Walmart’s shoppers come for low prices. Its shareholders are paying anything but. Investors now hand over about 38.59 times expected earnings for Walmart (NASDAQ:WMT), a higher price than the stock has averaged over the past five years and far above what the broader consumer staples sector commands.
The business itself needs little introduction. Walmart sells groceries, household goods, and general merchandise through US supercenters, Sam’s Club warehouses, and international operations such as India’s Flipkart, earning thin margins on enormous volume. WMT also ranks fourth on our list of the 10 Best Bear Market Stocks to Invest In Right Now. Increasingly, though, it makes money from things shoppers never put in a cart: advertising, membership fees, and digital services built on top of its stores. Is this still a grocery stock wearing a tech-stock multiple, or has the profit engine genuinely changed? The answer hinges on how much of Walmart’s recent earnings growth comes from that new business, and how much came from a one-time boost.
Scale Pays Twice
Walmart’s original moat is scale. Its buying power keeps prices low, and its store network puts much of America within easy reach of a pickup counter or delivery van. That combination still pulls people in. In fiscal Q2 2027, Walmart US transactions rose 1.5%, and Sam’s Club transactions climbed 7.0%.
What’s changed is how much that traffic is worth. Every shopper browsing the app or website is an audience advertisers will pay to reach, and global advertising revenue jumped 38% in the quarter. Global e-commerce sales grew 23%, while membership fee revenue rose 17%. It’s the same flywheel that turned Amazon’s advertising arm into a profit powerhouse, which brings us to another question: Is the Market Underestimating Amazon’s Moat?
These streams earn far fatter margins than selling detergent. That’s why consolidated operating income rose 17.4% on an adjusted, constant-currency basis, on revenue growth of 5.9%.
A Raise With Fine Print
Management lifted its full-year outlook alongside those results. It now expects fiscal 2027 net sales to grow 4.0% to 5.0% in constant currency, up from 3.5% to 4.5%, and adjusted EPS of $2.80 to $2.87, up from $2.75 to $2.85.
The nearer-term picture is softer. Fiscal Q3 guidance calls for sales growth of 3.0% to 3.75% and operating income growth of just 2.0% to 4.0%. Part of that is timing: Flipkart’s Big Billion Days sale shifts into the fourth quarter, which management says shaves more than 100 basis points off Q3 sales growth. CFO John David Rainey asked investors to judge Q2 and Q3 together for a cleaner read.
Is the Core Slowing?
That’s the worry that has dogged the stock since the quarter. CNBC reported that the results left investors unusually rattled, with the shortfall ranking among the company’s biggest in years. The details help explain why. Walmart US comparable sales rose 2.6% excluding fuel, with average ticket up just 1.1%.
There’s a quality-of-earnings question, too. GAAP operating income rose 28.8%, but the gross profit rate gained 96 basis points, primarily thanks to tariff refunds received during the quarter. Those refunds won’t last forever, and management plans to steer what remains into lower prices. Free cash flow for the first six months also fell by $1.4 billion to $5.5 billion, even as operating cash flow rose. How pricing and tariffs shake out is a story worth watching across other big-box retailers as well.
Still, the objection doesn’t sink the thesis. Transactions keep rising, and the high-margin streams grew far faster than the core even as comps cooled.
Priced for the Plan
This is where the valuation bites. At 38.59 times forward earnings, as of October 9, Walmart trades well above its five-year average P/E of 30.34 and far above the sector’s 14.61. Analysts expect earnings per share to grow 11.71% in 2028. That’s healthy for a mature retailer, but modest next to a multiple usually reserved for faster growers.
In plain terms, buyers today pay a growth-company price for low-double-digit earnings growth. That premium only works if advertising, membership, and e-commerce keep reshaping the profit mix for years, not quarters. The adjusted results suggest the shift is real. The tariff-assisted GAAP figures and cautious Q3 guidance suggest the clean version of that story is smaller than the headline. The membership-driven case behind Costco’s premium valuation faces a similar test.
Hedge fund interest ticked up, with 111 funds holding the stock in the most recent quarter, up from 99 in the prior one. Short interest sits at 1.83% of the float, a sign of relatively limited bearish positioning.
Quality at Full Price
Walmart’s moat is intact, and it’s earning more per shopper than ever, as the advertising and membership numbers show. But the stock already reflects much of that progress. The setup suits long-term investors who believe the profit-mix shift has years left to run and can stomach a premium multiple meanwhile. Value-focused investors will find little margin for error here. If US comps reaccelerate and ad growth holds up without tariff help, the premium starts to look earned. Another quarter of cooling comps would make it much harder to defend.
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