Why did GAAP EPS fall 42% while operating income grew 8.5%?

The decline came from a $1.16 billion pre-tax loss in 'Other (gains) and losses,' which reflects fair-value declines in Walmart's equity and other investments, including Symbotic and JD.com. Excluding this $0.11 per share after-tax item, adjusted EPS rose 9.8% to $0.67. Management treats these swings as non-operational, so investors should weigh adjusted EPS and operating results more heavily when judging core performance.

Is the raised FY25 guidance a meaningful change?

Yes. Management raised FY25 constant-currency net sales growth to 3.75%–4.75% (from 3.0%–4.0%) and adjusted operating income growth to 6.5%–8.0% (from 4.0%–6.0%). The adjusted EPS range moved up to $2.35–$2.43. The raise reflects first-half results, with gross margin gains and membership income growth driving profit. The company also noted continued pressure from its product and format mix.

Why did free cash flow decline so sharply?

Operating cash flow fell $1.8 billion to $16.4 billion, mainly due to the timing of certain payments and higher inventory purchases. Capital expenditures rose $1.3 billion to $10.5 billion to support strategic investments. Free cash flow therefore fell $3.1 billion to $5.9 billion. Management characterized this as investment-driven, but investors should monitor whether operating cash flow recovers in the second half.

What is driving growth in Walmart's higher-margin businesses?

Growth came from eCommerce, which rose 21% globally with store-fulfilled pickup and delivery and marketplace leading; advertising, up 26% globally; and membership income, up 16% in the quarter. Walmart U.S. comp sales rose 4.2%, and gross profit rate improved 51 bps there, partly because net delivery cost per order fell nearly 40%. These mix shifts underpin the margin expansion investors are watching.

Are there any risks or one-time items investors should note?

The quarter included a $255 million business reorganization charge in the six-month period, mainly tied to Walmart U.S. strategic decisions, which was excluded from adjusted results. Walmart International's sales were boosted by currency effects, and Sam's Club's membership and eCommerce growth were strong. Management noted that Easter timing shifted some international sales into Q1. Investors should also watch the company's inventory levels and the equity investment marks that continue to drive GAAP volatility.

WMT 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed August 15, 2024. Cited figures are marked; the original filing is the authoritative source.

Walmart reported fiscal Q2 2025 results (quarter ended July 31, 2024) that beat on top-line and profit growth while showing cash flow pressure.

Consolidated revenue rose 4.8% to $169.3 billion^a (5.0% in constant currency), and operating income grew 8.5% to $7.9 billion; adjusted operating income rose 7.2% to $7.9 billion, with eCommerce up 21% globally and the global advertising business up 26%. Gross margin rate expanded 43 bps to 24.4%, driven by Walmart U.S. and International, and the company credited reduced eCommerce losses and growth in membership income. Reported GAAP EPS was $0.56 (down 42% year over year because of a $1.16 billion pre-tax loss on equity and other investments), while adjusted EPS was $0.67, up 9.8%.

The quarter's weak spot was cash generation. Operating cash flow fell $1.8 billion to $16.4 billion^b for the six months, and free cash flow dropped $3.1 billion to $5.9 billion, reflecting payment timing, higher inventory purchases, and a $1.3 billion increase in capital expenditures. Cash fell to $8.8 billion and total debt was $47.0 billion.

Management also disclosed $2.1 billion^c of share repurchases year to date, with $14.5 billion remaining under the $20 billion authorization. Forward guidance was raised. FY25 consolidated net sales growth (constant currency) is now expected at 3.75% to 4.75%, up from 3.0% to 4.0%, and adjusted operating income growth at 6.5% to 8.0%, up from 4.0% to 6.0%.

Adjusted EPS guidance moved to $2.35 to $2.43^d from $2.23 to $2.37. For Q3, management guided to net sales growth of 3.25% to 4.25% and operating income growth of 3.0% to 4.5%, with adjusted EPS of $0.51 to $0.52.

02—Key points

Key Highlights

Consolidated revenue of $169.3B, up 4.8% (5.0% cc); net sales of $167.8B, up 4.7%
Operating income up 8.5% to $7.9B; adjusted operating income up 7.2%, with adjusted EBITDA margin up to 6.6% from 6.4%
Adjusted EPS of $0.67, up 9.8%; GAAP EPS of $0.56 was down 42.3% due to a $0.11 net loss on equity investments
Global eCommerce sales up 21%; global advertising up 26% (Walmart Connect U.S. up 30%)
Free cash flow fell $3.1B to $5.9B YTD on lower operating cash flow and higher capex; cash and equivalents $8.8B; total debt $47.0B
FY25 guidance raised: net sales growth 3.75%–4.75% cc and adjusted operating income growth 6.5%–8.0% cc; adjusted EPS $2.35–$2.43
Q3 guidance: net sales growth 3.25%–4.25% cc, operating income growth 3.0%–4.5% cc, adjusted EPS $0.51–$0.52

03—Questions

Frequently Asked Questions

Why did GAAP EPS fall 42% while operating income grew 8.5%?
The decline came from a $1.16 billion pre-tax loss in 'Other (gains) and losses,' which reflects fair-value declines in Walmart's equity and other investments, including Symbotic and JD.com. Excluding this $0.11 per share after-tax item, adjusted EPS rose 9.8% to $0.67. Management treats these swings as non-operational, so investors should weigh adjusted EPS and operating results more heavily when judging core performance.
Is the raised FY25 guidance a meaningful change?
Yes. Management raised FY25 constant-currency net sales growth to 3.75%–4.75% (from 3.0%–4.0%) and adjusted operating income growth to 6.5%–8.0% (from 4.0%–6.0%). The adjusted EPS range moved up to $2.35–$2.43. The raise reflects first-half results, with gross margin gains and membership income growth driving profit. The company also noted continued pressure from its product and format mix.
Why did free cash flow decline so sharply?
Operating cash flow fell $1.8 billion to $16.4 billion, mainly due to the timing of certain payments and higher inventory purchases. Capital expenditures rose $1.3 billion to $10.5 billion to support strategic investments. Free cash flow therefore fell $3.1 billion to $5.9 billion. Management characterized this as investment-driven, but investors should monitor whether operating cash flow recovers in the second half.
What is driving growth in Walmart's higher-margin businesses?
Growth came from eCommerce, which rose 21% globally with store-fulfilled pickup and delivery and marketplace leading; advertising, up 26% globally; and membership income, up 16% in the quarter. Walmart U.S. comp sales rose 4.2%, and gross profit rate improved 51 bps there, partly because net delivery cost per order fell nearly 40%. These mix shifts underpin the margin expansion investors are watching.
Are there any risks or one-time items investors should note?
The quarter included a $255 million business reorganization charge in the six-month period, mainly tied to Walmart U.S. strategic decisions, which was excluded from adjusted results. Walmart International's sales were boosted by currency effects, and Sam's Club's membership and eCommerce growth were strong. Management noted that Easter timing shifted some international sales into Q1. Investors should also watch the company's inventory levels and the equity investment marks that continue to drive GAAP volatility.

04—Continue

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