WS Investor
27 Aug 2026, 14:28
Best Buy Falls 5.3% Despite Strong Q2 Beat and Raised FY27 Guidance
Best Buy (NYSE: BBY) shares fell 5.3% on Thursday despite reporting stronger-than-expected second-quarter results and sharply raising its full-year outlook, as investors appeared to focus on softer margin expectations for the third quarter and questions over the sustainability of recent profitability gains.
Best Buy reported Q2 FY2027 revenue of $9.78 billion, up from $9.44 billion a year earlier. Comparable sales increased 4.1%, accelerating from 1.6% growth last year, while domestic comparable sales rose 4.5%.
Adjusted diluted EPS increased 15% to $1.47 from $1.28, while adjusted operating margin improved to 4.3% from 3.9%. GAAP EPS jumped 70% to $1.48, although the comparison benefited significantly from restructuring charges recorded in the prior-year period.
Strong Demand Across Computing and Home Theater
The quarter showed meaningful improvement in Best Buy's core electronics business. Domestic revenue increased 4.3% to $9.07 billion, with computing, home theater and emerging categories such as AI glasses among the largest contributors to comparable-sales growth. Traditional gaming remained a weak spot.
Online sales were also healthy, rising 5.1% to $3.0 billion and representing 33.1% of domestic revenue.
Domestic gross margin improved 60 basis points to 24.0%, helped by growth in Best Buy Ads and Marketplace as well as approximately $34 million of tariff refunds. However, underlying product margins declined, providing one possible source of investor caution.
Best Buy Raises FY27 Guidance Significantly
Management raised guidance across most major metrics following the strong first half. FY2027 revenue is now expected at $42.3 billion-$42.8 billion, up substantially from the previous $41.2 billion-$42.1 billion range.
Comparable-sales guidance was raised to growth of 1.9%-3.0% from the previous range of -1.0% to +1.0%, while adjusted EPS guidance increased to $6.70-$6.90 from $6.30-$6.60.
The adjusted operating margin outlook was also lifted slightly to 4.4%-4.5%.
Why Is BBY Falling 5.3%?
The selloff appears to reflect expectations rather than weakness in the headline Q2 numbers.
For Q3, Best Buy expects comparable sales growth of 1%-3%, a clear sequential slowdown from Q2's 4.1%. More importantly, adjusted operating margin is expected at 4.1%-4.2%, below the 4.3% achieved in Q2.
Investors may also be looking through some of the temporary benefits supporting Q2 profitability. Domestic gross margin received approximately $34 million from tariff refunds, while underlying product margin rates were lower. At the same time, adjusted SG&A increased to 19.6% of domestic revenue from 19.3%.
The 5.3% decline therefore looks somewhat counterintuitive given the strong quarter and substantial guidance increase. The market reaction suggests investors were already pricing in a strong result and are now focusing on slower Q3 comparable-sales growth, underlying product-margin pressure and whether Best Buy can sustain its recent earnings momentum through the second half.
Best Buy (NYSE: BBY) shares fell 5.3% on Thursday despite reporting stronger-than-expected second-quarter results and sharply raising its full-year outlook, as investors appeared to focus on softer margin expectations for the third quarter and questions over the sustainability of recent profitability gains.
Best Buy reported Q2 FY2027 revenue of $9.78 billion, up from $9.44 billion a year earlier. Comparable sales increased 4.1%, accelerating from 1.6% growth last year, while domestic comparable sales rose 4.5%.
Adjusted diluted EPS increased 15% to $1.47 from $1.28, while adjusted operating margin improved to 4.3% from 3.9%. GAAP EPS jumped 70% to $1.48, although the comparison benefited significantly from restructuring charges recorded in the prior-year period.
Strong Demand Across Computing and Home Theater
The quarter showed meaningful improvement in Best Buy's core electronics business. Domestic revenue increased 4.3% to $9.07 billion, with computing, home theater and emerging categories such as AI glasses among the largest contributors to comparable-sales growth. Traditional gaming remained a weak spot.
Online sales were also healthy, rising 5.1% to $3.0 billion and representing 33.1% of domestic revenue.
Domestic gross margin improved 60 basis points to 24.0%, helped by growth in Best Buy Ads and Marketplace as well as approximately $34 million of tariff refunds. However, underlying product margins declined, providing one possible source of investor caution.
Best Buy Raises FY27 Guidance Significantly
Management raised guidance across most major metrics following the strong first half. FY2027 revenue is now expected at $42.3 billion-$42.8 billion, up substantially from the previous $41.2 billion-$42.1 billion range.
Comparable-sales guidance was raised to growth of 1.9%-3.0% from the previous range of -1.0% to +1.0%, while adjusted EPS guidance increased to $6.70-$6.90 from $6.30-$6.60.
The adjusted operating margin outlook was also lifted slightly to 4.4%-4.5%.
Why Is BBY Falling 5.3%?
The selloff appears to reflect expectations rather than weakness in the headline Q2 numbers.
For Q3, Best Buy expects comparable sales growth of 1%-3%, a clear sequential slowdown from Q2's 4.1%. More importantly, adjusted operating margin is expected at 4.1%-4.2%, below the 4.3% achieved in Q2.
Investors may also be looking through some of the temporary benefits supporting Q2 profitability. Domestic gross margin received approximately $34 million from tariff refunds, while underlying product margin rates were lower. At the same time, adjusted SG&A increased to 19.6% of domestic revenue from 19.3%.
The 5.3% decline therefore looks somewhat counterintuitive given the strong quarter and substantial guidance increase. The market reaction suggests investors were already pricing in a strong result and are now focusing on slower Q3 comparable-sales growth, underlying product-margin pressure and whether Best Buy can sustain its recent earnings momentum through the second half.
