Walmart (NASDAQ: WMT) issued third-quarter guidance that falls short of analyst expectations for both earnings and revenue, triggering a sharp market sell-off. The retailer projects adjusted earnings per share (EPS) in the range of $0.62 to $0.64, missing the $0.68 consensus estimate.

For the same period, Walmart anticipates total sales between $183.134 billion and $184.468 billion. This range is below the analyst estimate of $188.339 billion.

Fuel Costs and Consumer Trade-offs

Chief Financial Officer John David Rainey warned that gasoline prices above $4 are changing how consumers spend. He noted a psychological impact when fuel costs rise, forcing shoppers to make trade-offs. Walmart expects fuel-related costs to run about $2 billion above its original forecast.

The pressure on shoppers is visible in transaction data. Growth in customer transactions slowed to 1.5% from 3% in the previous quarter. Average spending per transaction rose just 1.1%, down from 3.1% a year earlier.

Tariff Refunds and Price Strategy

CFO John David Rainey stated that Walmart plans to use expected U.S. tariff refund payments to lower consumer prices starting in the third quarter. The retailer is eligible for roughly $2.9 billion in tariff refunds and has received all but about $100 million of it. Rainey confirmed that this money will fund price cuts in the third quarter.

During a conference call, a Walmart executive clarified that the annual forecast assumes slightly better second-half sales versus the prior target. This improvement is driven by price investments. The executive further stated that the forecast assumes fuel and tariffs stay at current rates. Additionally, the company noted that the price rollback count started in late July and expressed satisfaction with the start of the back-to-school season.

Sales Growth and Headwinds

Despite the tariff refunds, Walmart’s U.S. sales growth has hit its weakest pace since 2020. The retailer reported second-quarter sales of $187.9 billion, surpassing estimates, but issued third-quarter guidance below expectations. The company cited a 125-basis-point headwind from pharmacy deflation due to new fair price regulations.

U.S. comparable sales increased 2.6%, driven by higher transactions. This was the retailer’s smallest quarterly increase since 2020.

Market Reaction and Analyst View

Walmart’s economic environment is also influenced by broader market tensions. U.S. stocks fell on Thursday as geopolitical tensions escalated following President Donald Trump’s announcement of “Operation Economic Fury” against Iran. This move has heightened Middle East tensions and impacted market indices, including the Dow Jones and S&P 500.

Brent crude climbed toward $94 a barrel as investors weighed the risk that the conflict will keep disrupting Middle Eastern energy supplies. Polymarket traders put the chances of Strait of Hormuz traffic returning to normal by Oct. 31 at around 15%. The odds of a U.S.-Iran nuclear deal by year-end stand at 11%.

WMT experienced one of its largest one-day moves in years, dropping 9.32% on Thursday. The stock’s market cap has decreased by about $85.01 billion over approximately three sessions. Currently, WMT trades 9.03% below its 50-day moving average of $113.93 and 12.54% below its 200-day moving average of $118.51, indicating a bearish trend.

Shares fell 6.79% year-to-date, rose 1.24% over the last year, and fell 15.57% over the last six months. It closed 9.15% lower at $103.84 per share on Thursday, and was 0.39% higher in premarket trading on Friday.

Despite the soft outlook, UBS analyst Michael Lasser remains optimistic. Speaking on CNBC’s Squawk Box, Lasser outlined three factors driving Walmart’s premium valuation: a stable core business commanding one out of every five grocery dollars in the United States, automation and technology improving profitability, and high-margin new revenue streams.

Lasser highlighted that Walmart’s e-commerce grew 24% in the U.S. and its advertising business grew 38% in the U.S. He stated these are comfortable growth levels that support the bull case on the stock.

