Earnings Call Insights: Walmart Inc. (WMT) Q2 2026
Management View
- CEO C. Douglas McMillon highlighted “strong top line results again this quarter, with sales up 5.6% in constant currency.” He noted global e-commerce sales growth of 25%, with Walmart U.S. and Sam’s Club U.S. leading at 26%. International sales rose 10.5%, particularly driven by China, Walmex, and Flipkart. “We gained market share in the U.S. and across markets internationally.” McMillon emphasized growth in newer businesses, stating, “we grew global advertising by 46%, including VIZIO, Walmart Connect in the U.S. was up 31%… membership income by 15%.” He also announced structural changes for AI leadership, with Daniel Denkers joining as head of AI acceleration and a new role reporting to CTO Suresh Kumar to focus on AI platforms. Regarding tariffs, McMillon said, “we’re doing what we said we would do. We’re keeping our prices as low as we can for as long as we can.”
- CFO John David Rainey stated, “the setup going into this quarter was more challenging than normal,” but emphasized, “our core business is strong and growing with accelerating e-commerce momentum.” He announced, “we’re raising our sales guidance for the year,” and maintained full-year operating income guidance despite cost pressures. Rainey also mentioned, “growth in our higher-margin businesses is contributing to our profit transformation, providing the financial flexibility to aggressively pursue share gains in the near term.”
Outlook
- Rainey reported, “we’re raising our full year sales growth guidance in constant currency by 75 basis points to a range of 3.75% to 4.75% growth.” For Q3, he also expects constant currency sales growth of 3.75% to 4.75%. Operating income guidance for the year remains at 3.5% to 5.5% growth. Rainey explained that these projections account for $730 million of incremental expense in Q1 and Q2 and ongoing inflation in claims cost for Q3 and Q4. He added, “Q3 operating income is expected to be in a range of 3% to 6% growth.”
Financial Results
- Consolidated Q2 revenue increased 5.6% in constant currency, with stronger sequential sales growth in all business segments compared to Q1. E-commerce sales rose 25% year-over-year, and Walmart U.S. comp sales grew 4.6%. International sales rose more than 10% in constant currency. Marketplace sales increased nearly 20%. Sam’s Club U.S. comp sales ex fuel increased nearly 6%, with e-commerce up 26%. Membership fee income was up over 15% across the enterprise.
- Q2 consolidated gross margin increased 4 basis points on a reported basis and 9 basis points on an adjusted basis. Adjusted operating income grew about 0.5 percentage point in constant currency. Adjusted EPS rose 1.5% to $0.68. The company accrued an additional $450 million over planned expense in Q2 related to general liability and workers’ compensation claims. Inventory globally was up 3.8% and up 2.2% in Walmart U.S.
Q&A
- Simeon Ari Gutman, Morgan Stanley: Asked about temporary factors affecting profitability and the role of AI. McMillon responded, “As it relates to AI, I don’t think it’s lifting our top line sales yet. I think this is very early days… I’m excited about the road map.” Rainey added that despite cost pressures, “when you dig into the details, particularly of the e-commerce business… you can see why we’re excited about the momentum in the business.”
- Christopher Michael Horvers, JPMorgan: Asked about a competitor’s expansion in grocery delivery and its impact. McMillon replied, “competition just keeps getting better… we stay focused on what’s happening with the customer.”
- Michael Lasser, UBS: Questioned if this quarter’s margin challenges are a trend. Rainey answered, “the reality of managing a business of our size and complexity is you’re going to have unexpected expenses… I would encourage people to look at the full year guide which we raised our revenue guidance, and we’re keeping our operating income guidance the same in the face of these higher costs.”
- Rupesh Dhinoj Parikh, Oppenheimer: Focused on inventory. John R. Furner stated, “our inventories are clean, and we have 7,000-plus rollbacks, a dramatic increase from the second quarter.”
- Seth Ian Sigman, Barclays: Inquired about price changes and elasticity. McMillon remarked, “as costs go up, units change, but that is always true. Customers… make rational trade-offs as they move from one category to the next.”
Sentiment Analysis
- Analysts’ tone reflected cautious optimism with several questions probing the durability of margin performance and potential impacts of AI and competitive dynamics.
- Management maintained confidence, emphasizing flexibility and strategic execution. Rainey stated, “Our business is strong, and we feel good about the back half of the year, particularly in light of what is still a rather uncertain environment.”
- Compared to the previous quarter, management continued to project confidence but acknowledged higher cost pressures and greater complexity; analysts remained focused on the sustainability of recent performance amid these headwinds.
Quarter-over-Quarter Comparison
- Guidance for full-year sales growth was raised from the prior quarter’s 3.5%-4.5% to 3.75%-4.75%. Operating income growth guidance was maintained. Q2 saw higher incremental costs from claims than in Q1, with additional accruals for general liability and workers’ compensation. E-commerce momentum accelerated, with sales growth stepping up from the low 20% range in previous quarters to 25%-26% this quarter. Management’s tone remained constructive, though with more emphasis on cost management and the evolving impact of tariffs.
- Analysts’ questions continued to center on cost pressures, inventory management, and the competitive landscape, similar to the prior quarter.
Risks and Concerns
- Management cited ongoing cost pressures from tariffs and claims expense, noting “the cost to resolve claims has risen, both for us and across the retail industry.” The company expects continued inflation in claims cost for the second half of the year but does not anticipate the same magnitude of increases. Tariff-related cost increases are expected to persist into Q3 and Q4, particularly as inventory is replenished at higher post-tariff prices. Management is closely monitoring consumer demand and price elasticity, especially among middle and lower-income households.
Final Takeaway
Walmart management expressed confidence in the company’s ability to sustain growth, highlighting accelerating e-commerce, strong market share gains, and the flexibility provided by higher-margin businesses. The company raised its full-year sales growth guidance while maintaining operating income projections, despite absorbing significant incremental claims costs and ongoing tariff pressures. Strategic advancements in AI and rapid delivery, along with disciplined inventory management and competitive pricing, are positioned as key drivers for continued momentum through the remainder of the year.