Walmart Ad Revenue Grew 46% While the Store Business Grew 5%

Walmart’s global advertising business grew 46% last fiscal year. The company as a whole grew 5%. That gap, close to nine times over, is the reason I keep coming back to this stock even though the store business itself is about as thrilling as a parking lot at 7 a.m.

Walmart trades around $106.73 as I write this, 38.7 times trailing earnings, a couple of points above its own five-year average of 36.8. My thesis is simple: the advertising and membership lines are pulling the profit mix toward something closer to a software margin, and the market has only partly paid for that shift so far.

Walmart’s headline multiple barely moved for most of the last decade because the market treated it as a grocery-heavy discounter with thin margins and not much else. That view is getting harder to defend. Operating margin now sits at 4%. That still looks unremarkable next to a software company, but the direction matters more than the level and it has been up.

So where does the money actually come from?

The math Walmart won’t spell out

For fiscal 2026, Walmart’s global advertising business, branded Walmart Connect, brought in $6.4 billion, up 46% from the year before. Membership fee income worldwide climbed 15.5% to $4.4 billion, and the broader membership-and-other-income line, which folds in a few smaller sources alongside membership dues, totaled $6.75 billion. Total operating income for the year was $29.8 billion. Walmart’s 10-K and annual report filings on SEC EDGAR break out the revenue lines but not the profit by segment, so nobody outside the building knows the exact margin on either business.

I did a rough version myself to see if the one-third claim you sometimes see repeated holds up. Assume advertising earns something like a 55% to 60% margin because a sponsored listing costs Walmart almost nothing to display once the platform exists. That puts profit from Connect near $3.6 billion. Membership fee income is close to pure margin once someone has already signed up and Walmart isn’t paying to acquire them again, so most of that $4.4 billion likely ends up as profit rather than being spent again to earn it. Add the two and you’re near $8 billion against $29.8 billion of total operating income, which is closer to a quarter than a third. Walmart doesn’t disclose segment profit for either business, so this is my own estimate and it could be off by a couple of billion in either direction. Call it a quarter today, drifting toward a third if the growth rates I’m about to describe keep holding.

What Walmart Connect actually sells

Connect is sponsored search results on walmart.com and product placements inside the app. It’s also a growing set of screens inside physical stores, plus a demand-side platform that lets brands target Walmart’s shopper data across the open web, not just on Walmart’s own pages. None of that requires a truck, a warehouse slot, or a cashier. Retailers up and down the sector are building the same kind of business now. Target has Roundel, and Amazon’s own ad unit dwarfs both of them. The ones with the most foot traffic and the most purchase data have the structural edge, which is part of why I’ve ranked Walmart against its retail peers before. Walmart’s advantage here is scale: it has more weekly shoppers than any retailer in the country, and every one of them is a potential ad impression that costs almost nothing marginal to serve.

There’s also a grocery angle that’s specific to Walmart. Consumer packaged goods brands spend enormous marketing budgets trying to reach shoppers exactly at the point where they’re deciding between two boxes of cereal, and Walmart is where a huge share of that decision actually happens in person. Amazon’s ad business is bigger in absolute dollars, but a smaller share of Amazon’s volume is the kind of everyday grocery and household spending where brand-versus-brand decisions get made at the shelf or the search bar in the same visit. That’s a structural reason Connect can keep growing faster than the store base even after the early-adopter phase of retail media ends industry-wide.

Why a membership fee is nearly pure profit

Sam’s Club and Walmart+ memberships work on the same logic Costco has run for decades: collect the fee up front, then treat the store or the website as close to a loss leader in comparison. I’ve made this argument in detail about Costco’s own membership fee. Once a shopper renews, the incremental cost of serving them again is small. The fee itself carries almost no cost of goods attached to it. A 15.5% growth rate in that line, off a $4.4 billion base, is not a rounding error for a company Walmart’s size.

It’s also stickier than advertising. A brand can pull its ad budget in a bad quarter. A member who already paid the annual fee usually just keeps shopping.

The two lines feed each other, too. A Walmart+ member shops more often and buys more categories than a non-member, which means more search queries and more product pages for Connect to place an ad against. Membership isn’t just a fee business sitting next to the ad business; it’s the mechanism that keeps feeding the ad business fresh impressions. I don’t have a verified figure for how much more a member spends than a non-member, since Walmart hasn’t published one recently that I could confirm, so I’ll leave that as a directional point rather than a number.

