Walmart Q2 FY2027 Earnings: The $2.9 Billion Refund Inside a Record Quarter

Walmart generated $187.94 billion of revenue in the second quarter of fiscal 2027, 5.9% more than a year earlier, and converted it into $9.38 billion of operating income, up 28.8%. The striking number sits inside cost of sales: Walmart received approximately $2.9 billion of tariff refunds during the quarter and recorded the recovery as a cost reduction. That refund helped push gross margin up nearly a full percentage point. The business grew before the refund, but the refund determined the shape of the reported profit. This quarter has to be read in two layers.

The Headline Numbers​

For the three months ended July 31, 2026, compared with the same fiscal quarter a year earlier:

The top and middle of the income statement were strong. Walmart added $10.54 billion of revenue and $4.50 billion of gross profit. Operating expenses rose $2.41 billion, so operating income retained almost half of the incremental gross profit. That is substantial operating leverage for a retailer whose gross margin remains in the mid-20s.

Net income moved the other way because the prior-year quarter contained $2.71 billion of other gains, while the current quarter carried $1.20 billion of other losses. The $3.91 billion swing below operating income more than offset the operating improvement. It is a clean reminder that a stronger store-and-commerce result can coexist with a lower GAAP bottom line when non-operating items reverse.

Revenue Deep Dive: Three Engines, Three Growth Rates​

Walmart reports three operating segments. All three grew, but International and Sam's Club supplied the faster expansion.

Walmart U.S. remains the economic center. Its $125.19 billion of net sales was led by $74.13 billion of grocery, $29.73 billion of general merchandise, and $16.94 billion of health and wellness. Grocery alone represented 59% of segment net sales. That mix makes traffic resilient, but it also limits gross margin: food turns quickly and brings customers back, yet it does not carry the economics of discretionary merchandise or advertising.

The U.S. digital layer is changing that equation. Walmart disclosed approximately $29.4 billion of U.S. e-commerce net sales, up from $23.7 billion. That is about 24% growth, far faster than segment revenue. Digital orders are not automatically high-margin orders because fulfillment costs matter, but the scale gives Walmart more chances to monetize membership, advertising, fulfillment services, and data alongside the basket.

International was the fastest large segment. Net sales reached $35.20 billion. Mexico and Central America contributed $14.33 billion, China $7.42 billion, Canada $6.38 billion, and other markets $7.07 billion. International e-commerce net sales were approximately $9.9 billion, up from $8.3 billion. The segment is no longer a small collection of overseas stores. It is a $35.6 billion quarterly revenue system growing at nearly 13%.

Sam's Club U.S. supplied the best operating leverage. Total revenue grew 8.7%, while segment operating income rose from $470 million to $678 million, a 44% increase. Grocery generated $17.22 billion of net sales, and fuel and other contributed $4.19 billion. E-commerce net sales rose from approximately $3.7 billion to $4.7 billion. The club model combines product turns with membership economics; the latter shows up in the $654 million of membership and other income that is not included in Sam's net sales.

The segment thesis is straightforward. Walmart U.S. supplies scale, International supplies faster growth, and Sam's supplies a membership-rich profit stream. The quarter worked because all three moved in the same direction.

The Margin Story​

The reported margin expansion was real, but it was not all recurring.

Gross margin expanded because cost of sales grew 4.5%, slower than revenue at 5.9%. The tariff refund explains much of the gap. Walmart says it received approximately $2.9 billion during the quarter and recorded it as a reduction to cost of sales, primarily in Walmart U.S.

A simple counterfactual shows the scale. Add the refund back to reported cost of sales, with no attempt to estimate secondary tax or behavioral effects, and gross profit would have been about $46.23 billion rather than $49.13 billion. Gross margin would have been roughly 24.6%, below the prior year's 25.2%, and operating margin would have been roughly 3.4% rather than 5.0%. This is an inference from the filing, not a company-issued non-GAAP measure. It isolates why the refund belongs at the center of the analysis.

That does not make the quarter weak. Revenue grew $10.54 billion, membership and other income grew 11.2%, and each operating segment expanded. It means the 28.8% operating-income growth rate is not a clean run rate. Investors should separate the commercial result from the recovery of a cost paid in earlier periods.

The $2.9 Billion Question: What Persists After the Refund?​

The one big question is not whether the refund was valid. The cash was received, the contingencies were substantially resolved, and the accounting placed it in cost of sales. The question is what Walmart's earnings power looks like when that benefit is absent.

Three operating facts offer the answer.

First, e-commerce grew much faster than the company in every segment for which Walmart disclosed a figure: approximately 24% in Walmart U.S., 19% International, and 27% at Sam's Club. Together, those disclosed amounts total roughly $44.0 billion for the quarter. That scale supports advertising, fulfillment, and membership revenue that can carry better economics than the merchandise itself.

Second, membership and other income rose 11.2%, almost twice the total-revenue growth rate. It remains less than 1% of consolidated revenue, so it cannot transform the margin alone. But its direction matters because it diversifies Walmart away from relying exclusively on the spread between shelf price and product cost.

