Walmart's Ad Business Jumps 37%: Margin Upside Ahead?

Walmart Inc. WMT is building a larger advertising business within its retail model, and the fourth-quarter fiscal 2026 results showed that this business is becoming more meaningful to the company’s profit mix. Higher-margin businesses, such as advertising and membership fees, are helping improve WMT’s e-commerce economics through the business mix.

In the fourth quarter, Walmart’s global advertising business grew 37%, including VIZIO. In the United States, Walmart Connect sales increased 41%. These numbers stood out in a quarter when total revenues rose 5.6% and operating income increased 10.8%, allowing profit growth to outpace sales growth. For the full year, Walmart’s global advertising business grew 46% to nearly $6.4 billion, including VIZIO.

The company made clear that advertising is no longer a small side business within the broader model. Advertising income and membership fees together accounted for nearly one-third of operating income in the fourth quarter. That figure shows how these higher-margin revenue streams are becoming a more important part of Walmart’s overall earnings mix as digital activity expands.

That ad growth is also linked with Walmart’s broader online momentum. Global e-commerce sales increased 24% in the quarter, supported by marketplace growth and strength in store-fulfilled pickup and delivery. As Walmart’s digital ecosystem becomes larger, it is creating more room for advertising activity across its platform.

Taken together, the fourth-quarter fiscal 2026 results show that advertising is becoming a more important part of Walmart’s profit mix, supported by continued digital growth and a stronger mix of higher-margin revenue streams. The fourth-quarter numbers also show why advertising is increasingly relevant to the company’s margin picture.

What the Latest Metrics Say About Walmart

Walmart, which competes with Costco Wholesale Corporation COST and Target Corporation TGT, has seen its shares rally 36% in the past year compared with the industry’s growth of 34.6%. Shares of Costco and Target have gained 4.5% and 5%, respectively, in the aforementioned period.

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From a valuation standpoint, Walmart's forward 12-month price-to-earnings ratio stands at 40.49, higher than the industry’s 37.04. The company is trading at a premium to Target (with a forward 12-month P/E ratio of 13.98) while trading at a discount to Costco (45.39).

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The Zacks Consensus Estimate for Walmart’s current fiscal-year sales and earnings per share implies year-over-year growth of about 5% and 9.5%, 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.

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This article originally published on Zacks Investment Research (zacks.com).

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