A market that shrugged at the last report

Walmart’s last earnings, on 2026-08-20, moved the stock -9.2%, against a historical average swing of about 6.1%. That’s nearly one and a half times the usual move, and it moved down, not up. I won’t pretend to know from the DB facts alone whether the underlying numbers missed or beat estimates; what I can say is that whatever was in that report hit the stock roughly twice as hard as a typical Walmart quarter does, which tells you expectations were already stretched going in.

The stock now sits 20.8% below its 52-week high of $135 and only 9% above its 52-week low of $98. That’s a wide range for a company whose sales grow in the mid-single digits. Forward earnings put it at 35.9 times, just under the five-year average of 36.8, so on the headline multiple alone this isn’t a stock priced for perfection anymore.

Where the valuation sits against its own history

The price-to-sales ratio tells a different story than the P/E. Walmart trades at 1.2 times sales now versus a five-year average of 0.9, and at 8.7 times book versus 6.8 historically. Both are meaningfully above where this stock has traded for most of the last five years, even with the P/E sitting close to normal. I read that gap as the market already giving some credit to the richer profit mix, just not paying for the earnings growth that mix is supposed to eventually produce. The 31 analysts covering the stock have an average target of $129, about 21% above today’s price, and 90% rate it a buy. The dividend yield is a modest 0.90% on $0.96 a share; if you’re buying Walmart for income specifically, there are better options built for that job, and I’d say so plainly rather than dress this up as a yield play it isn’t.

Metric	Walmart now	Five-year average	Read
P/E (TTM)	38.7	36.8	roughly in line
P/S (TTM)	1.2	0.9	well above average
P/B (TTM)	8.7	6.8	well above average
Operating margin	4%	fiscal 2026 op income $29.8 billion	thin but rising
Dividend yield	0.90%	trailing $0.96/share	modest

The seller marketplace feeding the ad engine

There’s a second loop working underneath the ad numbers. Every third-party seller who lists on Walmart’s marketplace adds inventory, which adds shoppers browsing more categories, which adds more places to sell a sponsored placement. It’s the same flywheel Amazon built first: the marketplace grows the audience, and the ad business monetizes the audience without Walmart ever touching the product. I don’t have a verified figure for how much of Connect’s growth comes specifically from marketplace-driven impressions versus first-party retail, and Walmart hasn’t broken that out publicly, so I’ll leave it as a mechanism rather than a number.

What I can say is that a bigger marketplace changes the economics of the whole company in a way that doesn’t show up cleanly in operating margin. A third-party sale carries a take rate instead of the cost of goods Walmart would otherwise absorb selling the item itself, and it still generates a shopper visit that Connect can monetize on top. Every part of that loop scales without a matching increase in trucks, warehouse space, or store labor, which is exactly the kind of growth that eventually shows up as a re-rated multiple if it keeps compounding for long enough.

If Connect’s growth converges with the stores

Here’s the honest risk. This thesis breaks if Walmart Connect’s growth rate decelerates toward the 5% pace of the overall business, because the entire case for paying above the five-year sales and book multiples rests on the high-margin lines staying a fast-growing minority rather than settling into the same rhythm as the rest of the company. Retail media broadly has already cooled from the explosive growth rates the category posted a few years back, and a 46% growth rate has more room to fall than to rise from here. If that deceleration shows up two quarters running, I’d expect the stock’s premium to its own five-year multiples to compress rather than hold.

That’s the one number I’d want to see before adding into any more weakness: is Connect’s growth rate still several multiples of the store growth rate, or has the gap started closing.

There’s a second, quieter risk worth naming. Every retailer running an ad business eventually faces a tradeoff between ad load and shopper experience. Cram too many sponsored listings ahead of the actual best-matching product and search results get worse. Conversion suffers, and the shopper trusts the platform a little less each time. Walmart hasn’t shown signs of that yet in anything I’ve verified. But it’s the kind of risk that shows up gradually in customer satisfaction scores long before it shows up in a quarterly ad-revenue line, worth watching precisely because it wouldn’t be obvious from the numbers cited here.

The number I’m checking next quarter

My take today is that Walmart is a reasonable stock to own for the mix shift, not a cheap one. The valuation already reflects part of the story I’ve laid out here. I’d rather add on a quarter where advertising growth holds above 30% and the stock is still sitting near the bottom of its range than chase it back toward $135. If Connect’s growth prints below 30% two quarters in a row, I’d treat that as the signal the easy part of this story is over.

Analysis and opinion only, not investment advice. Figures come from Walmart’s fiscal 2026 annual report and SEC filings on SEC EDGAR and its investor site; valuation multiples are approximate and were checked on 2026-09-18 20:02:16.