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Walmart (NYSE:WMT) reports earnings on Aug. 15. Its results are expected to be decent, if not spectacular. Most analysts see same-store sales growth with operating margins nearing double digits, which should be good for Walmart stock.
I’m not one to focus too closely on quarterly reports, opting to think bigger picture, longer-term. There are three things that I’ll continue to look for as the company continues to grow its behemoth business model.
For me, it boils down to Walmart’s growing ad business, the use of AI technology to grow its top and bottom line, and Walmart’s growth plans.
Given the market volatility, Walmart stock is an excellent buy for conservative investors looking for a defensive play,
Some might consider Walmart stock expensive, trading at 26% higher than its intrinsic value. I suggest you are paying for quality, growth, and safety all rolled into one excellent package.
Here’s why.
The Ad Business Continues to Grow Its Contribution
In fiscal 2024 (January year-end), Walmart’s advertising revenue grew by 28% to $3.4 billion, accounting for approximately 0.5% of its overall revenue of $648 billion.
In Q1 2025, its global ad revenue grew by 24%, with its U.S. ad business growing 26% year-over-year. Because it doesn’t reveal specific dollar amounts, let’s assume they rose to $4.22 billion on an annualized basis [$3.4 billion divided by 4 and multiplied by 1.24].
As ad businesses go, Walmart’s growth in the most recent quarter is on par with most of the big players, including Google, Meta Platforms (NASDAQ:META), Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT).
It’s certainly keeping up with the Joneses.
TVREV.com published an article on Aug. 9 titled, Could Amazon’s Ad Business Become An FTC Target? Google and META are at the top of their list regarding FTC targets. Amazon’s next on the list, according to this commentary.
While Walmart isn’t close to being in the crosshairs of regulators, if it continues to grow ad revenues by double digits, it might get there one day. In the meantime, it’s a big positive to continue to watch.
AI Technology Drives Top and Bottom Line Growth
One area that is bound to contribute significantly to Walmart’s business is AI technology. Fortunately, Walmart Generated $14.49 billion in trailing 12-month free cash flow, giving it plenty to invest in the latest and greatest AI tech.
Investment bank Cascadia Capital Published a study in June that retail technology was $19.1 billion in 2022 and is expected to reach nearly $48 billion by 2030.
“Retailers are leveraging AI-driven tools and virtual shopping technologies to transform the retail landscape, offering hyper-personalized, interactive, and immersive shopping experiences while simultaneously enhancing customer service and gaining insights into customer behavior,” TheStreet.com reported.
With Walmart’s heft and technology, it can simultaneously improve the online user experience, drive higher e-commerce revenue and make its supply chain more efficient on the back end, allowing for greater profits from its e-commerce business.
Its global e-commerce business grew 21% in Q1 2025, led by store-filled pickup and delivery. AI technology is all over that growth.
Walmart’s Expansion Plans Taking Shape
In January, the company announced it would open or convert over 150 large-format U.S. stores by the end of 2028. Although some will be enlarged locations that add the entire grocery store concept found in supercenters, most will be built from the ground up.
At the same time, it is spending $9 billion over the next two years to upgrade 1,400 U.S. stores, which is about one-third of its U.S. store footprint.
“These construction investments allow us to create more local jobs and make it easier for our associates to get customers what they want, when they want it,” CNBC reported comments from Walmart USA CEO John Furner in September 2023.
In Canada, where I live, they are testing new concepts at the Mississauga store, the country’s largest Walmart location.
The store, which has two levels, has a Hot Kitchen, where hot meals to go are provided for customers, along with a Health Hub, a centralized area that combines the pharmacy, vision center, and medical clinic. These were firsts for the Canadian operation.
Whether in the U.S. or elsewhere, Walmart is focused on staying ahead of the competition. That’s a great thing if you own Walmart stock.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
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