Third, the physical network keeps absorbing capital. Property, plant, and equipment reached $142.48 billion at quarter-end, up from $136.08 billion six months earlier and $94.52 billion at FY2022 year-end. Walmart spent $7.50 billion on capital expenditures in the quarter, compared with $6.42 billion a year earlier. The company is building capacity before the higher-margin digital services have fully matured.

The durable thesis therefore rests on monetizing the network, not on repeating the refund. If membership, advertising, fulfillment, and data revenue grow faster than merchandise, margin can remain structurally higher. If they do not, the reported FY2027 Q2 margin will prove to be a refund-shaped peak.

Tracking a $713 Billion Retailer in Plain Text​

Modeling Walmart in Beancount makes the distinction visible because double-entry forces the refund, operating costs, non-operating losses, and net income to reconcile to one zero-sum transaction. Income accounts carry negative credit balances; Expenses carry positive debit balances.

; INCOME STATEMENT
; Revenue 187937; cost 138804; R&D 0; SG&A 39750; other 1371; tax 1483; consolidated net income 6529.
; Check: -187937 + 138804 + 0 + 39750 + 1371 + 1483 + 6529 = 0
2026-07-31 * "Walmart Inc." "FY2027Q2 Income Statement"
  Income:Revenue                         -187937 MUSD
  Expenses:CostOfRevenue                  138804 MUSD
  Expenses:ResearchAndDevelopment         0 MUSD
  Expenses:SellingGeneralAdministrative   39750 MUSD
  Expenses:OtherNet                      1371 MUSD
  Expenses:IncomeTax                      1483 MUSD
  Equity:Adjustments                      6529 MUSD  ; net income offset (reported equity set by balance assertions)

The balance sheet tells the capacity story. Inventory reached $61.60 billion, up $2.75 billion from the January year-end, while PP&E increased $6.40 billion to $142.48 billion. Those are the two physical sides of retail scale: goods waiting to sell and the stores, clubs, distribution facilities, automation, and technology that move them.

2026-07-30 pad Assets:Current:Inventory                         Equity:Adjustments
2026-07-31 balance Assets:Current:Inventory                         61600 MUSD
 
2026-07-30 pad Assets:NonCurrent:PropertyPlantEquipment         Equity:Adjustments
2026-07-31 balance Assets:NonCurrent:PropertyPlantEquipment        142482 MUSD

The Multi-Year Arc​

The annual ledger history shows a retailer that has compounded revenue steadily while gradually rebuilding net margin after FY2023.

Revenue increased 24.5% from FY2022 to FY2026. Net income increased 59.8%. PP&E increased 44.0%. The important sequence is that fixed assets grew faster than revenue while net income grew faster than both. Walmart has been putting more capital into the network without losing the operating economics of the whole system.

The FY2023 dip is also instructive. Gross margin fell to 24.1%, operating margin to 3.3%, and net income to $11.29 billion. Over the next three years, annual revenue added more than $101 billion and net income nearly doubled. The business can recover from a margin shock, but it does so through enormous volume and disciplined expense control rather than high unit margins.

FY2027 Q2 should not be annualized mechanically. A retail quarter has seasonality, and the tariff refund is not recurring. It should be used as a stress test: Walmart's revenue engine is accelerating, digital mix is improving, and the balance sheet is still expanding. The remaining uncertainty is how much of the quarter's margin survives normalization.

The Verdict: Bull vs. Bear​

Bull Case

• Total revenue grew 5.9% to $187.94 billion, adding more than $10.5 billion in one quarter on top of an already enormous base.
• International revenue grew 12.8%, and Sam's Club revenue grew 8.7%; Walmart is not dependent on one domestic store format for growth.
• Disclosed e-commerce net sales grew about 19% to 27% across the three segments, creating a larger base for advertising, fulfillment, membership, and data monetization.
• Membership and other income grew 11.2%, evidence that non-merchandise revenue is compounding faster than the overall business.
• PP&E rose to $142.48 billion while annual net income grew from $13.94 billion in FY2022 to $22.27 billion in FY2026; the capital build has so far been absorbed by the earnings base.

Bear Case

• Approximately $2.9 billion of tariff refunds flowed through cost of sales; without that recovery, the quarter's inferred gross and operating margins would have been below the prior-year reported levels.
• Consolidated net income fell 8.7% despite stronger operations because other gains and losses swung by $3.91 billion, showing how much below-the-line volatility can matter.
• Walmart U.S. generated 67% of consolidated revenue and grew only 3.6%, leaving the company dependent on faster but smaller businesses to lift the total growth rate.
• Inventory reached $61.60 billion and PP&E $142.48 billion. A demand slowdown would meet a larger physical cost and working-capital base.
• Grocery dominates Walmart U.S. sales, supporting traffic but structurally limiting gross margin compared with higher-margin discretionary and service revenue.

Our Take: Walmart's commercial quarter was better than the net-income decline suggests and less profitable than the reported operating-income growth suggests. The right conclusion sits between those two headlines. Segment revenue, e-commerce, and membership all advanced, which supports a durable growth thesis. But the $2.9 billion refund supplied most of the reported margin expansion. Walmart earns a bullish verdict on the strength and breadth of its revenue system, with one hard condition: the next quarters must show that higher-margin digital and membership economics can replace a one-time cost recovery rather than merely follow it.