Key facts
- Walmart's advertising business, Walmart Connect, is increasingly crucial for supporting profits amid slowing retail sales.
- Walmart Connect experienced a 44% surge in revenue in the latest reported quarter.
- The advertising division contributes approximately one-third of Walmart's operating income, with an estimated 70% gross margin.
- Walmart's core same-store sales growth slowed to 4.1% in the quarter ended April 30.
- The company is leveraging AI and its recent Vizio acquisition to expand its advertising capabilities.
Walmart's advertising business, Walmart Connect, is increasingly vital for bolstering profits as the company navigates a slowdown in its core retail operations. While same-store sales growth has moderated, with U.S. growth slowing to 4.1% in the first quarter, Walmart Connect has seen significant expansion, surging 44% in the same period. This growth is attributed to the retailer's extensive shopper data, powered by its membership program, which allows brands to target consumers effectively across Walmart's platforms.
Despite accounting for a small fraction of Walmart's overall $713 billion in annual sales, Walmart Connect contributes a substantial one-third of the company's operating income, boasting an estimated 70% gross margin. Analysts anticipate continued strong performance from the advertising division when Walmart reports its latest quarterly earnings. The business is seen as having significant growth potential, with some analysts comparing its trajectory to Amazon's advertising success.
Walmart is also integrating artificial intelligence into its advertising strategy, testing ads within its AI shopping assistant, Sparky, and developing tools for advertisers. The recent acquisition of smart-TV maker Vizio is expected to extend Connect's reach into streaming television advertising, further diversifying its revenue streams and leveraging consumer data as a key asset.