IPO-Bound PhonePe’s ESOP Compensation Results in a $700 Million Hit for Walmart

Walmart has reported a significant $700 Million non-cash share-based compensation expense due to a revaluation of ESOPs at its Indian fintech subsidiary, PhonePe, ahead of its anticipated IPO. This move has dented the retail giant’s international operating income for the September 2026 quarter. 

PhonePe ESOP Charge Impacts Walmart’s Earnings Ahead of IPO 

Walmart's international segment reported a 41.7% year-on-year decline in operating income to $700 Million for Q3 FY26, primarily due to the $700 million ESOP-related charge from PhonePe. On a constant-currency basis, the drop was sharper at 46.3%, bringing the income down to $600 million. The charge stemmed from an increase in valuation of PhonePe’s share-based compensation as per accounting standards in anticipation of its IPO. 

CFO John David Rainey clarified that the charge does not impact cash flows, as it is a one-time, non-cash accounting adjustment driven by increased equity values. 

Operating Expenses Surge as IPO Preparations Advance 

Operating expenses for Walmart International rose 17.6% to $6.7 billion during the quarter. The increase was partly attributed to the ESOP expense tied to PhonePe’s IPO. The filing also noted a confidential DRHP submission with SEBI, indicating that the IPO planning is already underway. The IPO is expected to comprise an offer for sale (OFS) worth ₹12,000 crore ($1.35 billion), with Walmart, Tiger Global, and Microsoft likely to divest part of their holdings. 

Read More: Flipkart Drops Commission Fees for Products Listed Under ₹1,000! 

Flipkart’s BBD Sale Also Influences International Results 

Flipkart, another major Walmart investment in India, also played a significant role in quarterly results. The timing of its Big Billion Days (BBD) event affected revenue recognition, pressuring international margins due to format shifts. However, Flipkart reported a 14.4% rise in operating revenue to ₹20,493 crore in FY25. 

Conclusion 

Walmart’s $700 million ESOP compensation charge from PhonePe has led to a sharp quarterly dip in international income ahead of the fintech's public debut. With IPO proceedings underway and valuations rising, these accounting adjustments are likely to continue affecting financial disclosures in the near term. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.