Walmart trades at 40x earnings on mid-single-digit growth
Walmart’s stock trades at a growth-stock multiple despite management guiding for just 6% to 8% profit growth, forcing investors to bet heavily on an ongoing shift toward high-margin advertising and e-commerce.
Walmart shares have slipped from a 52-week high near $135 to roughly $114, yet the stock still commands a premium multiple of about 40 times earnings. That valuation is difficult to reconcile with the company’s recent financial trajectory and near-term forecasts. For the full year, management reiterated guidance for adjusted earnings per share of $2.75 to $2.85, representing only about 6% growth.
The retailer’s fiscal first-quarter results for the period ended April 30, 2026, painted a picture of steady, rather than explosive, expansion. Total revenue rose 7.3% to $177.8 billion. U.S. comparable sales excluding fuel grew 4.1%, a slight deceleration from 4.5% in the prior-year period. Mid-single-digit profit growth rarely supports a valuation multiple in the 40s.
The margin shift
Investors are pricing Walmart like a durable tech compounder because its underlying business mix is changing rapidly. The fastest-growing segments of the company are also its most profitable. U.S. advertising revenue through the Walmart Connect platform surged 44%, while global membership fee income climbed 17.4%.
E-commerce sales grew 26% and now account for roughly 23% of net sales. This shift is critical because advertising, membership fees, and marketplace commissions carry far fatter margins than traditional grocery sales. Additionally, an online operation that historically drained resources is finally reaching a scale where it contributes positively to the bottom line.
"Our teams are ... growing higher-margin commerce solutions," CEO John Furner said in the earnings release. The company is reinforcing this push by directing more capital expenditures toward automated distribution and fulfillment, which lowers the cost of processing each online order.
The central question for markets is whether this structural improvement in profit mix can outpace the current price tag. A grocery-dominated retailer growing adjusted operating income at 6% to 8% does not typically warrant a 40-times earnings multiple. The stock ultimately depends on whether these higher-margin businesses can scale fast enough over the next five years to grow into that premium.
