When Walmart Inc. (WMT) reports third-quarter earnings Thursday before the bell, it's not just another retail earnings report. It's potentially a window into how American consumers are actually spending, what tariffs are really doing to business, and whether the retail giant can justify a valuation that hasn't been this stretched in two decades.

The stakes are interesting here. Walmart has been on a tear, consistently beating expectations and expanding across income levels and product categories. But now the stock trades at around 35 times earnings, which is basically as expensive as it's been in 20 years. So the question isn't just "did Walmart have a good quarter?" It's "did Walmart have a good enough quarter to justify this price?"

What Wall Street Expects

Analysts are looking for third-quarter revenue of $177.41 billion, up from $169.59 billion in the same period last year. On the earnings side, expectations sit at 60 cents per share, compared to 58 cents a year ago.

Walmart's track record here is solid. The company has beaten revenue estimates in nine of the past 10 quarters, though it did miss on the top line in the most recent second quarter. On earnings per share, it's beaten in eight of the last 10 quarters. Before that recent Q2 report, the company had strung together seven consecutive quarters of double beats on both revenue and earnings.

The company's own guidance calls for revenue between $175.95 billion and $177.64 billion, with earnings per share in the 58 to 60 cents range. So analysts are basically at the high end of management's expectations.

The Bull Versus Bear Debate

Bank of America analyst Robert F. Ohmes laid out both sides of the argument in a recent note, maintaining his Buy rating with a $125 price target.

The bull case is straightforward: Walmart keeps gaining market share across different product categories and income levels. The company is building out its AI commerce platform. Margins are expanding thanks to higher-margin ancillary businesses. And management has shown it can navigate tariff challenges effectively.

The bear case? Those gains are getting harder to replicate because comparisons are getting tougher. AI commerce adoption might be slower than hoped. Grocery faces headwinds. And then there's that valuation issue—35 times earnings is expensive for a retailer, even one as dominant as Walmart.

"We reaffirm Buy on WMT as share gains continue across product categories and incomes while long-term profitability also continues to improve. We see WMT well-positioned to win in ecom as its value and convenience resonate," Ohmes said. But he also acknowledged that the high valuation and tough comparisons could "limit potential for upward stock price momentum" compared to retail peers.

Other analysts remain bullish too. Telsey maintains an Outperform rating with a $118 target. Wells Fargo has an Overweight rating and recently raised its target from $108 to $110. JPMorgan, also Overweight, bumped its target from $127 to $128. RBC Capital maintains Outperform and lifted its target from $106 to $116.

What to Watch Thursday Morning

The timing of this report is notable. Target Corp. (TGT) reports Wednesday, which means investors will get a preview of retail trends before Walmart's numbers drop. If Target shows weakness, that could actually be good news for Walmart—suggesting the retail giant is taking market share from its rival.

And the data suggests exactly that. According to Placer.ai, Walmart posted 0.4% year-over-year traffic growth in the third quarter, while Target saw traffic decline 2.7%. Walmart outperformed Target in July, August, and September. Even more promising, October showed a strong 3.5% traffic gain for Walmart, which could translate into optimistic fourth-quarter guidance.

Speaking of guidance, that's going to be crucial. After the second quarter, Walmart raised its full-year outlook for both earnings per share and revenue, citing strong comparable sales growth and increases in average ticket size. Any further raise would signal continued strength. Any pullback might spook investors already nervous about the valuation.

Then there's the tariff question. It's not dominating earnings calls the way it was earlier in the year, but Walmart matters here. CEO Douglas McMillon previously warned that tariff-related costs could rise further in the third and fourth quarters. Investors will want to hear whether that played out as expected and what the company sees ahead.

Oh, and one more thing: this earnings report comes after Walmart announced McMillon will step down as CEO in January 2026. John R. Furner, who currently leads Walmart U.S. and has been with the company since 1993, will take over. Leadership transitions always add an element of uncertainty, though Furner's long tenure and operational track record should reassure investors.

Walmart stock closed down 1.52% at $101.39 on Tuesday, within its 52-week range of $79.81 to $109.58. Shares are up 12.7% year-to-date in 2025.