Understanding how Walmart makes money goes beyond knowing it's the world's largest retailer. The company operates multiple revenue streams across physical stores, e-commerce, advertising, membership services, and international markets. For investors researching the Walmart (WMT) stock page, breaking down these segments and their relative contribution to revenue and profit helps paint a clearer picture of where growth is coming from and how durable the business model really is.
Key takeaways
- Walmart's U.S. stores generate the vast majority of total revenue, but grocery is the single largest product category, accounting for more than half of domestic sales.
- E-commerce and advertising are growing faster than traditional retail and carry higher margins, making them increasingly important to the profit story.
- Walmart's membership program (Walmart+) and its third-party marketplace create recurring revenue and diversify income beyond pure product sales.
- International operations span roughly two dozen countries, with Mexico and India representing the highest-growth markets.
- The company's profit margins are thin compared to peers like Amazon and Target, but its scale and cost discipline make that model work.
How does Walmart make money? The core business model
Walmart's business model is built on one principle: sell massive volumes at low prices. That sounds simple, but the execution behind it is anything but. The company leverages its enormous purchasing power to negotiate lower costs from suppliers, then passes some of those savings to customers while keeping razor-thin margins on each transaction. Multiply that thin margin across hundreds of billions of dollars in annual sales, and you get a very profitable operation.
Everyday Low Price (EDLP): Walmart's pricing strategy where products are consistently priced low rather than cycling through sales and promotions. This reduces marketing costs and builds customer loyalty around price predictability.
The Walmart revenue streams break into three main reporting segments: Walmart U.S., Walmart International, and Sam's Club. Each operates differently, attracts different customers, and carries different margin profiles. Investors who treat Walmart as a single monolithic business miss how these pieces interact.
What are Walmart's biggest revenue segments?
Walmart U.S.
This is the engine. Walmart U.S. typically represents around two-thirds of total company revenue. It includes more than 4,600 stores across formats like Supercenters, Neighborhood Markets, and smaller-format locations. Grocery is the dominant category here, making up over half of U.S. segment sales. That's worth sitting with for a moment: Walmart is, by revenue, primarily a grocery company.
General merchandise (electronics, apparel, home goods) fills out the rest, but these categories tend to be more cyclical. When consumers feel squeezed financially, they keep buying groceries at Walmart but cut back on discretionary items. This mix means Walmart's top line is relatively recession-resistant, though margins can shift depending on what people are putting in their carts.
Walmart International
The international segment covers operations in roughly 19 countries outside the U.S. Key markets include Mexico (Walmex), Canada, China, and India (through its stake in Flipkart). This segment accounts for a smaller share of total revenue but offers higher growth rates than the mature U.S. market.
Mexico is a standout. Walmex operates thousands of stores and has a dominant position in Mexican retail. India, through Flipkart, represents a bet on one of the world's largest and fastest-growing consumer markets. The challenge with international operations is currency fluctuation and varying competitive dynamics. What works in Arkansas doesn't always translate to Mumbai.
Sam's Club
Sam's Club is Walmart's membership-based warehouse club, competing directly with Costco. It generates revenue two ways: product sales to members and the membership fees themselves. Membership fees are almost pure profit, which makes them disproportionately valuable relative to their share of total revenue.
Sam's Club has historically been the smaller, less profitable sibling, but the company has invested in renovating clubs, improving the product mix, and building out curbside pickup and delivery. Membership counts have been trending upward, and the segment has shown stronger comparable sales growth in recent periods.
Walmart revenue streams beyond traditional retail
Here's where the story gets more interesting for investors. Walmart is building several high-margin businesses on top of its retail infrastructure. These don't dominate the income statement yet, but they're growing fast and could meaningfully change the company's margin profile over time.
Walmart Connect (advertising)
Walmart Connect is the company's advertising business. Brands pay to promote their products across Walmart's website, app, and in-store displays. This is essentially the same playbook Amazon runs with its ad business, and it's one of the highest-margin revenue streams Walmart has.
Retail media network: An advertising platform operated by a retailer that allows brands to buy ad placements across the retailer's digital and physical properties. These businesses are attractive because they monetize existing customer traffic at very high margins.
Walmart Connect has been growing at a pace well above total company revenue growth. The appeal for advertisers is that Walmart has first-party purchase data on hundreds of millions of customers. That data makes ad targeting more precise and measurable than many alternatives. For Walmart, every advertising dollar drops to the bottom line at margins that dwarf traditional retail.
