Analysis of Walmart Inc.’s Q2 FY2027 10-Q
Filing dated 28 August 2026 for the quarter ended 31 July 2026 · checked against the earnings calls on 21 May and 20 August
Where the filing and the story diverge
Walmart’s Q2 looked like a breakout: operating income up 28.8%. The 10-Q shows how much of it was one-off. $2.9B of tariff refunds were booked as lower cost of sales, and they are now substantially all received. A tax item cut interest expense by $0.5B and tax by $0.4B. Meanwhile six-month free cash flow fell 20.4%, and buybacks and dividends ran well ahead of it, with short-term borrowing up $3.9B.
- Three findings: $2.9B of one-off tariff refunds sit inside Q2 profit, and the pool is now used up; A one-off tax item cut Q2 interest by $0.5B and tax by $0.4B; Free cash flow fell 20.4% while buybacks and dividends ran 64% ahead of it. Each is set out below with the figure, where it sits in the filing and what would close it.
- On the calls. 2 of 3 findings were sidestepped or never asked.
- Management’s record. 3 kept, 3 changed on earlier promises.
- What it does not show. Nothing here shows a misstatement or a liquidity problem.
- Q2 revenue
- $187,937M, up 5.9%
- Walmart U.S. comparable sales
- Up 2.6% excluding fuel (call)
- Global eCommerce
- Up 23% (call)
- Adjusted EPS
- $0.81, against GAAP $0.80
- Full-year guidance
- Sales +4% to 5%; adjusted EPS $2.80 to $2.87
Area by area: what is solid and what is stretched
Walmart’s balance sheet and cash generation are strong. The risk is in earnings quality this quarter: two one-offs, and capital returns running ahead of free cash flow.
Three findings, ranked by importance
Each is set out in full below: what the filing shows, the numbers, the evidence and what would close it.
$2.9B of one-off tariff refunds sit inside Q2 profit, and the pool is now used up
Refunds equal to 31% of Q2 operating income were booked in the quarter. They are substantially all received, so the second-half price investments they funded have no refund left to offset them.
Note 5 says Walmart received approximately $2.9B of tariff refunds in the quarter, mainly in Walmart U.S., recorded as a reduction to cost of sales and representing substantially all the refunds it asked for. That is 31% of Q2 operating income of $9,383M. Management puts the net benefit, after the quarter’s price investments, at about 750 basis points of operating income growth, and says underlying growth was at the top end of guidance. In May, guidance assumed no refunds at all. Now the refunds are spent: the CFO said a large portion was invested in price at the end of Q2, with the full effect landing in Q3, and Q3 operating income is guided up only 2% to 4%. The quarter’s headline growth therefore leans on a gain that will not repeat, while the price cuts it pays for carry on.
Management’s own framing: treat Q2 and Q3 together. On that basis the CFO said reported operating income growth would average about 10% a quarter, and that the refund effect is largely contained within this fiscal year.
Evidence“During the quarter ended July 31, 2026, the Company received approximately $2.9 billion in tariff refunds, primarily in the Walmart U.S. segment, which were recorded as a reduction to cost of sales and represent substantially all of the refunds requested by the Company.”Q2 FY2027 Form 10-Q, Note 5, Gain Contingencies
A one-off tax item cut Q2 interest by $0.5B and tax by $0.4B
Debt interest fell to $137M from $651M, but $0.5B of the drop is a reversal tied to unrecognised tax benefits, not refinancing. Without it, debt interest was roughly flat.
Note 1 says Q2 included a $0.5B reduction of interest expense and a $0.4B benefit to income tax expense, both from changes in unrecognised tax benefits. That explains most of the fall in debt interest from $651M to $137M: add back the $0.5B and Q2 debt interest is about $637M, close to last year. It also helps explain the Q2 tax rate of 18.5% against 23.3% a year earlier. Walmart’s adjusted EPS excludes this as “a certain tax matter” worth $0.11 a share, so adjusted figures are not flattered. But the reported interest line and tax rate are, and the full-year guide still calls for adjusted net interest to rise $200M to $300M.
Evidence“During the quarter ended July 31, 2026, the Company recorded a $0.4 billion benefit to income tax expense and a $0.5 billion reduction of interest expense in the Condensed Consolidated Statements of Income related to changes in unrecognized tax benefits.”Q2 FY2027 Form 10-Q, Note 1, Income Taxes
Free cash flow fell 20.4% while buybacks and dividends ran 64% ahead of it
Capital spending rose $2.8B, buybacks and dividends took $9,049M against $5,529M of free cash flow, and short-term borrowing rose $3.9B. The CFO still promises double-digit free cash flow growth for the year.
Operating cash flow rose to $19,710M over six months, but capital spending jumped to $14,181M from $11,409M, so free cash flow fell to $5,529M. Over the same period Walmart paid $5,104M for buybacks and $3,945M in dividends, $9,049M in total, 1.64x free cash flow. Short-term borrowings rose to $10,479M from $6,596M in January, and payment obligations under supplier financing programmes rose to $6.4B from $6.0B. Capex guidance moved up to about 4% of sales from about 3.5%. Even so, the CFO said Walmart expects double-digit growth in free cash flow for the full year, which requires a strong second half.
