Walmart Connect Ads Up 31%: Can Digital Ads Become a Core Driver?

Core Insights - Walmart Inc.'s second-quarter fiscal 2026 results demonstrate a significant shift towards digital advertising, with Walmart Connect achieving 31% year-over-year growth, excluding VIZIO [1][8] - The company's global advertising revenues surged by 46% during the quarter, driven by increased marketplace adoption and brand partner engagement [2] - Higher-margin businesses, particularly advertising and membership, are transforming Walmart's income statement, indicating a long-term strategy to diversify revenue streams beyond traditional retail [3][4] Financial Performance - Walmart's advertising at Sam's Club U.S. increased by 24%, while international markets like Flipkart contributed an additional 15% to overall growth [2] - The Zacks Consensus Estimate projects year-over-year sales growth of 4.1% and earnings per share growth of 3.6% for the current financial year [10] - Walmart's forward 12-month price-to-earnings ratio is 36.29, which is higher than the industry average of 33.59, indicating a premium valuation compared to Target but a discount relative to Costco [6] Market Position - Walmart's shares have increased by 26.8% over the past year, slightly underperforming the industry growth of 28.2%, while Costco shares rose by 5.1% and Target shares fell by 34.6% [5] - The integration of digital and physical advertising channels allows Walmart to leverage its extensive ecosystem, reaching millions of shoppers and enhancing profitability [4]