Q3 2025 Summary
Published Feb 7, 2025, 7:58 PM UTC- Walmart is growing operating income faster than sales, with profits up approximately 10% on sales growth of about 5%, exceeding their financial targets and demonstrating strong execution.
- Significant growth in membership income, with Sam's Club reporting a 15.1% increase and Sam's Club China growing over 30%, indicating strong member engagement and contributing to higher margins.
- Rapid expansion of higher-margin businesses: advertising revenue up 50%, marketplace sales up 42%, and membership income up 22%, reshaping Walmart's profit composition and driving operating income growth.
- Margin pressure from GLP-1 drug sales negatively impacting gross profit mix. GLP-1 sales contributed about 1 point to the segment comp but continue to create mix pressures in gross profit.
- Unanticipated expenses from hurricanes and port strikes negatively affected operating income growth. The quarter included two large hurricanes and a U.S. port strike, which lifted sales growth by a small amount but negatively affected operating income growth by a larger amount.
- General merchandise expected to underperform health and wellness and grocery, affecting profit margins until normal purchasing cycles return. The company expects general merchandise to improve but continue to underperform health and wellness and grocery until normal purchasing cycles return across general merchandise categories.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +5.5% | Driven by strong sales in both the U.S. and International segments, supported by eCommerce growth and increased foot traffic; reflects higher mix of grocery and health & wellness categories and value-focused consumers. |
Walmart U.S. | +5.0% | Benefited from increased comparable sales in grocery and continued momentum in digital orders; improved inventory management and targeted promotions helped boost store traffic and conversion. |
• Health & Wellness | +25% | Growth propelled by GLP-1 drugs demand, higher branded prescription volume, and strong over-the-counter sales; reflects focus on value and consumer emphasis on essential healthcare products. |
Walmart International | +8% | Broad-based constant currency sales growth led by Walmex, China, and other key markets; eCommerce expansion and omnichannel strategies contributed to higher traffic, particularly in regions with strong digital adoption. |
• China | +18% | Driven by robust Sam’s Club membership momentum and nearly half of sales now digital; rapid fulfillment capabilities (many orders delivered in under one hour) improved customer satisfaction and boosted overall sales mix. |
• Other Markets | +29% | Reflects strong demand in emerging markets and post-pandemic recovery in certain regions; marketplace expansion and store openings provided new sales channels, with a shift toward value-oriented private label products. |
Sam’s Club Grocery & Consumables | +7% | Steady demand for everyday essentials (e.g., snacks, dry grocery) plus higher membership levels lifted sales; strong omnichannel adoption (Scan & Go, curbside) helped attract younger demographics. |
Sam’s Club Fuel, Tobacco & Other | -15% | Fuel price deflation relative to last year drove down reported revenues; tobacco and “other” subcategories remained relatively flat, with no significant shifts reported. |
Sam’s Club Technology | +6% | Investments in Scan & Go and AI-driven checkout solutions boosted digital engagement; improved operational efficiencies and higher usage by younger members contributed to modest growth in technology-related revenue. |
Operating Income | +8% | Gross margin expansion from product mix (more advertising, better eCommerce margins) and supply chain efficiencies (automation, fulfillment) outpaced higher operating expenses; focused cost management helped sustain profits. |
Net Income | >$4.5B vs. $453M (>+900% YoY) | Reflects significantly lower fair-value losses on equity investments compared to the prior period, alongside improved operating income; reduced tax expenses also supported bottom-line growth. |
EPS (Diluted) | +229% | Fueled by stronger net income and a favorable comparison to the prior period’s investment-related losses; underscores Walmart’s shift toward higher-margin businesses (advertising, membership) and disciplined cost control, providing tailwinds for per-share earnings. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Sales Growth | FY 2025 | 3.75% to 4.75% | 4.8% to 5.1% | raised |
Operating Income Growth | FY 2025 | 6.5% to 8% | 8.5% to 9.25% | raised |
Adjusted EPS | FY 2025 | $2.35 to $2.43 | $2.42 to $2.47 | raised |
Sales Growth | Q4 2025 | no prior guidance | around 3% to 4% | no prior guidance |
Operating Income Growth | Q4 2025 | no prior guidance | around 5% to 7.5% | no prior guidance |
Currency Impact | Q4 2025 | no prior guidance | ~100 bps headwind to sales, ~200 bps to OI | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Sales Growth | Q3 2025 | 3.25% to 4.25% | 5.46% (calculated from 160,804To 169,588) | Beat |
Operating Income Growth | Q3 2025 | 3% to 4.5% | 8.16% (calculated from 6,202To 6,708) | Beat |
Earnings Per Share (EPS) | Q3 2025 | $0.51 to $0.52 | $0.56 (diluted EPS) | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Persistent eCommerce growth and marketplace expansion | Cited as a major driver of performance and profitability in Q2 2025, Q1 2025, and Q4 2024, with strong double-digit eCommerce and marketplace expansion each quarter. | In Q3 2025, Walmart reported 27% eCommerce growth and 42% marketplace growth, helping reshape profit composition. | Consistently highlighted as a core growth engine. |
Advertising and membership fee increases driving higher-margin income | Repeatedly emphasized in Q2 2025, Q1 2025, and Q4 2024 as key higher-margin drivers (advertising from mid-20% to high-20%+ growth; membership also growing double digits). | Contributed to over half of operating income growth in Q3 2025, with advertising up 50% and membership income up 22%, fueling margin expansion. | Important profit driver consistently discussed. |
Gaining market share among higher-income consumers | Mentioned each prior quarter, with higher-income segments driving a majority of share gains; strong pickup/delivery adoption among these consumers. | In Q3 2025, 75% of U.S. market share gains came from households with incomes above $100k, especially in grocery and pickup/delivery channels. | Ongoing expansion among wealthier demographics. |