Walmart Marketplace and fulfillment services
Walmart's third-party marketplace lets outside sellers list products on Walmart.com. Walmart takes a commission on each sale. The marketplace has expanded significantly, with the seller count growing from a few thousand to tens of thousands. Walmart also offers fulfillment services (WFS) where it stores, picks, packs, and ships products for marketplace sellers, similar to Amazon's FBA model.
This is a capital-light way to expand product selection without carrying inventory risk. It also feeds the advertising business since marketplace sellers are natural buyers of Walmart Connect ads.
Walmart+ membership
Walmart+ is the company's answer to Amazon Prime. Members pay an annual or monthly fee for benefits like free delivery, fuel discounts, and early access to deals. The recurring revenue is valuable, but the real strategic purpose is increasing customer stickiness. Members shop more frequently and spend more per visit than non-members.
Financial services and healthcare
Walmart has pushed into financial services (money transfers, check cashing, buy-now-pay-later) and once explored a significant healthcare play through Walmart Health clinics, though it scaled back the clinic initiative. Financial services, particularly for underbanked customers who already shop at Walmart, remain a meaningful ancillary revenue source.
How do Walmart's profit margins compare to Amazon and Target?
This is where how WMT makes money gets nuanced. Walmart's gross margins typically sit in the 24-25% range. Target runs slightly higher, often around 26-28%. Amazon's overall gross margins are considerably higher (in the 45-48% range), but that comparison is misleading because Amazon Web Services (AWS) skews the average dramatically upward.
On an operating margin basis, Walmart usually runs around 4-5%. Target is in a similar range, though more volatile. Amazon's retail operations actually run at low single-digit margins comparable to Walmart, with AWS providing the bulk of operating profit.
The takeaway: Walmart's margins are thin by design. The company trades margin for volume and market share. It makes money through sheer scale. Where Walmart's margin story could shift is through the growth of high-margin businesses like advertising, marketplace commissions, and membership fees. If Walmart Connect and WFS scale to represent even a modest percentage of total revenue, the blended margin profile improves meaningfully without changing the core retail pricing strategy.
What's driving Walmart's growth beyond just retail stores?
Several factors are expanding Walmart's revenue and profit potential beyond the traditional store model:
- E-commerce acceleration: Online sales have grown substantially, with grocery pickup and delivery being major drivers. Walmart has invested billions in automation, micro-fulfillment centers, and last-mile delivery infrastructure.
- Advertising and data monetization: Walmart Connect's growth rate significantly outpaces overall revenue growth. This business barely existed a few years ago and is now a material contributor to profit.
- Marketplace expansion: More third-party sellers means more product selection, more commissions, and more advertising demand. It's a flywheel effect.
- Supply chain automation: Walmart is deploying automation across its distribution network to reduce costs and improve delivery speed. These investments compress costs over time and widen the efficiency gap against smaller competitors.
- International digital growth: Flipkart in India and digital investments in Mexico and China give Walmart exposure to fast-growing consumer markets that are earlier in their e-commerce adoption curves.
You can dig into the relative weight of these growth drivers by asking the Rallies AI Research Assistant to break down segment growth rates and margin contributions.
How Walmart's scale creates a competitive moat
The Walmart business model works because of self-reinforcing advantages that are nearly impossible to replicate. More stores and more online traffic mean more purchasing volume. More volume means better supplier pricing. Better pricing means more customers. More customers mean more data. More data means better advertising products. Better advertising means higher-margin revenue.
Walmart's distribution network is another piece of this. The company operates one of the largest private fleet and distribution center networks in the world. This gives it a cost advantage on logistics that most competitors simply cannot match. When Walmart builds a new automated fulfillment center, the cost savings compound across the entire network.
For investors evaluating the durability of Walmart's business, the question isn't whether someone can compete on price for a single product. It's whether anyone can replicate the entire system of procurement, logistics, data, and customer traffic at comparable scale. So far, only Amazon comes close, and even Amazon's physical retail presence is a fraction of Walmart's.
Risks and limitations of the Walmart business model
No business model is bulletproof, and Walmart's has real vulnerabilities worth considering:
- Margin pressure from grocery: Grocery is low-margin by nature. As grocery becomes a larger share of the sales mix, it can drag down overall profitability unless offset by higher-margin businesses.
- Labor costs: Walmart is one of the largest private employers globally. Minimum wage increases, benefits costs, and labor market tightness directly impact operating expenses.
- E-commerce profitability: Online grocery delivery is expensive. Customer acquisition and last-mile logistics eat into margins. The unit economics of e-commerce are improving but are not yet as favorable as in-store transactions.
