Walmart’s Q1 Beat the Top Line, Held the Guide, and Lost 7% on the Day. The Operating Environment Did Not Change.

Walmart reported first-quarter fiscal 2027 results before the open on May 21, posting revenue of $177.8 billion, up 7.3% year-over-year and up 5.9% in constant currency. The company beat the top end of its own Q1 sales guidance by 120 basis points on a constant currency basis. Adjusted earnings per share came in at $0.66, matching analyst estimates. The stock fell roughly 7% by mid-morning, with CNBC reporting shares down approximately 8% in morning trading.

Walmart U.S. comparable sales grew 4.1% excluding fuel, with transactions up 3.0% and ticket up 1.1%. CEO John Furner told investors that transaction growth was the strongest the U.S. business has posted in six quarters. Global eCommerce sales grew 26%, with Walmart U.S. eCommerce up 26% and store-fulfilled delivery up 45%. Furner noted on the call that this extended the streak of 20%-plus U.S. eCommerce growth into a ninth consecutive quarter. Sam’s Club U.S. comparable sales grew 3.9% excluding fuel, on transaction growth of 6.2%. Walmart International net sales grew 10.1% in constant currency.

Operating income grew 5.0% on a reported basis and 2.5% in constant currency, with adjusted operating income up 5.1% in constant currency. CFO John David Rainey told investors on the earnings call that the quarter absorbed approximately $175 million, or about 250 basis points of operating income growth, from higher-than-planned fuel costs in global distribution and fulfillment operations. He said the company chose to “continue to play offense despite the short-term pressure on profits” rather than passing those costs through to shoppers.

This was Furner’s first full quarter as CEO. He stepped into the role on February 1 and used the release to frame the quarter around what he called the company’s focus on “growing higher-margin commerce solutions.”

The Held Guide Is the Most Important Disclosure In the Release

Walmart reiterated every line of its full-year fiscal 2027 outlook unchanged from February: constant currency net sales growth of 3.5% to 4.5%, adjusted operating income growth of 6.0% to 8.0%, and adjusted earnings per share of $2.75 to $2.85. Rainey told investors the company now expects full-year sales growth to land toward the upper end of that initial range based on Q1 performance and the Q2 outlook.

That language matters. Walmart did not raise the guide despite beating Q1, and analyst consensus for full-year EPS had been sitting higher — around $2.91 to $2.97 depending on the survey. The implication is that management is absorbing the Q1 outperformance into a more cautious second-half view, holding the original framework intact rather than re-pricing the year upward. For suppliers and sellers building FY27 plans against Walmart’s stated framework of growing operating income faster than sales, nothing in the Q1 release changes the foundation laid in February.

The Q2 guide came in below where the market had positioned. Walmart guided to constant currency net sales growth of 4.0% to 5.0%, operating income growth of 7.0% to 10.0%, and adjusted earnings per share of $0.72 to $0.74. Consensus had been at $0.75. As CNBC noted, Q1 marked just the third time in the past 16 quarters that Walmart did not beat quarterly earnings expectations. Rainey told CNBC after the report that the Q2 operating income guide is the best the company has given “in maybe a decade and a half,” adding that Walmart is absorbing the fuel prices “and still maintaining our guidance, and I feel really good about that.” The market response did not reflect that framing.

The Second-Engine Businesses Accelerated Across the Board

Every line of the higher-margin businesses Walmart has been scaling moved up in Q1. Global advertising grew 37% year-over-year, with Walmart Connect in the U.S. up 44% excluding Vizio and total Walmart U.S. advertising up 36%. Membership fee revenue grew 17.4% globally, with Walmart+ posting a record Q1 for net additions. Rainey told investors that advertising and membership together represented approximately one-third of operating income, calling that mix “very different from the Walmart of 10 years ago.”

U.S. marketplace net sales grew nearly 50%, which Rainey called the strongest level in two and a half years. Marketplace seller advertising spend grew over 50% year-over-year, with a corresponding sales lift. Units shipped same-day or next-day through Walmart Fulfillment Services grew nearly 150%. The company launched cross-border marketplace into Canada and Mexico during the quarter, extending the U.S. seller platform into two additional markets.

Walmart’s AI shopping agent, Sparky, posted weekly active user growth of more than 100% sequentially. Units purchased through Sparky grew more than four times sequentially. The average order value for Sparky users continues to run approximately 35% higher than non-users. Walmart added in-store availability, Spanish-language support, and personalized auto-replenishment to Sparky during the quarter.

Merchandise Mix Helped Margins for the First Time in 18 Quarters

Walmart U.S. gross profit grew 29 basis points to 27.8%, with Rainey telling investors that Q1 marked the first time in 18 quarters that merchandise category mix contributed favorably to U.S. gross margin expansion. The contribution came from broad-based improvement in general merchandise, where comps grew mid-single digits and Walmart posted its strongest GM share gains in five years. Fashion led the category, with the strongest share growth in five years. Private brand sales grew double digits in general merchandise, lifting private brand mix by 175 basis points.

Health and wellness ran a 100-basis-point headwind to Walmart U.S. comps from Maximum Fair Pricing legislation and pharmacy. The legislation took effect January 1 and disproportionately affects in-store pharmacy revenue.

The Consumer Picture Hardened During the Quarter

Rainey told investors that higher-income households are spending with confidence across categories, while lower-income households are more budget-conscious and in some cases navigating financial distress. He told CNBC that the gap between high-income and low-income shoppers “has continued to widen” over the past several quarters. The number of gallons customers fill up with at Walmart fuel stations fell below 10 for the first time since 2022, which Rainey described as an indication of stress. He told CNBC after the call that higher tax refunds had muted some of the pressure from elevated fuel prices in Q1, and that consumers are likely to feel that pressure more in Q2 as the tax refund tailwind dissipates.

Walmart now has approximately 7,200 rollbacks across its assortment, up more than 20% year-over-year. The rollback program extended through Q1 and Furner indicated on the call that the company would continue leaning into price investment rather than passing fuel costs through. Rainey told analysts that Walmart will participate in the IEEPA tariff refund process as the importer of record but said the maximum potential recovery represents less than half of one percent of U.S. annual sales. He said the company would “bias and try to prioritize price investment” with any recovery rather than letting it accrue to operating income.

Q1 Confirmed the FY27 Framework. The Stock Reaction Did Not.

The Q1 results confirm the operating framework Walmart laid out after Q4. Sales growth is running ahead of guidance. The higher-margin businesses Walmart has been building for the better part of a decade are scaling faster than the core. The fuel headwind is real, the consumer split is hardening, and the company is choosing to invest in price rather than protect short-term margin. The stock reaction priced the Q2 EPS miss and the unchanged full-year outlook; the underlying business did not deliver news that should change how suppliers and sellers plan for FY27.

For 1P suppliers, the held guide reaffirms what Walmart’s merchant organization will be asking for in the back half of the year: operational reliability, sharp value execution, and merchandise that supports the mix story now visibly working at the gross margin line. For 3P sellers, the Q1 disclosures on marketplace, advertising, and WFS are individually more consequential than the headline financials. The platform’s standards for fulfillment speed, advertising sophistication, and assortment readiness moved up again during the quarter, and the operating standards for FY27 will be set against the Q1 numbers, not against the prior year’s baseline.

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