Executive Summary
Q4 FY26 Financial and Segment Performance
In Q4 2026, net sales grew by +5.6% to $188.9B, beating consensus slightly. Constant currency net sales growth was +4.9%. Adjusted EBIT saw a robust +10.5% YoY growth on a constant currency basis. Ads and membership income accounted for approximately one-third of EBIT in Q4, and adjusted EPS of $0.74 beat consensus by 1 cent.
Segment Breakdown
Walmart US grew comp sales by +4.6% ex fuel, driven by grocery and health & wellness. E-commerce was a massive driver, contributing ~520bps to Walmart US comp sales growth. Sam's Club US saw comp sales rise +4.0% ex fuel, propelled by strong transaction growth of +5.3%. Walmart International delivered +7.5% net sales growth on a constant currency basis, with e-commerce sales up +17%.
| Segment | YoY Growth | Δ vs. Consensus |
|---|---|---|
| WMT U.S. | +4.6% | +0.1% |
| Sam's Club | +2.9% | -1.2% |
| WMT Intl | +11.5% | +1.1% |
Outlook, AI Initiatives, and Model Adjustments
Management's FY27 guidance was notably conservative, projecting constant currency net sales growth of +3.5–4.5% and adjusted EBIT growth of +6.0–8.0%. Despite this, Bernstein sees a clear path for WMT to grow EBIT in the mid/high-teens, meaningfully above guidance. Early investments in AI partnerships are expected to be a near-term positive as AI agents drive higher quality traffic and potentially reshape retail media opportunities.
Forecast Adjustments
Minor adjustments were made to Q1 2027 gross margin estimates (-20bps) to reflect residual tariff impacts. Expectations for debt repayment were reduced based on management guidance, while FX and gas projections provided a tailwind, bringing FY27 EPS estimates to $3.13.
"Despite its valuation, we expect WMT to deliver in FY27 and recommend buying on weakness."
Key Risks
- Consumer Softening: An unexpected softening of the consumer environment in the US or in large international markets could result in weaker comps and expense deleverage.
- New Venture Execution Risk: Walmart could fail in new business ventures, including e-commerce and advertising, which would threaten its ability to achieve long-term revenue and margin targets.
- Regulatory Scrutiny: Increased regulatory scrutiny in the US given Walmart's leading position in US grocery.
Investment Conclusion
Bernstein maintains an Outperform rating on Walmart with a raised price target of $134 (up from $129), based on a 37.0x multiple applied to Q5–8 EPS estimates. The Q4 print confirmed the durability of Walmart's competitive advantages: consistent US comp outperformance, accelerating e-commerce contribution at +520bps, and a retail media business growing at +37% globally.
The deliberately conservative FY27 guidance — cc net sales growth of +3.5–4.5% versus consensus at +4.9% and EBIT growth of +6.0–8.0% versus Bernstein's mid/high-teens expectation — creates a textbook beat-and-raise setup. Walmart's continued share gains across all income demographics, particularly the trade-down from upper-income households, provide a structural tailwind that the guidance does not fully reflect.
Near-term, early AI partnership investments and the expanding Walmart Connect advertising platform add incremental upside optionality. The recommendation is to buy on weakness, as the combination of conservative guidance, improving e-commerce unit economics, and broadening revenue streams positions WMT to sustainably outperform expectations through FY27.
0 comments