- International execution risk: Operating in diverse markets introduces currency risk, regulatory complexity, and cultural differences in consumer behavior. Walmart has exited several international markets over the years (UK, Brazil, Japan) when the economics didn't work.
- Competition: Amazon continues to expand grocery and physical retail. Costco competes aggressively against Sam's Club. Dollar stores have captured share in rural markets. The competitive environment never gets easier.
If you want to stress-test these risks against Walmart's financials, the Vibe Screener lets you filter and compare retailers across margin, growth, and valuation metrics.
Try it yourself
Want to run this kind of analysis on your own? Copy any of these prompts and paste them into the Rallies AI Research Assistant:
- Break down how Walmart makes money — what are their biggest revenue streams, how do their profit margins compare to Amazon and Target, and what's driving their growth beyond just retail stores?
- Break down how Walmart makes money — what are their biggest revenue streams and what's growing fastest?
- Compare Walmart's advertising and marketplace revenue growth to Amazon's. How meaningful could these segments become for WMT's overall profit margins?
Frequently asked questions
What is the Walmart business model in simple terms?
Walmart buys products in enormous quantities, negotiates the lowest possible cost from suppliers, and sells them to consumers at low prices with thin profit margins. The model works because of scale. Small margins multiplied across hundreds of billions in sales produce significant total profit. Increasingly, Walmart also monetizes its customer base through advertising, memberships, and marketplace commissions.
What are Walmart's main revenue streams?
Walmart's revenue comes from three reporting segments: Walmart U.S. (the largest, dominated by grocery and general merchandise), Walmart International (operations in about 19 countries), and Sam's Club (a membership-based warehouse format). On top of product sales, Walmart earns revenue from advertising through Walmart Connect, third-party marketplace commissions, Walmart+ membership fees, and financial services.
How does WMT make money from advertising?
Walmart Connect allows brands to purchase ad placements on Walmart's website, mobile app, and in-store screens. Because Walmart has purchase data on hundreds of millions of shoppers, it can offer advertisers precise targeting and clear measurement of return on ad spend. Advertising revenue carries much higher margins than traditional retail sales, making it an increasingly valuable part of the business.
Is Walmart profitable despite low prices?
Yes. Walmart's operating margins are thin, typically in the 4-5% range, but the absolute dollar amount of profit is large because total revenue is so massive. The company's cost discipline, supply chain efficiency, and growing high-margin businesses like advertising and memberships all contribute to sustained profitability despite an everyday-low-price strategy.
How does Walmart compare to Costco and Amazon?
Walmart, Costco, and Amazon each use different models. Costco relies heavily on membership fees for profit and keeps product margins near zero. Amazon's retail operations run at low margins while AWS generates the bulk of profit. Walmart falls between them, earning profit from both product sales and a growing portfolio of services. Each model has trade-offs in terms of margin structure, growth trajectory, and capital intensity.
What is Walmart+ and does it help Walmart make money?
Walmart+ is a paid membership program offering free delivery, fuel discounts, and other perks. The subscription fees provide recurring revenue, but the bigger financial impact is behavioral. Members tend to shop more frequently and spend more per transaction than non-members. This increased engagement drives higher total revenue and feeds Walmart's advertising and data businesses.
What are the biggest risks to how Walmart makes money?
Key risks include margin compression from a growing grocery sales mix, rising labor costs, expensive e-commerce fulfillment logistics, international execution challenges, and relentless competition from Amazon, Costco, and dollar store chains. Investors evaluating WMT should weigh these risks against the company's scale advantages and diversifying revenue mix.
Bottom line
How does Walmart make money? Primarily through massive-scale retail operations with thin margins on grocery and general merchandise, supplemented by faster-growing, higher-margin businesses in advertising, e-commerce marketplace commissions, and membership fees. The Walmart business model is evolving from pure retail into a platform that monetizes its customer traffic and data in multiple ways. That shift matters because it could gradually improve profitability without requiring Walmart to raise prices.
If you want to explore Walmart's revenue segments, margin trends, and competitive positioning in more depth, check out our stock analysis resources and run your own research with the tools on Rallies.ai. Do your own research before making any investment decisions.
Disclaimer: This article is for educational and informational purposes only. It does not constitute investment advice, financial advice, trading advice, or any other type of advice. Rallies.ai does not recommend that any security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. All investments involve risk, including the possible loss of principal. Past performance does not guarantee future results. Before making any investment decision, consult with a qualified financial advisor and conduct your own research.
Written by Gav Blaxberg, CEO of WOLF Financial and Co-Founder of Rallies.ai.