Walmart's Earnings Confirm Dominance but Valuation Limits Upside

What happened

Walmart recently reported earnings that highlight its continued dominance in U.S. retail, with strong revenue and operating income growth reflecting scale advantages. The company's omni-channel flywheel is executing well, driven by mid-single-digit U.S. comps and over 20% eCommerce growth, supported by rapid store-fulfilled delivery expansion. Higher-margin segments like retail media are scaling rapidly, with ad sales growing approximately 30% and bolstered by the Vizio acquisition for connected-TV inventory. However, the stock's valuation looks full, with a P/E around 40 and EV/EBITDA near 46, implying much of the positive mix shift is already priced in. Management remains focused on margin expansion and free cash flow, but competitive pressures and policy risks, such as SNAP changes and tariffs, temper near-term optimism.

Implication

The earnings underscore Walmart's defensive moat and operational strength, reinforcing its role as a core holding in consumer staples. Growth in high-margin businesses like retail media provides a lever for future profit expansion, but this is largely anticipated by the market. Valuation metrics suggest limited near-term upside, making the stock less attractive for new investments despite solid fundamentals. Key areas to monitor include sustained retail media growth above 25-30%, U.S. comps stability, and free cash flow generation relative to capex plans. Until evidence of valuation decompression or accelerated margin gains emerges, investors are better off waiting for a more favorable entry point or clearer catalysts.

Thesis delta

The earnings report confirms Walmart's execution on growth and margin expansion, aligning with the existing hold thesis that solid fundamentals are offset by full valuation. No material shift is warranted unless retail media momentum accelerates significantly or valuation metrics adjust downward to improve risk-adjusted returns.