As Walmart prepares to report earnings, Bank of America urges investors to look beyond U.S. store sales and focus on the company's fast-growing advertising and marketplace segments, which now play a bigger role in profitability
Walmart is set to release its quarterly earnings on August 20, and most investors will be watching the same familiar number: how much its U.S. stores sold compared to last year. While that figure remains important, Bank of America is telling clients that the real story lies elsewhere in the company's results. The firm has maintained its Buy rating and $144 price target for Walmart, even after trimming its forecast for U.S. store sales growth. The reason? Walmart's newer, higher-margin businesses-especially advertising and its third-party marketplace-are now contributing more to the bottom line than ever before.
What's Driving Walmart's Profit Outlook
Bank of America analyst Christopher Nardone expects Walmart to report adjusted earnings of $0.74 per share for the second quarter, up from $0.68 a year ago. That forecast assumes U.S. store sales growth will slow, but that the company's other business lines will more than make up the difference. The $144 price target is roughly 25% above Walmart's August 12 closing price of $115.55, reflecting confidence that the retailer can deliver both a modest earnings beat and a raised full-year outlook-two factors that have historically driven the stock higher after earnings.
Walmart's management has already warned investors to expect slower net sales growth this quarter, guiding for a 4% to 5% increase on a constant-currency basis, down from 5.7% in the previous quarter. Bank of America projects growth near the middle of that range, at 4.6%. The slowdown is attributed to three main factors: the fading impact of tax refunds, less benefit from general merchandise pricing, and reduced spending by lower-income shoppers as budgets tighten. Still, the firm notes that even if U.S. store sales come in half a percentage point below expectations, the impact on full-year sales growth would be minimal-about a tenth of a percentage point.
Advertising and Marketplace: The New Growth Engines
Where Bank of America sees the most upside is in Walmart's high-margin businesses. In the first quarter, global advertising revenue grew 36%, marketplace sales surged nearly 50%, and membership fee revenue remained strong. Advertising is especially profitable because Walmart sells ad space to brands already on its shelves, with most of that revenue flowing directly to profit. The marketplace model, which allows outside sellers to list products on Walmart's site, generates fees without the company having to hold inventory.
These segments are now large enough to offset slower growth in the core U.S. store business. Bank of America argues that as long as advertising and marketplace sales continue to post double-digit gains, Walmart can maintain its overall profitability even if store sales growth moderates to the 3%-4% range. This shift in the company's earnings mix is a key reason the firm remains bullish despite trimming its store sales outlook.
Price Cuts and Competitive Positioning
Walmart announced sharper price cuts in early July, a move Bank of America expects will help the retailer attract more customers in the second half of the year. Lower prices, a broader selection from marketplace sellers, and faster delivery options are all designed to give shoppers more reasons to choose Walmart over competitors. Importantly, these price cuts were already factored into the company's previous guidance, so they are not expected to create new margin pressure this year.
There is a risk that profit margins could tighten next year, especially as tariff-related refunds that benefited Walmart this year are unlikely to repeat. However, Bank of America believes the company's high-margin advertising business can help fund continued price reductions, allowing Walmart to stay aggressive on pricing without sacrificing profitability to the same extent as rivals.
Stock Performance and Valuation Risks
Walmart shares have climbed in the days leading up to the earnings report, closing at $115.55 on August 12-up 2.02% for the day and about 1.4% over the previous five trading sessions. This move from the low $110s to the mid-$110s suggests investors are positioning for a solid quarter. But with the stock trading at roughly 40 times earnings-a premium for a retailer-there is little room for disappointment. That valuation reflects the market's willingness to pay up for Walmart's newer, higher-profit businesses, but it also raises the stakes if results or guidance fall short.
For investors weighing whether to buy ahead of earnings, Bank of America's case depends on several factors: continued double-digit growth in advertising and marketplace sales, a raised full-year outlook, stable profit margins despite recent price cuts, and resilience among lower-income shoppers. If any of these falter, the justification for Walmart's premium valuation could quickly erode. This dynamic is similar to what's been seen with other major retailers, as Bank of America's recent caution on Target's stock rally illustrates.
What to Watch in the Earnings Report
Bank of America expects Walmart to deliver second-quarter earnings of $0.74 per share, with slower U.S. store sales but continued strength in advertising, marketplace, and membership fees. For current shareholders, the upcoming report is critical: the stock is expensive by historical standards, and shares have already moved higher in anticipation of good news. A disappointing quarter could trigger a sharper pullback than usual. For new buyers, the potential upside to the $144 target depends on Walmart's ability to sustain rapid growth in its high-margin businesses and to raise its outlook for the rest of the year. Ultimately, the numbers that matter most for the stock may not be the ones most investors are watching.
In the first quarter of 2026, Walmart reported global advertising revenue growth of 36% and marketplace sales growth of nearly 50%, according to company filings. U.S. comparable store sales rose 5.7% in the prior quarter, but management's guidance for the second quarter calls for a slower 4% to 5% increase. As of August 12, Walmart's market capitalization stood at approximately $310 billion, with shares trading at a price-to-earnings ratio of about 40, well above the average for the retail sector.
Walmart's shift toward higher-margin businesses like advertising and its online marketplace reflects a broader trend among large retailers seeking to diversify revenue streams and reduce reliance on traditional store sales. These segments typically offer greater profitability and resilience during periods of slower consumer spending. For investors, understanding how these business lines contribute to overall earnings is increasingly important, especially as valuation multiples rise and competition intensifies. The ability to balance aggressive pricing with margin protection will likely remain a central challenge for Walmart and its peers in the years ahead.
