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Walmart's Ad Business Expands: Can High-Margin Growth Lift Profits?
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Key Takeaways
Walmart's global advertising business grew 38% in fiscal Q2 2027 as e-commerce sales rose 23%.
Walmart's gross profit rate rose 96 basis points to 25.4%, helped by a favorable ad-driven business mix.
Vibe expands Walmart's ad reach but is expected to create a 20-basis-point operating income headwind.
Walmart Inc. (WMT - Free Report) is increasingly building advertising into the economics of its digital business, adding a faster-growing revenue stream alongside e-commerce operations. The business is gaining scale across U.S. and international platforms while contributing to a more favorable mix of higher-margin commerce solutions.
In second-quarter fiscal 2027, Walmart’s global advertising business grew 38% year over year. Walmart U.S. advertising, including VIZIO, also increased 38%, led by a 43% rise in Walmart Connect. International advertising advanced 20%, driven by Flipkart Ads. The gains came as global e-commerce sales increased 23%, including 24% growth at Walmart U.S. and 19% internationally.
The profit contribution is becoming more relevant as digital businesses scale. Walmart’s gross profit rate expanded 96 basis points to 25.4%, with the improvement also reflecting a favorable business mix led by global advertising. Adjusted operating income increased 17.4% in constant currency, supported in part by improved incremental margins in digital and strength in high-margin commerce solutions, although tariff refunds were a significant benefit.
Walmart is widening its advertising opportunity through the acquisition of Vibe. The deal expands access to small and medium-sized advertisers through self-service tools and adds measurement capabilities tied to shopping behavior. However, acquisition and integration costs related to Vibe are expected to create an approximately 20-basis-point headwind to fiscal 2027 operating income growth.
Advertising’s growth is helping improve Walmart’s business mix. Its expansion adds a higher-margin commerce solution to the profit mix, although Vibe-related costs will weigh on fiscal 2027 operating income growth.
What Do the Latest Metrics Say About Walmart?
Walmart, which competes with Costco Wholesale Corporation (COST - Free Report) and Target Corporation (TGT - Free Report) , has seen its shares gain 4.8% over the past year compared with the industry’s 3.5% growth. Shares of Costco have dipped 5.8%, while Target has surged 79.7% in the aforementioned period.
Image Source: Zacks Investment Research
From a valuation standpoint, Walmart's forward 12-month price-to-earnings ratio stands at 34.75, higher than the industry’s 31.79. The company is trading at a premium to Target (with a forward 12-month P/E ratio of 16.8) while trading at a discount to Costco (44.77).
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Walmart’s current fiscal-year sales and earnings per share implies year-over-year growth of 5.3% and 8.7%, respectively.
View the Zacks #1 Rank List
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Walmart's Ad Business Expands: Can High-Margin Growth Lift Profits?
Key Takeaways
Walmart Inc. (WMT - Free Report) is increasingly building advertising into the economics of its digital business, adding a faster-growing revenue stream alongside e-commerce operations. The business is gaining scale across U.S. and international platforms while contributing to a more favorable mix of higher-margin commerce solutions.
In second-quarter fiscal 2027, Walmart’s global advertising business grew 38% year over year. Walmart U.S. advertising, including VIZIO, also increased 38%, led by a 43% rise in Walmart Connect. International advertising advanced 20%, driven by Flipkart Ads. The gains came as global e-commerce sales increased 23%, including 24% growth at Walmart U.S. and 19% internationally.
The profit contribution is becoming more relevant as digital businesses scale. Walmart’s gross profit rate expanded 96 basis points to 25.4%, with the improvement also reflecting a favorable business mix led by global advertising. Adjusted operating income increased 17.4% in constant currency, supported in part by improved incremental margins in digital and strength in high-margin commerce solutions, although tariff refunds were a significant benefit.
Walmart is widening its advertising opportunity through the acquisition of Vibe. The deal expands access to small and medium-sized advertisers through self-service tools and adds measurement capabilities tied to shopping behavior. However, acquisition and integration costs related to Vibe are expected to create an approximately 20-basis-point headwind to fiscal 2027 operating income growth.
Advertising’s growth is helping improve Walmart’s business mix. Its expansion adds a higher-margin commerce solution to the profit mix, although Vibe-related costs will weigh on fiscal 2027 operating income growth.
What Do the Latest Metrics Say About Walmart?
Walmart, which competes with Costco Wholesale Corporation (COST - Free Report) and Target Corporation (TGT - Free Report) , has seen its shares gain 4.8% over the past year compared with the industry’s 3.5% growth. Shares of Costco have dipped 5.8%, while Target has surged 79.7% in the aforementioned period.
Image Source: Zacks Investment Research
From a valuation standpoint, Walmart's forward 12-month price-to-earnings ratio stands at 34.75, higher than the industry’s 31.79. The company is trading at a premium to Target (with a forward 12-month P/E ratio of 16.8) while trading at a discount to Costco (44.77).
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Walmart’s current fiscal-year sales and earnings per share implies year-over-year growth of 5.3% and 8.7%, respectively.
Walmart currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.