Where Could Walmart’s Next Growth Come From?
Walmart (WMT) stock currently trades at 39.0 times earnings, well above the 21.5 multiple for the S&P 500. Investors typically assign that kind of premium to rapid growth, yet Walmart reported a modest 5.9% revenue increase in its latest quarter. This valuation suggests the market expects profit to outpace sales by a wide margin, and selling more groceries alone may not be enough to justify it. So what does Walmart have that can grow faster than its stores?
Walmart’s Advertising, Marketplace And Membership Are Outgrowing Its Stores
Three specific businesses are expanding far more rapidly than the core retail operation: advertising, the third-party marketplace, and paid membership. Global advertising grew 38% in fiscal Q2 2027, while U.S. marketplace and fulfillment services sales climbed 52%. Membership income also increased by nearly 17%. By comparison, Walmart’s total net sales grew just 5% in constant currency during the same quarter. Speaking on an August 20, 2026 call, executives noted that the quarter’s profit reflected strength in what they called high-margin commerce solutions.
The company is pushing these segments into new regions and pitching them to a wider pool of advertisers. During fiscal Q2, Walmart extended its U.S. marketplace platform to Mexico and Canada, and introduced its Walmart+ membership program to Canadian shoppers. It also made an acquisition that provides self-service tools for advertisers of all sizes. Separately, Business Insider reported on October 6, 2026, that Walmart struck a partnership with Warner Bros. designed to capture more TV ad spending.
Why Does This Matter So Much To Walmart’s Profit?
The shift toward these newer segments is critical because Walmart keeps very little of each sales dollar. The retailer recorded a 4.4% operating margin over the last twelve months, trailing the 18.5% margin for the broader S&P 500. However, when applied to $735.8 billion of revenue, even a small gain in margin translates into a large increase in actual profit.
The retailer has already begun to realize those gains. Walmart operated on a 3.5% operating margin three years ago. Over that three-year period, earnings per share grew 16.6% a year while revenue grew just 5.3% a year. Profit is outgrowing sales, and management expressed confidence on the August call that the trend will continue.
Despite the underlying operational progress, the stock has struggled recently. Walmart stock lost 14.6% over the past six months, trailing a broader market where the S&P 500 returned 15.7%. Shares now sit 19.2% below their 52-week high.
What Could Stop Walmart’s Profit From Outgrowing Its Sales?
Recent profit figures did get a temporary boost. While adjusted operating income grew 17.4% in constant currency during fiscal Q2 2027, about 7.5 percentage points of that increase was a net benefit from tariff refunds. Without that specific benefit, management noted that operating income growth landed at the top end of its 7% to 10% guidance range. Walmart has now received substantially all of the roughly $2.9 billion in refunds, and it is funneling a large portion of that cash into lowering consumer prices.
Executives cautioned that there is a lag before lower prices pay off, adding that it is too early to determine how many of these cuts will be permanent. When asked during the August 20 call about maintaining momentum after lowering prices today, management acknowledged that growing on top of the quarter’s 19% rise in adjusted earnings per share will be a challenge. Still, leadership maintained that it feels really good about the years to come.
The company’s own forecast for fiscal Q3 2027 sets a more modest expectation. Walmart expects operating income to grow 2% to 4% in constant currency, alongside sales growth of 3% to 3.75%. That projection puts profit growth roughly on par with sales growth, rather than exceeding it.
The advertising, marketplace, and membership segments are delivering results. What remains unsettled is whether profit can continue to outgrow sales while the company spends its refunds on lower prices. If operating income growth breaks above that 2% to 4% range in fiscal Q3 2027, it will be the first sign that profit can keep outgrowing sales while the refunds go into lower prices.
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