Key Highlights

  • Walmart shares slipped 0.14% to $103.67 in pre-market trading on August 21, extending Thursday's roughly 9% post-earnings decline to a nine-month low.
  • Adjusted EPS of $0.81 beat the $0.74 estimate by 9.46%, and Revenue grew 5.9% in constant currency, ahead of the 4-5% pace analysts expected.
  • US comparable sales growth of 2.6% missed the 3.7% consensus, and third-quarter EPS guidance of $0.62-$0.64 came in below the $0.69 expected.
  • Numerous banks, including Morgan Stanley, Goldman Sachs, Truist, TD Cowen, Citigroup, Baird, Evercore ISI, and Deutsche Bank, cut price targets following the report.

Walmart Shares Stay Under Pressure After Guidance Miss

Walmart (NASDAQ:WMT) shares slipped 0.14% to $103.67 in pre-market trading on August 21, remaining under pressure as they extend a roughly 9% post-earnings plunge to a nine-month low. The stock closed down 9.15% at $103.84 on August 20, a day after reporting fiscal second-quarter results that beat on the top and bottom lines but delivered third-quarter guidance that fell well short of expectations.

Headline Beat Undercut by Soft Guidance

Walmart's fiscal second-quarter enterprise net sales grew 5% in constant currency, at the top end of guidance, with global E-commerce up 23% and adjusted Operating Income up 17.4%, boosted by roughly 750 basis points from Tariff refund receipts. Adjusted EPS rose over 19% and beat the $0.74 estimate by 9.46%, coming in at $0.81 against a revenue estimate of $186.6 billion versus $187.9 billion actual, a 0.71% beat.

The report's weak spot was Walmart US, where comparable sales rose 2.6%, missing the 3.7% consensus and impacted by a roughly 125-basis-point headwind from maximum fair pricing regulation on drugs. Sam's Club comps rose 4.4%, and International sales rose 7.9%, led by China and India. The company's third-quarter guidance called for sales growth of 3-3.75% in constant currency and adjusted EPS of $0.62-$0.64, below the $0.69 analysts had expected, which drove the bulk of the post-earnings selloff.

Investment in Price Cuts Weighs on Near-Term Profit Outlook

Management said Walmart is investing tariff refunds, approximately $2.9 billion received, heavily into price, delivering over 11,000 rollbacks in the quarter, up from 7,200 in the prior quarter, and widening price gaps versus conventional grocers. The company encouraged investors to view combined second and third quarter operating income together, averaging roughly 10% growth per quarter, to assess underlying Business performance rather than either quarter in isolation.

Digital and platform businesses continued to outperform, with global Advertising growing 38%, marketplace growing 52%, and membership income growing roughly 17% globally. Walmart Plus US saw double-digit growth and achieved its best first half on record, and Walmart US e-commerce achieved double-digit incremental margins in the first half. The company also expanded its marketplace into Mexico and Canada, launched Walmart Plus in Canada, and acquired Vibe to strengthen its advertising capabilities. Full-year guidance was raised slightly, with net sales growth now expected at 4-5%, up from 3.5-4.5%, and operating income growth raised to 7-8.5% from 6-8%, alongside full-year adjusted EPS guidance raised to $2.80-$2.87 from $2.75-$2.85.

Analysts Cut Targets Despite Raised Full-Year Guidance

Despite the raised full-year outlook, numerous banks cut price targets following the report, mostly into the $110-$132 range, while largely maintaining bullish ratings. Morgan Stanley, Goldman Sachs, Truist, TD Cowen, Citigroup, Baird, Evercore ISI, and Deutsche Bank all lowered targets, and Gordon Haskett downgraded the stock to Accumulate. UBS's analyst and others have argued the selloff is overdone given resilient e-commerce and AI-driven engagement, noting Sparky users spend 40% more per order, though some flag Margin pressure from planned price investments.

What This Means for Investors

Walmart's setup illustrates a genuine Earnings beat overshadowed by forward guidance that disappoints, particularly when a company is deliberately sacrificing near-term margin to fund price competitiveness. The roughly $2.9 billion in tariff refunds funneled into rollbacks is a strategic choice rather than a sign of weakening demand, but it compresses the margin picture analysts had modeled. With price targets cut across a wide range of banks even as most maintain bullish ratings, the stock's next moves will likely hinge on whether price Investment and digital growth translate into US comp-sales reacceleration.