Walmart raised its full-year guidance, but the stock fell. What in the report upset investors?

Shares of the largest U.S. retailer Walmart collapsed by 5.5% in trading on August 21. Investors were disappointed by the company's profit for the last quarter, which for the first time in more than three years did not reach the forecasts of Wall Street. Even the fact that Walmart unexpectedly raised its annual forecast for profit and revenue, as well as exceeded analysts' expectations for sales in the last quarter could not ease the pressure on quotes. Investors expected too much from the company, but it remains in good shape, analysts say.

In trading on August 21, Walmart shares collapsed in the moment by 5.5% - to $96.9. This became their minimum for almost a month. However, compared to the beginning of 2025, the securities remain in the plus by almost 9%. For comparison: the main U.S. stock index S&P 500 for the same period added the same amount.

Investors were disappointed by earnings that fell short of Wall Street expectations. Walmart reported adjusted earnings per share of 68 cents for the second quarter of fiscal 2026, which ended Aug. 1, versus Wall Street's expected 74 cents, CNBC reports, citing LSEG data. This marked the company's first profit miss in more than three years, Reuters notes.

Despite profits below expectations, Walmart's revenue was resilient: it reached $177.4 billion against Wall Street's forecast of $176.16 billion, Reuters points out. An additional driver was the growth of online business - more customers are using home delivery, the publication adds. Walmart's global online sales grew 25% in the second quarter. In the US, the chain's comparable sales rose 4.6% (analysts expected 3.8%). The average check rose 3.1% vs. 0.6% a year earlier, but visit growth slowed to 1.5% vs. 3.6% a year ago.

For the current quarter, Walmart expects revenue growth of 3.75% to 4.75% versus analysts' forecast of 3.8%, Barron's notes. The company estimates adjusted earnings per share to be 58-60 cents, compared with the Wall Street consensus of 57 cents, the publication adds.

In addition, Walmart improved its full fiscal year revenue and profit outlook, helped by strong demand from shoppers across income levels who are choosing the world's largest retailer amid rising costs, Reuters reports. The company now expects full-year earnings to rise 3.75-4.75% versus a previous forecast of 3-4% growth. Expectations for adjusted earnings per share were raised to $2.52-2.62 instead of $2.5-2.6. Raising the forecast came as a surprise to some on Wall Street: prior to the report, some analysts did not believe the company would do so.

In a previous report, Walmart declined to give an earnings per share forecast, citing changing trade policies. However, now Walmart CEO Doug McMillon noted that the impact of the duties was gradual enough and did not change consumer habits. The company's management reminded that two-thirds of Walmart goods sold in the U.S. are made domestically, giving the company some protection from duties compared to competitors, Reuters adds.

"However, as we replenish inventory at new prices, we are recording higher costs every week," he told analysts, adding that costs will continue to rise in the second half of the year (quoted by Reuters).

Despite the stock's decline, Wall Street analysts believe last quarter was a "solid" quarter for the company and that its fundamentals have not deteriorated.

"We believe the market forecasts were overly optimistic and the miss [on earnings] is not indicative of a deterioration in business fundamentals," RBC Capital Markets analyst Stephen Shemesh said in a statement to Reuters. Walmart's stock price-to-earnings forecast ratio is more than 36 - nearly three times that of rival Target - indicating the market's inflated expectations of the company, Reuters noted.

"Overall consumer and macroeconomic trends remain favorable for Walmart, particularly in terms of shoppers' desire to get the most for their money," added Neil Saunders, managing director at consulting firm GlobalData. - The result is a strong value proposition that appeals to a broader range of customers, including higher-income consumers."

Earnings aside, Walmart had a "solid" quarter, Oppenheimer analyst Rupesh Parikh notes in Barron's outline.

"The company is clearly ramping up its core U.S. business in key categories including food and home essentials," added Zacks Investment Research strategist Brian Hayes, emphasizing that Walmart hasn't sagged on revenue since 2020.

"Walmart's report shows strong traffic and promotional initiatives supporting market share growth, with momentum in the U.S. notably ahead of peers," said Jefferies analyst Corey Tarlow. - Key margin drivers remain in place, suggesting earnings resilience and further upside potential."

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