Walmart advertising revenue surges 46% amid economic pressures

Walmart reported a 46% surge in global advertising revenue during the second quarter of fiscal 2026, according to the company's earnings announcement on August 21, 2025. The retail giant's advertising business, including the recently acquired VIZIO smart TV manufacturer, generated significant growth as total company revenue reached $178.9 billion in constant currency terms.

The Arkansas-based retailer's Walmart Connect advertising platform grew 31% excluding VIZIO contributions, while the inclusion of the smart TV manufacturer pushed total advertising growth to nearly 50%. According to the earnings call transcript, CFO John David Rainey noted that "50% of our incremental profit, excluding claims, was related to advertising, membership and marketplace."

Walmart's total revenue increased 5.6% in constant currency during the quarter, with eCommerce sales jumping 25% globally. The company's U.S. operations posted comparable sales growth of 4.6%, driven primarily by grocery and health categories. International operations contributed $32.7 billion in net sales, marking 10.5% growth in constant currency terms.

The retailer's advertising momentum comes as the company faces significant cost pressures from elevated general liability claims. Walmart accrued an additional $450 million beyond planned expenses during Q2, representing a 560 basis point headwind to adjusted operating income growth. The company expects total incremental claims costs to reach $730 million for the first half of fiscal 2026.

"While this claim count has decreased year-over-year, the cost to resolve claims has risen both for us and across the retail industry, and we've increased our accrual to reflect these trends," Rainey explained during the earnings call. The expense relates to general liability and workers' compensation claims for which Walmart self-insures, with costs spanning approximately $1 billion from low to high estimates.

President and CEO Doug McMillon emphasized the company's competitive positioning despite economic headwinds. "Growth in transactions and units is helping drive our performance. We grew eCommerce sales by 25% globally with all segments exceeding 20% growth, led by Walmart U.S., and Sam's Club U.S. at 26%," McMillon stated during the earnings call.

The VIZIO acquisition, completed earlier in fiscal 2026, contributed 20 basis points to net sales growth guidance while creating an 80 basis point headwind to adjusted operating income due to integration costs. The acquisition provides Walmart entry into connected TV advertising, expanding beyond traditional retail media offerings.

Sam's Club U.S. demonstrated strong performance with eCommerce growth of 26%, while membership income increased 7.6%. The warehouse club format saw steady growth in member counts and renewal rates, with increased penetration of Plus members driving revenue expansion.

International operations faced currency headwinds of $1.5 billion but showed strength in key markets. China operations grew 30% during the period, while Flipkart contributed to 15% growth in international advertising revenue. According to the earnings presentation, currency rate fluctuations negatively affected international sales despite underlying business momentum.

Walmart's marketplace business expanded with third-party seller growth of 19%, while 250 basis points more sellers utilized Walmart fulfillment services. The company increased fulfillment center efficiency and delivery speed, with two-thirds of deliveries from stores completed in three hours or less.

The retailer's inventory position remained healthy with 4% year-over-year increases, primarily attributed to higher costs of imported goods and timing considerations. "In this tariff impacted period, we're closely monitoring customer demand and managing quantity decisions as we measure the price elasticity of impacted items," Rainey noted during the earnings discussion.

Walmart raised full-year net sales growth guidance to 3.75%-4.75% in constant currency, up 75 basis points from previous estimates. The company maintained adjusted operating income guidance of 3.5%-5.5% despite absorbing significant claims costs. Third-quarter expectations call for 3.75%-4.75% net sales growth with operating income increases of 3.0%-6.0%.

The company's membership programs showed continued traction with global membership fee income growth of 15.3%. Walmart+ membership income grew double digits, while the upcoming OnePay credit card launch offers 3% cash back at Walmart locations, increasing to 5% for Walmart+ members.

Retail media networks have gained prominence as traditional advertising channels face challenges from privacy regulations and platform changes. Amazon's advertising business generated $15.7 billion in Q2 revenue with 23% year-over-year growth, while Target reported double-digit growth for its Roundel advertising platform.

Walmart's advertising expansion includes digital out-of-home screens across 4,500+ stores and data integrations with demand-side platforms. The company operates 170,000 digital screens reaching millions of weekly store visitors through TV walls and self-checkout displays.

The retailer's "Who Knew?" advertising campaign, launched in mid-June, aims to broaden customer perception of Walmart's assortment beyond traditional categories. John Furner, President of Walmart U.S., explained the campaign's objectives: "What we were obviously hoping to do was help people see Walmart a bit differently and help explain to people that may not know, a lot of people do, but a lot of people do not know that we have such a broad assortment, which would include our stores, our first party commerce, business and marketplace."

CFO Rainey addressed retail method accounting complexities during the quarter, explaining that merchants successfully contained margin impacts from tariff-related cost increases. "We did have more markups than normal in the second quarter. We also had more markdowns than normal. And so they had a netting effect," Rainey explained during the buyside investor call.

Looking ahead, Walmart faces ongoing uncertainty regarding final tariff resolutions across major import markets including China, Mexico, Vietnam, India, and Canada. The company sources less than one-third of U.S. inventory from international markets, with domestic sourcing representing the largest procurement category. As McMillon noted regarding competitive pressures: "What goes through my mind is that, gosh, I've been doing this for a long time now, and competition just keeps getting better. So that's kind of factored into our plan."

Rainey also emphasized the strength of the underlying business despite cost pressures: "It is a kind of a nuanced earnings report given some of the cost pressures. But when you dig into the details, particularly of the eCommerce business, you look at things like membership growth of 16%, advertising growing 50% year-over-year, 30% in the US. You can go line by line, and you can see why we're excited about the momentum in the business."

