Revenue and EPS Both Exceed Expectations, Yet Stock Falls from $114 to $104
For the second quarter of fiscal year 2027, Walmart achieved revenue of $187.9 billion, a 5.9% year-over-year increase, surpassing the market expectation of $186.8 billion. Adjusted earnings per share were $0.81, also significantly higher than the expected $0.74. Despite the better-than-expected performance, the stock price fell from around $114.30 pre-earnings to approximately $104.26, a drop of about 8.8%.
This abnormal market reaction indicates that investors are concerned not just about "whether there is growth," but whether the current valuation already fully reflects the long-term benefits from e-commerce, automation, and AI. Walmart's market capitalization of approximately $838.6 billion already makes it one of the world's largest retailers, and its high valuation demands the company deliver consistently faster profit growth, not merely steady revenue.
Raises Full-Year Guidance, E-commerce and High-Margin Services Begin Providing Leverage
The company raised its full-year net sales growth guidance from 3.5%-4.5% to 4%-5%, and its operating income growth expectation from 6%-8% to 7%-8.5%. The full-year EPS guidance was also raised from $2.75-$2.85 to $2.80-$2.87, with third-quarter EPS projected at $0.62-$0.64.
The operating profit margin for the second quarter was 5%, unchanged from the same period last year. Against the historical backdrop of lower margins in e-commerce, Walmart's ability to maintain its overall margin suggests that higher-margin advertising, membership, service businesses, and improved supply chain efficiency are offsetting some of the online fulfillment costs. However, comparable store sales growth decelerated from 4.8% a year ago to 3.1%, indicating consumer spending growth remains modest.
AI, Automation, and Store Network Form the Bull Thesis; $131.88 is the Consensus Target
Walmart continues to advance automation in distribution centers, AI-assisted inventory forecasting, mobile payments, online grocery, and curbside pickup. Its vast network of physical Supercenter stores also serves as local e-commerce fulfillment nodes, capable of shortening delivery times and reducing "last-mile" costs, an advantage difficult for pure online competitors to replicate.
Several institutions have recently initiated or increased their positions in Walmart. The market consensus rating is a "Moderate Buy," with an average price target of $131.88. Compared to the current stock price around $104, this implies an upside potential of over 25%. However, whether this target can be realized depends critically on whether the operating margin can rise as e-commerce scales. If only sales grow in the future while margins remain stuck at 5%, the room for valuation recovery will be limited. If automation, advertising, and membership services drive profit growth to consistently outpace revenue growth, the post-earnings sell-off may ultimately prove to be an overreaction.
