The broader retail industry is moving beyond physical stores, with channels including e-Commerce, digital advertising, memberships, and convenience-led fulfillment tagged as critical growth drivers. Furthermore, scale and pricing are important, and consumers continue to emphasize value. Such trends are supporting Walmart Inc. (NASDAQ:WMT).
The company has been benefiting from businesses that are beyond its traditional physical-store retail operations. Its Q2 revenue saw an increase of 5.9% to reach $187.9 billion, with global e-Commerce sales increasing by 23% and advertising revenue jumping by 38%. Membership revenue also rose 17%. This gives the company several higher-growth businesses alongside its core stores.
Margin Story Keeps Getting Better
Investors gave more weight to its profitability. The company’s adjusted operating income went up by 17.4% in constant currency, and its gross margin expanded 96 bps. Walmart Inc. (NASDAQ:WMT) reported $19.7 billion in operating cash flow. However, its FCF fell to $5.5 billion.
On the positive side, the company increased its FY 2027 outlook to 4%-5% sales growth and 7%-8.5% adjusted operating income growth. This means that earnings might continue to grow faster than its revenue.
Bernstein Sees the Reality
Bernstein analyst Zhihan Ma kept a “Buy” rating on Walmart Inc. (NASDAQ:WMT)’s stock and a price objective of $142. As per the analyst, the quarter ended at the high end of guidance. The analyst opines that softer US comparable sales were mainly aided by pharmacy-related factors rather than deterioration in the company’s core business. Also, the analyst anticipates the combined Q2-Q3 period to result in approximately mid-single-digit sales growth and around 10% EBIT growth.
Advertising and e-Commerce Can Add to the Upside
Wall Street believes that Walmart Inc. (NASDAQ:WMT)’s investment thesis is becoming less reliant on low-margin merchandise sales. The US e-Commerce went up by 24%, with Walmart Connect advertising seeing an increase of 43% excluding VIZIO, and membership revenue rising by double digits in the U.S.
Notably, such businesses are expected to improve the company’s economics as digital scale increases. This can enable earnings to compound faster compared to sales.
The Bear Case
Bears believe that the key concern limiting the upside is that the company needs to deliver robust earnings growth despite the deliberate pricing actions, elevated fuel costs, and increased inventory, which rose by 6.7% YoY. Also, the company’s guidance for Q3 is for only ~2% – 4% operating-income growth. This is partly because of tariff refunds being redirected toward lower prices.
If sales growth sees softness without the resulting improvement in margins, the broader market might be less willing to pay a premium for the company’s defensive growth profile.
Walmart versus Amazon: A Comparison
Amazon.com, Inc. (NASDAQ:AMZN) can be compared with Walmart Inc. (NASDAQ:WMT), with both companies competing for digital shoppers. Both are also building advertising and membership businesses. Walmart’s global e-Commerce growth of 23% remains critical; however, Amazon enjoys a larger digital ecosystem as well as a cloud business.
However, Walmart Inc. (NASDAQ:WMT) has its physical-store network that aids same-day pickup, delivery, and marketplace fulfillment. This gives the company a competitive edge. If Walmart continues to combine its strong footprint and its faster-growing digital and advertising revenue, it will be able to narrow its profitability gap without replicating Amazon’s model.
Short Interest and Hedge Funds Data
Short interest remains low for both companies. As of August 14, approximately 0.79% of Walmart’s float was sold short, compared with roughly 0.97% for Amazon. The low figures suggest that neither stock is attracting significant outright bearish positioning.
As per Insider Monkey’s database, 99 hedge funds reported owning stakes in Walmart Inc. (NASDAQ:WMT)’s stock at the end of Q1 2026, increasingly modestly to 111 in Q2.
Conclusion
Bernstein’s thesis centers on earnings durability. Walmart Inc. (NASDAQ:WMT) continues to combine mid-single-digit sales growth, quicker operating-income growth, 23% growth in e-Commerce, and 38% growth in advertising while, at the same time, returning capital via buybacks.
Since management raised FY 2027 guidance, Wall Street experts believe the current weakness may offer an opportunity if the company converts its large customer base into higher-margin digital, advertising, and membership revenue.
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