Walmart Inc FY2025 Q2 Financial Report: Revenue Increased 4.8%, Net Income Down 42.3%

Executive Summary

Walmart Inc. reported its fiscal second quarter of 2025 with a notable increase in revenue by 4.8% year-over-year, reaching $167.8 billion, driven primarily by growth in eCommerce and international markets. However, net income declined significantly by 42.3% compared to the prior year, dropping to $4.7 billion, mainly due to increased operational expenses and other losses. The company maintains a strong liquidity position with total assets of $254.4 billion and a solid equity base of $90.6 billion, despite rising debt levels. This report provides a detailed analysis of Walmart’s financial performance, balance sheet health, cash flow dynamics, and strategic outlook amid a challenging macroeconomic environment.

Key Metrics

Income Statement Analysis

Revenue and Gross Profit

Walmart’s total revenue increased by 4.8%, primarily driven by higher sales in U.S. and international segments, with net sales reaching $167.8 billion compared to $161.6 billion in the same period last year. Gross profit margins remained stable despite inflationary pressures, reflecting effective cost management.

Operating Income and Net Income

Operating income grew modestly by 8.7% to $7.9 billion, supported by operational efficiencies. However, net income saw a sharp decline of 42.3%, falling from $8.1 billion to $4.7 billion, impacted by increased interest expenses, other losses, and higher tax provisions.

EPS and YoY/QoQ Trends

Basic and diluted earnings per share decreased from $0.98 and $0.97 respectively in the prior year to $0.56 in this period, reflecting the net income decline. The YoY decrease in EPS is primarily due to lower net income despite stable share counts.

Balance Sheet Analysis

Assets and Liquidity

Walmart’s total assets increased slightly to $254.4 billion, with property and equipment rising to $113.8 billion, indicating ongoing investments in infrastructure. Cash and cash equivalents declined to $8.8 billion from $9.9 billion, but the company maintains ample liquidity supported by undrawn credit facilities totaling $15 billion.

Liabilities and Leverage

Total current liabilities are $95.3 billion, including $1.5 billion of short-term debt. Long-term debt stands at $35.4 billion, with a slight decrease after debt repayments. The company’s debt-to-equity ratio remains stable, reflecting prudent leverage management.

Cash Flow Analysis

Net cash provided by operating activities decreased to $16.4 billion from $18.2 billion, mainly due to higher working capital needs. Capital expenditures totaled $10.5 billion, focusing on store improvements and eCommerce infrastructure. The company paid dividends of $0.83 per share and repurchased shares worth $0.7 billion, aligning with its capital allocation strategy.

Ratios & DuPont Analysis

Walmart’s net profit margin declined from 4.9% to 2.8% YoY, mainly due to net income compression. Return on assets (ROA) dropped from 4.0% to 1.9%, while return on equity (ROE) decreased from 11.4% to 5.2%. Asset turnover remained steady at approximately 0.66, indicating consistent sales efficiency. The equity multiplier held at 2.8, pointing to stable leverage levels.

Risk Factors

The company faces regulatory risks from ongoing legal proceedings related to opioids, antitrust matters in Mexico, and foreign investment reviews in India. Market risks include competitive pressures from eCommerce and discount retailers. Operational challenges involve supply chain disruptions and inflation. Macro risks encompass economic downturns, currency fluctuations, and geopolitical tensions.

Notes & Additional Commentary

Walmart settled opioid claims with a $3.3 billion liability as of FY2024, with ongoing litigations and regulatory investigations. Unusual items include a $0.3 billion loss from the sale of JD.com shares, impacting non-operating income. The company also experienced a slight increase in inventory levels, consistent with strategic stock positioning amid supply chain uncertainties.

Investment Implications

Short-term opportunities include leveraging eCommerce growth and store modernization initiatives to enhance sales. Long-term risks involve legal liabilities and regulatory headwinds, which could impact profitability. The company’s stable liquidity and resilient market position suggest a cautiously optimistic outlook, but investors should monitor legal developments and macroeconomic factors closely.