Walmart Q2: Revenue Up, Dividend Raised, Buybacks Surge; Margins Under Pressure

Quick read - Walmart Inc. (NYSE: WMT) - Q2 FY2026 (quarter ended July 31, 2025)

What's happening inside the company
Walmart is pushing omnichannel growth (store‑fulfilled pickup/delivery and Walmart+), investing aggressively in stores, supply chain and technology, returning capital via a larger dividend and heavy buybacks, while managing higher operating costs and a number of legal and regulatory exposures that are increasing near‑term expense volatility.

Key income-statement and financial facts (as reported)
Net sales (3 months ended July 31, 2025): $175,750 million.
Total revenues (3 months): $177,402 million (six months: $343,011 million).
Cost of sales (3 months): $132,771 million; Gross profit (3 months): $42,979 million (24.5% of net sales).
Operating income (3 months): $7,286 million (down 8.2% vs prior‑year quarter); operating margin 4.1% (prior 4.7%).
Other (gains) and losses (3 months): $(2,708) million (net gain) - large swing tied to fair‑value increases in equity investments.
Interest, net (3 months): $675 million. Provision for income taxes (3 months): $2,168 million; effective tax rate ~23.3%.
Consolidated net income (3 months): $7,151 million; consolidated net income attributable to Walmart: $7,026 million.
Diluted EPS (3 months): $0.88 (prior: $0.56). Six‑month diluted EPS: $1.43 (prior: $1.19).
Net cash provided by operating activities (six months): $18,352 million; Free cash flow (six months): $6,943 million.
Payments for property & equipment (six months): $11,409 million (capex up vs prior).
Share repurchases (six months): $6,200 million (67.4 million shares at average $92.03).
Dividend: fiscal 2026 annual dividend $0.94 per share (13% increase vs prior year).
Balance sheet snapshot (July 31, 2025): Cash & cash equivalents $9,431 million; Total assets $270,837 million; Total shareholders' equity $96,550 million; Total long‑term debt (including current portion) $39,651 million; Working capital deficit $21.5 billion.

Segment highlights
Walmart U.S.: Net sales $120,911M; operating income $6,720M - strong comparable sales (calendar comparable +4.7% for quarter), eCommerce contributing ≈4.0% to comp sales.
Walmart International: Net sales $31,201M; operating income $1,227M - sales up but operating income down (gross profit rate compressed by channel/format mix and investments).
Sam's Club U.S.: Net sales $23,638M; operating income $489M - comparable sales positive but margin pressure from fuel volatility and reorganization charges.

Positives (income statement & operations)
* Revenue growth: total revenues up ~4.8% year‑over‑year for the quarter; net sales up $8.0B for the quarter.
* Improved gross profit rate: slight lift to 24.5% (up ~4 bps vs prior year) driven by disciplined inventory and higher‑margin businesses.
* Strong operating cash flow and rising free cash flow: $18.4B operating cash, $6.9B free cash flow (six months).
* Capital returns accelerated: $6.2B of buybacks in six months plus dividend increase to $0.94/year.
* Fair value gains boosted reported earnings this quarter: other gains of $2.7B materially increased net income.

Negatives / risks (income statement & other)
* Operating income contraction: operating income fell 8.2% vs prior quarter despite revenue growth - operating margin compressed to 4.1%.
* Expense pressure: operating expenses increased to $37,345M (21.2% of sales) - includes ~$0.4B legal charges and higher self‑insured general liability claims (~$0.4B for quarter, ~$0.6B for six months).
* Earnings volatility from non‑operating items: large swings in "other gains and losses" (fair‑value) can mask underlying operating performance.
* Rising leverage near term: long‑term debt increased (issuances net $3.98B in April) and long‑term debt including current portion reported at $39,651M; working capital deficit widened to $21.5B.
* International margin pressure: Walmart International gross profit rate down (~80 bps for the quarter) due to channel/format mix and investments in price/delivery.
* Ongoing legal/regulatory exposures: opioid litigation (MDL and DOJ matters), Asda equal‑value claims, Mexico antitrust, FTC money transfer settlement ($10M) and other investigations - these create potential future charges and operational distraction.

Analyst takeaways - short and direct
Walmart is producing top‑line growth driven by U.S. comps and eCommerce while plowing cash into capex and buybacks. The company generated robust cash flow, raised the dividend and aggressively repurchased stock. However, margins are under pressure from rising operating expenses, legal and liability costs, and some international margin softness. Reported net income benefited materially from investment fair‑value gains this quarter - keep that in mind when assessing core operating momentum. Balance sheet and cash flow remain solid, but watch operating expense trends, legal outcomes (opioids, antitrust, local probes) and the sustainability of margin expansion as capex and wage/investment spend continue.

Source: Walmart Inc. Form 10‑Q - Condensed Consolidated Statements of Income, Balance Sheet, Cash Flows, and Management Discussion for quarter ended July 31, 2025.