What Can Make Walmart Stock A Buy

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Beyond its stores, Walmart (WMT) earns from advertising, memberships, and its online marketplace, and stock buyers may be paying for those businesses. You probably think of Walmart as a discount store that keeps a few cents of each sales dollar as profit, and it still does. Yet the stock trades at 43.0 times earnings, against 22.6 for the S&P 500, and that is the contradiction. So how much of Walmart's profit growth do those three businesses drive?

Ads, Memberships, Marketplace: Almost Half Of Walmart's Profit Growth

During the August 20, 2026 call for fiscal Q2 2027, management said almost half of Walmart's profit growth came from areas like membership, advertising and marketplace. The company expects this to continue. Those businesses are growing far faster than Walmart as a whole. Global advertising, driven partly by Walmart Connect in the U.S., grew 38% in fiscal Q2 2027, while enterprise net sales grew 5% in constant currency. Membership income rose nearly 17%, and U.S. net sales from marketplace and fulfillment services climbed 52%.

Walmart's online sales are also getting more profitable, a shift management credits in part to strong ad and membership revenue. Its U.S. e-commerce business earned double-digit incremental margins in the first half of fiscal 2027, meaning each extra dollar of online sales added at least ten cents of profit.

What Should Worry A Walmart Buyer Now?

The concern lies with Walmart's stores. In-store comparable sales fell by a low single-digit percentage in fiscal Q2 2027, continuing a trend that began late in the prior fiscal year, management said. Management tied the drop mainly to lower health and wellness sales, most of which happen in store. Management also expects more than $2 billion of extra fuel costs in fiscal 2027, and sees more pressure on consumers than at the start of the year.

Yet management raised its full-year earnings guide to $2.80 to $2.87 a share, from $2.75 to $2.85. During the call, management pointed to growth in membership, advertising and fulfillment services as elements making the business more durable, adding that it expects profit to keep growing much faster than sales in 2027 and later years. The company's full-year guide already has operating income growing 7% to 8.5%, against sales growth of 4% to 5%.

Part of the fiscal 2027 lift came from outside the business, however. Walmart has received substantially all of about $2.9 billion in tariff refunds, which management said added about 750 basis points to adjusted operating income growth of over 17% in fiscal Q2 2027. Without those refunds, growth landed at the top end of management's 7% to 10% guide for the quarter.

What Could Go Wrong For Walmart Holders?

The main risk is that Walmart's price cuts consume the gains from its faster businesses. Walmart reported running more than 11,000 price cuts, called rollbacks, during fiscal Q2 2027, up from 7,200 at the end of the first quarter. Management expects fiscal Q3 2027 operating income to grow 2% to 4% after reinvesting tariff refunds, against sales growth of 3% to 3.75%. That guide has profit growing roughly in step with sales, not faster, though management said Q2 and Q3 reported operating income together would grow about 10% a quarter on average. Management noted it is too early to say how many rollbacks will be permanent, and that lower prices pay back with a lag.

Holders have also seen a deep fall during a market shock. Walmart stock fell as much as 21.0% in the 2025 US tariff shock, dropping from February 19 to June 13, 2025, against 19.0% for the S&P 500 ETF.

Walmart's advertising, membership and marketplace businesses are growing far faster than its sales, even as in-store sales slip. Advertising growth is the number to watch when Walmart reports its fiscal Q3 2027 results, expected in November 2026.

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