Liquidity is not the concern: $15.0B of committed credit lines are undrawn, and the new notes carry no financial covenants. The question is how capital returns are funded while the investment cycle runs.
Evidence“The outstanding payment obligations to financial institutions under these programs were $6.4 billion, $6.0 billion and $5.7 billion as of July 31, 2026, January 31, 2026 and July 31, 2025, respectively.”Q2 FY2027 Form 10-Q, Note 1, Supplier Financing Program Obligations
Other findings, checked and set aside
Each item was tested against the filing. None changes the lead findings above.
| Item | What the filing shows, and why it is not a lead finding |
|---|---|
| Receivables | $11,075M, up 5.3% year on year against 5.9% sales growth; no collection stress. |
| Inventory | $61,600M, up 6.7% year on year; management cites cost inflation and strategic positioning. |
| New debt | $4,230M of notes issued in April, maturing 2029 to 2036, with no financial covenants; $2,303M repaid. |
| Interest rate and currency swaps | $9,918M notional with a net fair value of −$1,337M; hedges, Level 2. |
| Opioid litigation | DOJ and False Claims Act cases settled for immaterial amounts, accrued; other matters ongoing and not estimable. |
| Spark Driver settlement | $100M judgment, $63M suspended; about $37M accrued at January. |
| Goodwill | $28,260M, down from $28,735M on currency; no impairment indicators. |
What management said about each finding
Checked against the calls on 21 May and 20 August.
Management confirmed the $2.9B, a net benefit of about 750 basis points, and that the investment is managed across Q2 and Q3. Asked about vendor support and the split of refunds, no dollar figures were given.
“To date, we received substantially all of these tariff refunds.”
Neither management nor analysts mentioned the $0.5B interest reduction or the $0.4B tax benefit. The release adjusts for it as a $0.11 a share “certain tax matter”.
No analyst asked about the free cash flow decline, borrowing or supplier financing. The CFO volunteered that free cash flow should grow double digits for the year despite higher capex.
“Even with this increase, we expect to generate double-digit growth in free cash flow this year.”
10 disclosures moved
10-Q Q2 FY2027 compared with the 10-K for FY2026.
| Status | Disclosure | Before | Now |
|---|---|---|---|
| New | Tariff refunds Note 5 | Excluded from guidance (May) | ~$2.9B received, booked as lower cost of sales |
| New | Unrecognised tax benefits Note 1 | Not disclosed | $0.4B tax benefit; $0.5B lower interest expense |
| Changed | Supplier financing obligations Note 1 | $6.0B | $6.4B |
| Changed | Short-term borrowings Balance sheet | $6,596M | $10,479M |
| Changed | Long-term debt, incl. current Note 3 | $38,166M | $39,932M |
| Changed | Equity investments at fair value Note 4 | $5,675M | $4,867M |
| Changed | Inventories Balance sheet | $58,851M | $61,600M |
| Changed | Walmart shareholders’ equity Balance sheet | $99,617M | $98,238M |
| Changed | Capex guidance Guidance | About 3.5% of net sales | About 4.0% of net sales |
| Changed | Full-year guidance Guidance | OI +6% to 8%; EPS $2.75 to $2.85 | OI +7% to 8.5%; EPS $2.80 to $2.87 |
Two one-offs arrived together: the refunds and the tax reversal. Borrowing and supplier financing rose, equity investments fell in value, and guidance moved up on sales, earnings and capex.
5 markers for 19 November
Set before the numbers, so the read can be checked afterwards.
| Marker | Now | Gap widens if | Gap closes if | Result |
|---|---|---|---|---|
| Underlying operating income | Q2 +17.4% adjusted cc, incl. ~750bps refund benefit | Q3 below the 2% to 4% guide | Q2 and Q3 together average ~10% as guided | Awaiting |
| Free cash flow | Six months $5,529M, down 20.4% | Nine-month FCF still down year on year | On track for double-digit full-year growth | Awaiting |
| Debt interest run-rate | Q2 $137M, incl. $0.5B one-off reduction | Further unexplained releases | Q3 back near ~$600M, as expected | Awaiting |
| Supplier financing | $6.4B | Keeps rising faster than payables | Stable as a share of payables | Awaiting |
| Capital returns vs free cash flow | 1.64x over six months | Returns stay above FCF, funded by borrowing | FCF catches up or buybacks slow | Awaiting |
These are monitoring checks set before the numbers, not forecasts of a loss or breach.
