Walmart Inc. (Walmart (WMT)) shares slipped Thursday after the retail giant reported a solid first quarter but served up a cautious outlook that left investors wanting more.

Adjusted earnings came in at 66 cents per share, matching analyst estimates. Revenue rose 7.3% year over year (5.9% in constant currency) to $177.8 billion, ahead of the $175.0 billion consensus. Gross margin expanded by 6 basis points, helped by strength in the U.S. business, and adjusted operating income climbed 5.7% from a year earlier. Operating cash flow was $4.7 billion, though free cash flow turned negative at $1.9 billion.

The headline numbers were fine, but the market's focus quickly shifted to what's ahead. Walmart reaffirmed its full-year guidance, which trails Wall Street forecasts. For the second quarter, the company expects adjusted earnings of 72 to 74 cents per share, below the 75-cent consensus, and revenue of $182.8 billion to $184.6 billion, missing the $186.4 billion estimate. For fiscal 2027, Walmart projects adjusted earnings of $2.75 to $2.85 per share on revenue of $731.1 billion to $738.2 billion—both below analyst expectations of $2.94 per share and $742.6 billion in revenue.

During the conference call, Walmart's CFO added a sobering note: if the current elevated cost environment persists, the company expects somewhat higher retail price inflation in the second quarter and the second half of the year. In other words, shoppers might see higher prices on shelves soon.

On the bright side, Walmart's digital and advertising engines are humming. At Walmart U.S., revenue increased 4.5% to $117.2 billion, with e-commerce sales jumping 26%. Store-fulfilled delivery surged 45%, advertising revenue rose 36%, and marketplace sales grew roughly 50%—the segment's strongest performance in 10 quarters. International sales climbed 10.1% to $32.8 billion, while Sam's Club U.S. revenue rose 6.1% to $23.4 billion, fueled by grocery and general merchandise. Global advertising revenue jumped 37% year over year, and membership fee revenue increased 17.4%.

Walmart noted that U.S. revenue growth faced a roughly 100-basis-point headwind from pharmacy pricing changes. Comparable sales, excluding fuel, rose 4.1% at Walmart U.S. and 3.9% at Sam's Club.

WMT Price Action: Walmart shares were down 3.60% at $126.14 during premarket trading on Thursday.