What the Numbers Show

The guidance indicates a divergence between market expectations and Walmart’s internal outlook for the quarter. Both key metrics—adjusted EPS and total sales—are projected to land below the consensus figures provided by analysts. However, the executive comment suggests that strategic price investments are expected to support stronger performance in the second half of the year compared to earlier targets. The reliance on current fuel and tariff levels highlights sensitivity to external cost pressures. The decision to deploy $2.9 billion in tariff refunds toward price cuts underscores a strategy to offset specific sectoral headwinds, such as the 125-basis-point drag from pharmacy deflation, while attempting to maintain volume growth despite slowing sales momentum. The decline in transaction growth from 3% to 1.5% alongside a drop in average spend growth from 3.1% to 1.1% signals that higher fuel costs are eroding consumer purchasing power faster than price cuts can compensate. Meanwhile, the robust double-digit growth in e-commerce (24%) and advertising (38%) provides a counter-narrative to the slowing core retail metrics, suggesting a structural shift in revenue composition even as near-term consumer spending tightens.

Walmart Inc. (NASDAQ: WMT) is scheduled to release its fiscal 2027 second-quarter earnings results on Aug. 20 before the market opens. Bank of America Securities analyst Christopher Nardone expects the retailer to return to a beat-and-raise cycle, maintaining a Buy rating and a $144 price forecast. The firm anticipates that accelerating digital sales and improving profit margins will support results even as US comparable-sales growth slows.

Earnings Forecast and Sales Outlook

Bank of America forecasts second-quarter adjusted earnings of $0.74 per share. The firm lowered its Walmart US comparable-sales forecast, excluding fuel, to 3.5% from 4%. Nardone estimates that every 50-basis-point shortfall in second-quarter US comparable sales would reduce Walmart’s full-year net sales growth by about 10 basis points.

Walmart previously guided for second-quarter constant-currency net sales growth of 4% to 5%, down roughly 100 basis points from the first quarter’s 5.7% growth. Bank of America expects 4.6% growth. The slowdown reflects the end of tax-refund benefits, less help from general merchandise pricing, and some moderation among lower-income consumers.

What the Numbers Show

High-growth, high-margin businesses such as advertising are positioned to fund further price investments. Global advertising revenue grew 36% in the first quarter, while Marketplace sales jumped nearly 50%. This divergence suggests that even if core US comparable-sales growth remains in the 3% to 4% range, e-commerce and alternative revenue streams could improve overall profitability.

Strategic Investments and Margins

The analyst expects Walmart’s July 6 price investments to help the retailer gain market share in the second half of the year. A larger Marketplace assortment and faster delivery should also support those gains. Bank of America said the investments were already included in Walmart’s guidance and should not create additional margin risk.

Tariff-related refunds could create a margin headwind next year as Walmart laps those benefits. However, strong performance in digital segments may offset this pressure. Membership fee revenue also remained strong in the prior period.

Valuation and Analyst Consensus

Bank of America’s $144 price forecast is based on 45 times its fiscal 2028 adjusted earnings estimate. The premium reflects expectations for positive US comparable sales, continued market-share gains, and operating income growth at nearly twice the pace of sales growth.

Walmart carries a consensus Buy rating with an average price forecast of $141.11. Recent analyst actions include:

• RBC Capital Markets: Outperform, $137 target (Aug. 12)
• Oppenheimer: Upgraded to Perform (Aug. 4)
• Bernstein: Outperform, lowered target to $142 from $145 (July 31)
• BTIG: Buy, $145 target (June 8)
• Tigress Financial: Buy, raised target to $155 from $150 (May 29)
• UBS: Buy, lowered target to $141 from $147 (May 22)
• BNP Paribas: Outperform, lowered target to $146 from $147 (May 22)

Historical Performance

Wall Street expects Walmart to report second-quarter adjusted earnings of $0.74 per share, up from $0.68 a year earlier. Revenue is expected to rise to $186.77 billion from $177.40 billion.

Walmart has beaten earnings estimates in two of the past four quarters, with an average earnings surprise of negative 0.9%. In the most recent quarter (reported May 21), Walmart posted earnings of $0.66 per share, matching estimates. Revenue of $177.75 billion topped the $174.75 billion estimate.

On Feb. 19, Walmart reported earnings of $0.74 per share, beating the $0.73 estimate. Revenue of $190.70 billion also topped expectations of $189.18 billion. However, Walmart missed earnings expectations on Aug. 21, 2025, with earnings of $0.68 per share falling short of the $0.74 estimate, even as revenue of $177.40 billion beat the $174.80 billion forecast.

Walmart shares were up 1.93% at $115.45 at the time of publication on Wednesday.