Walmart Earnings: Fuel Costs Slow U.S. Sales to a Six-Year Low

The beat that markets punished

Walmart's latest quarter landed with a contradiction that investors have not fully digested. On the headline numbers, the company did what it usually does. It beat profit expectations, grew revenue at a healthy clip and raised its full-year sales forecast. Underneath, its home market showed the weakest growth in years, and Walmart said higher fuel prices were a main reason.

For the fiscal second quarter, which ended July 31, 2026, Walmart reported revenue of about $187.9 billion, up 5.9% from a year earlier.115 Adjusted earnings per share came in at $0.81, ahead of the $0.74 consensus and up roughly 19% from the prior year.1517 Global e-commerce sales rose 23%.1317

The U.S. business told a different story. Comparable sales at Walmart U.S., excluding fuel, grew 2.6%. Coverage puts that at the slowest pace in about six years.1112 Business Insider reported that shares fell as much as 9% to a 2026 low.12 Another account called it the stock's worst day in four years.16

How the numbers fit together

The main outlets agree on the core figures but differ on details. Estimates of the U.S. comparable-sales consensus Walmart missed range from 3.5% to 3.8%, depending on the outlet.111216 Business Insider put the stock decline at 7% in its headline and 9% in its body text, which likely reflects different points in the trading session.12 None of these differences changes the main finding: U.S. comp growth came in at least a full percentage point below what the Street expected.

Reported profit tells a different story from adjusted profit. Net income for the quarter was about $6.3 billion. That was a decline of roughly 9.3% from about $7 billion a year earlier, even as adjusted EPS rose sharply.138 Investors reading only the adjusted figure would think profits were surging. Reported earnings fell, so they were not.

This quarter also stands out against the rest of the year. In the first quarter, which ended April 30, Walmart's revenue rose 7.3% to $177.75 billion and Walmart U.S. comparable sales grew 4.3%.3 Talk Business & Politics reported net income for that quarter of $5.33 billion, up 18.8%.9 The company's 10-Q, as summarized by Stock Titan, showed consolidated net income of $5.49 billion and diluted EPS of $0.67.3 The gap between the two figures most likely reflects consolidated income versus income attributable to Walmart shareholders. In the fourth quarter of fiscal 2026, Walmart U.S. comps grew 4.6%.1 Falling from the mid-4% range to 2.6% within one quarter is a sharp slowdown for a company this large.

The gas-price mechanism

The reasons behind the slowdown matter more than the miss itself, and here the coverage diverges in useful ways.

One explanation focuses on the pump. Chief financial officer John David Rainey described a psychological effect once fuel prices rose above $4 a gallon, according to an account citing NBC News.16 The same outlet reported a national average of $4.27 on September 10, citing AAA. It tied the rise in crude to fighting around the Strait of Hormuz.16 Its argument is that customers are rationing spending to cover fuel, not that they have stopped spending.16

The data on spending per trip support that view. Average spending per transaction grew 1.1% in the quarter, down from 3.1% a year earlier.12 Shoppers are still visiting but putting less in the basket.

Fuel also hurts Walmart's own costs. The company expects more than $2 billion in extra fuel-related expenses this fiscal year, assuming prices stay near current levels.1220 That figure exceeds what the original guidance assumed.20 Business Insider noted that Walmart had already taken a $175 million hit to profits in the first quarter because of high energy costs.12 The pressure has grown since then.

The second explanation is pharmacy. Federal drug-price negotiations reduced Walmart's health and wellness sales, cutting about 0.8 percentage points from comparable sales.12 Even excluding that effect, comps were 3.4%, still below expectations.12 Another analysis estimated the drag from the new drug-pricing rules at about 125 basis points.15 Either way, pharmacy explains part of the miss but not all of it.