What management said, and what happened
Promises from the May (Q1) call, against the August results.
| Topic | What management said | What happened | Outcome |
|---|---|---|---|
| Tariff refunds | May: Guidance does not assume any impact from IEEPA tariff refunds | About $2.9B received in Q2, booked as lower cost of sales. | Changed |
| Use of refunds | May: Would prioritise price investment with any refunds | 11,000 rollbacks by quarter-end, from 7,200 at the end of Q1. | Kept |
| Q2 sales | May: Q2 sales growth of 4% to 5% in constant currency | 5.0% in constant currency, the top of the range. | Kept |
| Q2 operating income | May: Q2 operating income growth of 7% to 10% in constant currency | 17.4% adjusted, including about 750bps from refunds; underlying at the top end, per management. | Kept |
| Q2 EPS | May: Q2 EPS of $0.72 to $0.74 | Adjusted EPS $0.81, helped by the refunds. | Changed |
| Capex | Feb: Capex of about 3.5% of net sales | Raised to about 4.0% of net sales in August. | Changed |
| Commitment | What they said | Result |
|---|---|---|
| Q3 sales growth | 3.0% to 3.75% in constant currency | Awaiting |
| Q3 operating income growth | 2% to 4% in constant currency | Awaiting |
| Q3 adjusted EPS | $0.62 to $0.64 | Awaiting |
| Full-year sales growth | 4% to 5% in constant currency | Awaiting |
| Full-year operating income growth | 7% to 8.5% in constant currency | Awaiting |
| Full-year adjusted EPS | $2.80 to $2.87 | Awaiting |
| Free cash flow | Double-digit growth this year | Awaiting |
| Capex | About 4% of net sales | Awaiting |
| Fuel costs | More than $2B above original assumptions | Awaiting |
| Refund effect | Largely contained within this fiscal year | Awaiting |
8 questions, checked against the call
Raised by the 10-Q. To be tested again at Q3 FY2027 results on 19 November.
Investor relations: Steph Wissink, Senior Vice President, Investor Relations · ir@walmart.com
What this does and does not show
CEO and CFO described Q2 growth differently
The CFO said Q2 operating income growth included a net benefit of about 750 basis points from tariff refunds. In his closing remarks the CEO said operating income was up 17.4% “without the benefit of the refunds”. Both cannot be right; the CFO’s version matches the release.
Not corrected on the call.
What would resolve this: Q3 materials restate underlying growth consistently.
Listed equity stakes swing reported earnings
Equity investments measured at fair value fell $1.1B in Q2, after rising $2.0B a year earlier. The swing turned a $2,708M gain into a $1,200M loss in other gains and losses, and is why GAAP EPS fell 9.1% while adjusted EPS rose 19.1%.
Not raised.
What would resolve this: Exposure and sensitivity disclosed, or the stakes reduced.
Asda equal value claims: third phase from 23 November
About 77,000 current and former Asda employees have claims. Walmart sold Asda in 2021 but indemnifies certain claims up to a contractually determined amount, which is not disclosed. The third phase hearing begins on 23 November 2026.
Not raised.
What would resolve this: The indemnity cap is disclosed or the claims are resolved.
Nothing here shows a misstatement or a liquidity problem.
The refunds and the tax item are disclosed, adjusted EPS excludes the tax item, and $15.0B of credit lines are undrawn.
- Q2 and Q3 together deliver the ~10% average operating income growth management described
- Free cash flow recovers to double-digit growth for the year
- Debt interest returns to its normal run-rate with the tax matter explained
- Supplier financing stays stable relative to payables
- Buybacks stay within free cash flow
- Q3 operating income misses the 2% to 4% guide once the refund is gone
- Free cash flow stays down while buybacks continue on borrowed money
- Further one-off tax or interest releases support results
- Supplier financing keeps climbing faster than payables
- More fair-value losses on listed stakes
Every figure ties back to the filing
| Walmart Form 10-Q, quarter ended 31 July 2026 | Open ↗ |
| Q2 FY2027 earnings presentation | Open ↗ |
| Q2 FY2027 earnings call, 20 August 2026 | Third-party transcripts |
| Q1 FY2027 earnings call, 21 May 2026 | Third-party transcripts |
Helmledgers reads the full 10-Q, including the notes, and ties every figure to the statement or note it comes from. The Q2 call is read against the filing to record what management answered, sidestepped or left out, and the Q1 call is used to check promises. Quotes are checked word for word against the filing, the release and the transcripts before release. This is an accounting read of public SEC filings, not an audit opinion and not investment advice.
- Severity
- High: material effect on cash, debt or reported results. Medium: worth tracking, smaller or less certain effect.
- On the call
- Direct answer, Partly answered (topic addressed, figure missing), Sidestepped (raised but not answered) or Not asked.
- Since the read
- Confirmed by a later disclosure, Escalated (grown since), Open (untested) or Missed (not flagged by the read).
- Said versus done
- Kept, Slipped (late), Changed (plan or terms changed), Missed or Reversed.
- Markers
- Measurable checks set before results, each with what would widen or close the gap. Scored after the next results.
- Closes if
- The evidence that would resolve a finding.
Helmledgers and its analysts hold no position in Walmart (WMT) securities.
This is an accounting read of public SEC filings. It is not an audit opinion and not investment advice.