The earnings announcement highlighted Walmart's strategic focus on AI implementation through its Sparky shopping assistant and various automation tools for associates, suppliers, and developers. CEO McMillon positioned AI capabilities as fundamental to future customer engagement: "As we improve and scale Sparky, we'll make it even smarter and more personalized. It will be the primary digital vehicle for discovery, shopping, and for managing everything from reorders to returns. We see Sparky becoming an indispensable part of how people shop with us."

Timeline

August 21, 2025: Walmart announces Q2 FY26 earnings with 46% advertising growth and $178.9 billion total revenue

July 2025: Walmart marketplace expansion allows Amazon fulfillment for cross-platform sales under specific conditions

July 2025: FTC targets false claims across Amazon and Walmart marketplaces regarding "Made in USA" labels

April 2025: Yahoo and Costco partnership demonstrates retail media growth as competitors expand advertising networks

2021: Walmart Connect launch introduced DOOH screens, digital retail ads, and data integrations

Summary

Who: Walmart Inc. (NYSE: WMT), led by CEO Doug McMillon and CFO John David Rainey, reported second quarter fiscal 2026 earnings affecting investors, advertisers, and retail industry competitors.

What: The company achieved 46% global advertising revenue growth including VIZIO acquisition, with total revenue of $178.9 billion in constant currency and 25% eCommerce growth, while absorbing $730 million in unexpected general liability claims costs.

When: Second quarter fiscal 2026 results announced August 21, 2025, covering the 13-week period ended August 1, 2025, with guidance issued for Q3 and full fiscal year 2026.

Where: Bentonville, Arkansas-based retailer operates 4,500+ U.S. stores with global presence including strong international performance in China (30% growth), Mexico, and India through Flipkart operations.

Why: Advertising revenue surge reflects retail media network expansion, VIZIO acquisition integration, and advertiser migration toward first-party data platforms amid privacy regulation changes, while claims cost increases stem from post-COVID litigation trends affecting retail industry nationwide.

PPC Land explains

Advertising Revenue: The income generated from selling advertising space and services across Walmart's digital and physical properties. This includes revenue from Walmart Connect, the company's retail media network, as well as advertising income from the recently acquired VIZIO smart TV platform. The 46% growth in Q2 2026 represents a significant shift toward high-margin revenue streams that leverage Walmart's customer data and shopping traffic to attract brand advertisers seeking targeted reach.

Constant Currency: A financial reporting method that eliminates the impact of foreign exchange rate fluctuations when comparing financial results across different time periods. Walmart uses constant currency figures to provide investors with a clearer view of underlying business performance, particularly important given the company's significant international operations. The $178.9 billion revenue figure in constant currency terms strips out the $1.5 billion negative impact from currency movements during Q2.

eCommerce Growth: The expansion of online sales channels including website transactions, mobile app purchases, and digital marketplace activities. Walmart's 25% global eCommerce growth demonstrates the company's success in competing with Amazon and other digital-first retailers. This growth encompasses store-fulfilled pickup and delivery services, third-party marketplace transactions, and direct-to-consumer sales across all operating segments.

General Liability Claims: Legal and financial obligations arising from workplace injuries, customer incidents, and property-related accidents across Walmart's retail locations. The $730 million in incremental costs during the first half of fiscal 2026 reflects post-COVID increases in settlement amounts and legal expenses. These self-insured claims represent a significant cost pressure that affects operating margins despite strong revenue performance.

Retail Media: Advertising services offered by retailers that allow brands to promote products directly within the shopping environment. Walmart Connect exemplifies this model by selling ad placements on Walmart.com, mobile apps, and in-store digital screens. Retail media networks have become increasingly valuable as privacy regulations limit traditional digital advertising targeting capabilities, making first-party shopping data more attractive to advertisers.

VIZIO Acquisition: Walmart's strategic purchase of the smart TV manufacturer to expand advertising capabilities into connected television and streaming media. The acquisition provides access to viewing data and advertising inventory beyond traditional retail environments, enabling Walmart to compete with Amazon's advertising ecosystem. VIZIO contributed approximately 28 percentage points to the 46% advertising revenue growth, while creating integration costs that impact operating margins.

Walmart Connect: The company's retail media network that monetizes customer traffic and shopping data through advertising services. Connect offers display ads, sponsored product placements, and search advertising across Walmart's digital properties, along with in-store advertising through 170,000 digital screens. The platform grew 31% excluding VIZIO contributions, positioning Walmart as a major competitor to Amazon's advertising business.

Marketplace Growth: Expansion of third-party seller participation on Walmart's e-commerce platform, similar to Amazon's marketplace model. The 19% growth in marketplace business provides Walmart with commission revenue while expanding product assortment without inventory investment. Third-party sellers increasingly utilize Walmart's fulfillment services, with 250 basis points more sellers adopting these logistics solutions during Q2.

Constant Currency Growth: The measurement of business performance that adjusts for foreign exchange rate impacts, providing a normalized view of operational results. This metric is particularly relevant for Walmart's international operations, which faced $1.5 billion in currency headwinds despite strong local performance. Constant currency figures help investors understand underlying business trends separate from macroeconomic currency movements.

Operating Income: The profit generated from core business operations after deducting operating expenses but before interest and tax payments. Walmart's operating income declined 8.2% due to the unexpected claims costs, though adjusted operating income grew 0.4% in constant currency terms. This metric reflects the company's ability to generate profits from retail operations while managing cost pressures from both expected business expenses and unexpected liability increases.