The third explanation is the broader economy. U.S. retail sales fell 0.6% in July, well below forecasts.1216 One commentary, however, pointed to stronger-than-expected August hiring and unemployment holding at 4.1%. On that basis it argued the slowdown reflects a fuel squeeze rather than a recession.16

Reading the signal

The most defensible reading is that this quarter shows a squeeze, not a collapse. Total revenue still grew close to 6%, and Walmart raised its full-year net sales growth outlook to 4% to 5%.1120 Companies bracing for a downturn do not usually raise guidance.

The squeeze is still real, and it is landing on the company most likely to benefit from customers trading down. Walmart typically gains when households look for value. If its own U.S. comps are slowing, consumers are probably cutting back rather than just switching stores. One market note quoted an analyst who said management acknowledges that higher food and fuel costs are stretching household budgets, while still calling the earnings solid overall.12

Rival results make the point sharper. One valuation analysis noted that Target's latest comparable sales rose 3.8%, ahead of Walmart U.S. at 2.6%.17 Walmart has rarely trailed Target on that measure in recent years, which says more about the slowdown than any single figure.

The guidance problem

If the quarter itself was mixed, the outlook did the most damage to the stock. Walmart guided third-quarter adjusted EPS to $0.62 to $0.64, below the prior consensus of about $0.68.15 It projected quarterly sales growth of 3.0% to 3.75% and adjusted operating income growth of 2% to 4%.17 One analysis listed three headwinds:

• more than $2 billion in extra fuel costs
• the drug-pricing drag
• a third-quarter hit of more than 100 basis points from the timing of Flipkart's Big Billion Days sale in India15

For the full year, Walmart guided adjusted EPS to $2.80 to $2.87 and adjusted operating income growth to 7% to 8.5%.20 That is up from the February outlook of $2.75 to $2.85 in EPS and 6% to 8% operating income growth.6 The full-year raise and the soft near-term quarter explain the mixed reaction. Investors are being asked to trust a stronger second half while the next three months look weaker.

Analysts have been cutting. The consensus EPS estimate for the fiscal year ending January 2028 fell to about $3.23 from roughly $3.29 over 90 days. In the past 30 days, analysts made 25 downward revisions and only four upward ones.15 As of early October, shares were about 23% below their 52-week high of $134.84.15

The tariff-refund wildcard

One unusual factor is the roughly $2.9 billion in tariff refunds Walmart received. Management said it would use the money to keep prices low.12 It funds more than 11,000 price rollbacks.1516 This is a reversal from May 2025, when then-CEO Doug McMillon said Walmart could not absorb all of the tariff costs and would raise some prices.19

The refunds are a deliberate trade-off. Walmart is giving up near-term margin in exchange for traffic and market share at a moment when fuel costs are squeezing its customers. One analysis linked the slower third-quarter profit growth directly to the refunds being spent on lower prices.17 If the rollbacks bring lasting market-share gains, the decision will look smart. If customers spend the savings at the pump instead of in the store, Walmart will have given up margin for little return.

The higher-margin businesses

The optimistic case for Walmart rests less on store sales and more on its faster-growing businesses. In the quarter, global advertising grew 38%, Walmart Connect grew 43%, U.S. marketplace sales rose 52% and membership income rose 17%. Management attributed about half of operating profit growth to these businesses.15 U.S. online sales grew more than 20% for the tenth straight quarter.15 Walmart has also said shoppers who use its AI shopping agent, Sparky, spend 40% more.13 CEO John Furner said he was "even more bullish" on how the businesses reinforce one another.17

Those businesses can soften a fuel shock but probably cannot offset it entirely. With the stock trading at roughly 32 times forward earnings, there is little room for further estimate cuts.15 One bullish $155 price target would require the multiple to rise to about 48 times.15

What comes next

Walmart reports third-quarter results on November 19.1417 The key number is whether U.S. comparable sales recover from 2.6%. That depends largely on gas prices, which Walmart cannot control. If fuel stays above $4, the $2 billion cost estimate could rise and basket sizes could keep shrinking. If prices fall, the rollbacks funded by tariff refunds could turn a weak quarter into a strong holiday season. For now, the softest U.S. growth in six years at the country's largest retailer is a clear sign that high fuel prices are squeezing household budgets.