommerce sales were up 26%. While GAAP operating income was down, adjusted operating income (cc) grew 16.9% to $1.4 billion.

Sam’s Club U.S.: Net sales (ex-fuel) increased 4.4% to $21.1 billion, driven by share gains in grocery and general merchandise. Comp sales (ex-fuel) grew 3.8%, reflecting a 3.9% rise in transactions. eCommerce sales continued to strengthen, growing 22%. Membership income grew a healthy 7.1%.

Balance Sheet and Cash Flow

Liquidity and Debt: Walmart ended the quarter with $10.6 billion in cash and cash equivalents, against a total debt load of $53.1 billion.

Cash Flow Generation: Operating cash flow reached $27.5 billion, marking a substantial increase of $4.5 billion over the prior year. This supported a strong free cash flow of $8.8 billion, an increase of $2.6 billion.

Capital Allocation: The robust free cash flow funded aggressive share repurchase activity, with 75.3 million shares repurchased year-to-date for a total of $7.0 billion, demonstrating commitment to returning capital to shareholders.

Updated Guidance for FY26

Due to the strong Q3 performance, the company raised its fiscal year 2026 outlook:

Net Sales (cc): Guidance was raised from 3.75%–4.75% to 4.8% to 5.1% growth.

Adjusted Operating Income (cc): Guidance was raised from Unchanged to 4.8% to 5.5% growth.

Adjusted EPS: The target range was raised from $2.52–$2.62 to $2.58 to $2.63, including an expected currency headwind of $0.01 to $0.02.

Capital Expenditures: Expected to be approximately 3.5% of net sales.

AI Integration with ChatGPT

Beyond the impressive financials, the most transformative news is the deepening partnership with OpenAI, which signals Walmart's commitment to "native AI experiences." The planned launch of Instant Checkout, a new in-chat shopping feature within ChatGPT, will allow consumers to purchase Walmart products directly through the conversational AI interface.

CEO Doug McMillon emphasized the broad impact, stating that AI is "going to change literally every job" and confirming that Walmart is "leaning in to make it work for our customers, associates and partners." This AI-first strategy, which includes free training for employees, suggests a long-term commitment to operational efficiency and personalized customer experience.

Technical Analysis

Following the robust earnings report and raised guidance, the WMT stock price experienced a substantial rally. However, the stock now faces a key resistance level at $112. A decisive breakout and sustained close above $112 would confirm the bullish momentum sparked by the Q3 report and the AI catalyst. If this resistance is cleared, the stock's next technical target will be $122.

Should the stock fail to overcome the $112 resistance, or if profit-taking ensues, it may retreat to test immediate support at $96. A more significant correction, potentially triggered by macro-economic headwinds, would look toward the firm structural support around $88.