Walmart's good results did not satisfy the market

Walmart (WMT.US) released its results for the second quarter of 2025. Investors were left somewhat disappointed. The growth rate is underwhelming, valuation metrics are very high, and external risks to the company are mounting. The stock has dropped over 4%.

• EPS: 0.68 vs. expected 0.73

• Revenue: $177.4 billion vs. expected $175.9 billion

• Sales growth: 4.8% vs. expected 4.21%

• Gross margin: increased to 22.8% vs. expected 24.8%

• Raised full-year sales growth guidance: from 3–4% to 3.75–4.75%

• Operating costs: up 8% year-over-year

• E-commerce sales: up 26%

The company’s Price-to-Earnings (P/E) ratio is currently near all-time highs at around 38, which is significantly above the industry standard.

The Federal Reserve’s policy of maintaining interest rates and additional tariffs pushed by the new presidential administration pose serious threats to the company’s condition in the coming quarters.

Treasury Secretary Scott Bessent stated that “Walmart will be able to absorb some of the costs related to tariffs.” Naturally, this may raise concerns among stakeholders who are more interested in the company’s profits than in supporting the U.S. president’s policies. CEO Doug McMillon announced that despite Walmart’s efforts to avoid price increases, they are inevitable.

Chart outlook

Walmart’s shares are falling today after the quarterly results and are approaching the 100-day exponential moving average (gold line). Breaking this level could push the price down to around $96–97 per share. Despite solid sales, higher operating costs have reduced the company’s profitability, which did not sit well with investors, leading to selling pressure.
Source: xStation5

Walmart’s scale works in its favor. It is the largest distributor and employer in the U.S. This scale allows Walmart to absorb costs and negotiate deals impossible for competitors.

The company’s management communicates confidence to investors by raising guidance. However, investors remain cautious, penalizing the stock with a significant decline. The future direction for Walmart will be shaped by the upcoming meeting in Jackson Hole. The Fed’s interest rate policy will likely determine consumer strength in the coming quarters, directly impacting Walmart’s earnings.