Deflation in general merchandise affecting margins | Deflationary trends cited in Q2 2025, Q1 2025, and Q4 2024; the rate of decrease has varied, but Walmart has still grown units in deflationary environments. | Q3 2025 saw low to mid-single-digit deflation in GM but positive comps driven by unit growth; GM typically has higher margins than grocery. | Continued mention of GM deflation with mixed margin impact. |
SG&A expense pressures and expense deleverage | Similar drivers noted in Q2 2025 (marketing, variable pay), Q1 2025 (variable pay), and Q4 2024 (business mix, technology investments). | In Q3 2025, higher marketing spend and incentive pay caused SG&A pressure; eCommerce mix also contributed to deleverage. | Ongoing concern as eCommerce grows and labor costs rise. |
Investments in automation and operational efficiencies | Appears each quarter, with growing automation in supply chain and store-level technology; recognized as a key enabler of cost reduction and improved customer experience. | Over 50% of fulfillment center volume automated in Q3 2025; net delivery cost per order reduced by 40% for the third straight quarter. | Key long-term focus for cost savings and improved service levels. |
Ongoing eCommerce profitability challenges | Discussed each quarter as a work in progress; narrowing losses and improved delivery density, but still not fully profitable. | In Q3 2025, Walmart reiterated its long-term focus over immediate profitability, though U.S. eCommerce losses continue to narrow. | Gradual improvement but not yet fully profitable. |
Holiday season expectations influencing inventory and sales strategies | Q2 2025 also mentioned a positive holiday outlook; Q1 2025 did not specify holiday plans, while Q4 2024 discussed better-than-expected holiday results. | Q3 2025 commentary showed optimism; they built momentum from back-to-school into the holiday period and highlighted strong seasonal setups. | Recurring seasonal focus, especially in Q2 and Q3 as holidays approach. |
Macroeconomic uncertainties (including geopolitical factors) impacting outlook | Q2 2025 described a more uncertain than normal macro and geopolitical backdrop; Q1 2025 was cautious but focused on execution; Q4 2024 noted an improved macro mood. | No specific mention in Q3 2025. | Shifted out of focus in Q3 2025. |
Shifts in product mix (food vs. general merchandise) affecting profit margins | Previously significant in Q2 2025, Q1 2025, and Q4 2024, with GM noted as a margin lever though overshadowed by strong grocery demand. | In Q3 2025, GM sales improved despite deflation, supporting margins; GM typically carries higher gross margins than grocery. | Continued role in margin management amid deflation and changing demand. |
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Alternative Revenue Streams Contribution
Q: How much did alternative revenue streams contribute to EBIT growth?
A: Membership fees and advertising income contributed to a little more than half of our operating income improvement and nearly one-third of overall operating income. These are important growth drivers, but they rely on getting the basics right in core retail. -
Operating Income Guidance and E-commerce Profitability
Q: Did changes in Q4 operating income guide affect outlook for e-commerce profitability?
A: There's a modest improvement in Q4 performance with the business performing consistently. Shrink has performed better than expected, aiding gross margins. We are confident we'll make money in e-commerce but aren't racing to it; we're focused on long-term growth and meeting customer needs. -
E-commerce Growth and Profitability Outlook
Q: What's the sustainable e-commerce growth and profitability outlook?
A: We're investing to enhance customer experience and drive growth, with e-commerce now representing 18% of our business, up 300 basis points from last year. We see significant opportunity due to our relatively low e-commerce market share. While confident in e-commerce profitability, we're prioritizing customer service over rushing to profit. -
General Merchandise Impact on Gross Margin
Q: When will general merchandise mix balance, and how will it impact gross margins?
A: General merchandise has improved, with positive comps due to unit growth despite low to mid-single-digit deflation. We're excited about the season and see bright spots in home, toys, and hardlines. Growth in general merchandise can positively impact gross margin expansion. -
Share Gains with Upper-Income Consumers
Q: How is Walmart gaining share with upper-income consumers?
A: By offering both value and convenience, we're attracting higher-income customers. Growth in e-commerce, especially marketplace expansion and assortment in fashion and apparel, appeals to them. Categories like gluten-free, grass-fed beef, and organic produce show higher share in pickup and delivery. -
Operating Expenses and SG&A Potential Improvement
Q: Can OpEx get closer to 19% from 21.2%, considering e-commerce losses?
A: Higher SG&A is driven by investments in marketing and incentive pay for frontline associates. The shift toward digital channels, which have higher SG&A, pressures expenses. While focused on efficiencies, growing digital will continue to impact SG&A. -
Acceleration in Average Ticket
Q: What drove the acceleration in average ticket in the U.S.?
A: We saw the highest growth in units in food in several years. Positive comps in general merchandise despite deflation, and growth in deliveries under three hours contributed. One-time events like hurricanes also had an impact. -
Competition Response to Share Gains
Q: What are observations on competitors' response to Walmart's share gains?
A: The competitive landscape is evolving and varies by market. In the U.S., we face fierce competition from various directions. We focus on customers and adapt by learning and applying insights from competitors. -
Membership Growth and Impact
Q: What's driving membership growth, and how does it impact behavior?
A: Walmart+ membership is up double digits, helping customers save on delivery costs. We're committed to delivering orders on time and complete, enhancing customer experience. Membership enables us to offer additional services and deepen customer relationships.