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Ulta Beauty’s Earnings Beat Was Stronger Than the Stock’s Reaction

By Dan Schmidt. First Published: 9/2/2026.

The retail sector took center stage last week with a bevy of earnings reports, and reactions were mixed, even though most companies beat estimates and raised their outlooks. One prime example was Ulta Beauty Inc. (NASDAQ: ULTA).

This $23 billion cosmetics colossus reported earnings after the market closed on Aug. 27. Healthy results across the board weren't enough to wow the market, and the stock sold off following the release before paring those losses over the next two sessions.

Even analysts are conflicted about the state of the business, so a deeper dive into the numbers is warranted to determine where ULTA shares may be headed next.

Strong Beat and Guidance Raise Not Enough to Boost Shares

Double beats and guidance raises haven't always been enough to reward companies during the most recent quarter. Many top-line figures in the retail sector were juiced by tariff refunds, which are hopefully a one-time boost that won't recur in Q3. Ulta largely escaped the tariff net, meaning its Q2 fiscal year 2027 (FY2027) results weren't aided by a one-time cash influx. Earnings per share (EPS) totaled $6.55 for the period, ahead of the $6.22 estimate. Revenue also beat estimates, growing 8.9% year over year (YOY), and the company raised its fiscal 2027 sales growth outlook to 6.7%–7.2%. Comparable sales grew 3.8% YOY, while operating income increased more than 10% to $379.6 million.

So why the tepid response to a genuinely good quarter? The first factor that stands out is gross margin, which dipped from 39.2% to 39.1%. But that largely reflects last year's Space NK acquisition, a U.K. retailer with structurally lower economics. Operating margin actually improved by 10 basis points (bps) YOY, so the margin story starts on flimsy ground. The real concern is growth, which the company's own projections show will slow in the coming months.

Acquisitions and New Store Openings Shroud Growth Deceleration

Comparable sales grew faster than expected in Q2 FY2027, but 3.8% growth is a stark drop from 6.7% a year ago. The full-year guide of 3.2%–3.7% also implies a further slowdown in the second half of the year to approximately 2%–3%, equating to single-digit growth over a full fiscal year. Management is telling the market not to expect 2025 growth rates to persist into the second half of 2026 or 2027. As a result, the stock now trades at 18 times forward earnings. ULTA shares traded as high as 25 times earnings as recently as January, so this valuation stepdown feels more like a proper re-rating than an unfair punishment.

Additionally, it's worth reiterating what comparable sales strip out: new stores and acquisitions. The gap between the net sales outlook and comparable sales expectations is supplied by the Space NK acquisition and 31 new store openings, the latter of which will begin lapping in the next reporting period. Investors are not buying into the 8.9% headline revenue growth figure or the 13.3% EPS growth continuing into the future. The 2024 buyback authorization program expires at the end of this year, and any further repurchase agreements will need board approval. Ulta will have bought back $3 billion worth of shares by the culmination of this program, and a lack of future buybacks will likely pull 13.3% EPS growth back toward the 10.1% operating income growth figure. If comparable sales and buybacks continue to decline—and the company doesn't make another acquisition—the market could re-rate the stock even lower.

Analysts and the Chart Show Conflicting Momentum Far From Settled

Beauty is in the eye of the beholder, which is why multiple stock analysis firms can view the same report and reach different conclusions. The day after the report, Goldman Sachs and DA Davidson raised their price targets, while Bank of America and Barclays Group lowered theirs. Even experts disagree, and the stock's price action reflects the conflicting motivations of buyers and sellers.

ULTA shares are still down nearly 10% year to date (YTD), although the stock has recovered about half of its losses over the last three months. A Death Cross in early May put bulls on the defensive, but the Relative Strength Index (RSI) began trending higher from oversold levels shortly thereafter. The RSI re-entered bullish territory as the share price moved above the 50-day moving average, a resistance level it hadn't surpassed since early March.

But now comes the tough part. The next earnings catalyst is still three months away, and the stock is now stuck between resistance at the 200-day moving average and support at the 50-day moving average. A break above the 200-day moving average would be a strong signal that the uptrend is resuming. However, if the RSI dips back below 50, it could signal another long period of range-bound trading ahead of the fiscal Q3 results.