The One Per Cent That Earns Like SoftwareNarrow moat

Walmart (WMT) — moat facet

About one per cent of the revenue, something close to a fifth of the profit, and it did not exist a decade ago.

There is a business inside Walmart that is about one per cent of revenue and something close to a fifth of the profit, and it did not exist a decade ago.

Growth against net sales, June 2026 quarter (%)+52%Marketplace+38%Advertising+17%Membership fees+5.9%Net salesAbout 1% of revenue, and close to a fifth of operating profit at near-zero incremental cost.
The fastest-growing things Walmart sells are not merchandise. On $713bn of revenue they are a rounding error; on $29.8bn of operating income they are not.

Global advertising was roughly $6.4 billion in fiscal 2026, up 46%1. In the June 2026 quarter it grew 38%, with Walmart Connect excluding VIZIO up 43%2. Membership fee revenue rose 17% globally in the same quarter, and marketplace sales rose 52%3. Set those growth rates against a company whose net sales grew 5.9%4 and the significance is obvious: the fastest-growing things Walmart sells are not merchandise.

The reason they matter is margin. A sponsored placement on a product page costs Walmart essentially nothing to produce; a membership fee has no cost of goods at all; a marketplace commission is collected on inventory Walmart never bought, never stored and never marked down. On $713 billion of revenue these lines are a rounding error. On $29.8 billion of operating income they are not.

They also exist only because of everything else. Walmart Connect can sell advertising because Walmart Connect reaches more than 150 million weekly American customers5 and can prove the purchase happened. The marketplace works because sellers want access to that traffic. Fulfilment services work because the supply chain was already built. None of it is separable from the stores, which is the strongest argument for regarding it as part of the moat rather than a business bolted on beside it.

Two things qualify it. Advertising load has a ceiling — a product page cluttered with sponsored results is a worse shopping experience, and Walmart has promised the customer a good one. And the growth rate is already showing strain at the edges: total advertising grew 38% in the June quarter while Walmart Connect excluding VIZIO grew 43%6, which means the $2.3 billion television business Walmart bought to accelerate the category is currently diluting it.

What tests this facet is membership and other income, which is where the membership fees and much of the rest of this cluster surfaces in the accounts: up from $5,488 million to $6,750 million in two years7, growing more than twice as fast as net sales.

Moat trajectory: Widening

This is the fastest-widening part of the company by a distance. Advertising grew roughly 46% in fiscal 2026 and 38% in the June quarter, membership fee revenue 17%, marketplace sales 52% — all against net sales growth of 5.9%. The absolute base is small; the direction is not in doubt.

The number that tests this moat
Reported
Membership and other income
$6,750 million, from $5,488M two years earlier

The line where membership fees and much of the non-merchandise cluster surfaces, growing more than twice as fast as net sales. It is the only figure in the accounts that measures a customer who has committed to anything.

Source: Walmart Form 10-K, fiscal year ended January 31, 2026 ↗
Aspects of the moat
DIG DEEPER 01
Walmart Connect
Walmart sells suppliers access to a shelf those suppliers are already on, and can prove the sale happened because it rang it up.
DIG DEEPER 02
The Fee That Is Not a Price
Membership converts Walmart's weakest asset — a customer relationship with no commitment in it — into something measurable.
DIG DEEPER 03
The Marketplace
The fastest-growing line in Walmart is inventory Walmart does not own.
DIG DEEPER 04
Selling the Supply Chain
Having built a logistics network to fill its own shelves, Walmart now rents it out.
⚠ Threats to the moat
⚠ THREAT 01
Advertising Load Has a Ceiling
The company that spent sixty years building trust in its prices has the most to lose from monetising attention hard.
⚠ THREAT 02
The Television Business Is Already Diluting the Growth
Walmart reports advertising growth excluding VIZIO because the figure excluding VIZIO is better.
References
  1. ReportedGlobal advertising was roughly $6.4 billion in fiscal 2026, up 46%.
    Marketing Dive - Walmart global advertising revenue of nearly $6.4 billion in fiscal 2026, up 46%, with Walmart Connect U.S. up 41% in the fourth quarter; advertising and membership fees accounted for about a third of fourth-quarter operating income — FY2026 · publ. 2026 · source ↗
  2. ReportedIn the June 2026 quarter it grew 38%, with Walmart Connect excluding VIZIO up 43%.
    Walmart second-quarter fiscal 2027 earnings release (Form 8-K exhibit 99.1) - revenue $187.9 billion +5.9% and +5.1% in constant currency; operating income +28.8% and +17.4% adjusted in constant currency; global eCommerce +23%; global advertising +38% with Walmart Connect excluding VIZIO +43%; membership fee revenue +17%; gross profit rate +96 basis points and Walmart U.S. +158; Walmart U.S. comp sales +2.6% and operating income +20.6% with operating expenses deleveraged 72 basis points; Sam's Club operating income +44.3% and International +16.6%; ROA 8.0% and ROI 15.4%; free cash flow $5.5 billion; 42.3 million shares repurchased for $5.1 billion year to date; FY27 guidance of 4.0-5.0% net sales growth, 7.0-8.5% adjusted operating income growth and $2.80-$2.87 adjusted EPS — Q2 FY2027 · publ. August 20, 2026 · source ↗
  3. ReportedMembership fee revenue rose 17% globally in the same quarter, and marketplace sales rose 52%.
    Walmart second-quarter fiscal 2027 earnings release (Form 8-K exhibit 99.1) - revenue $187.9 billion +5.9% and +5.1% in constant currency; operating income +28.8% and +17.4% adjusted in constant currency; global eCommerce +23%; global advertising +38% with Walmart Connect excluding VIZIO +43%; membership fee revenue +17%; gross profit rate +96 basis points and Walmart U.S. +158; Walmart U.S. comp sales +2.6% and operating income +20.6% with operating expenses deleveraged 72 basis points; Sam's Club operating income +44.3% and International +16.6%; ROA 8.0% and ROI 15.4%; free cash flow $5.5 billion; 42.3 million shares repurchased for $5.1 billion year to date; FY27 guidance of 4.0-5.0% net sales growth, 7.0-8.5% adjusted operating income growth and $2.80-$2.87 adjusted EPS — Q2 FY2027 · publ. August 20, 2026 · source ↗
  4. ReportedSet those growth rates against a company whose net sales grew 5.9% and the significance is obvious: the fastest-growing things Walmart sells are not merchandise.
    Walmart second-quarter fiscal 2027 earnings release (Form 8-K exhibit 99.1) - revenue $187.9 billion +5.9% and +5.1% in constant currency; operating income +28.8% and +17.4% adjusted in constant currency; global eCommerce +23%; global advertising +38% with Walmart Connect excluding VIZIO +43%; membership fee revenue +17%; gross profit rate +96 basis points and Walmart U.S. +158; Walmart U.S. comp sales +2.6% and operating income +20.6% with operating expenses deleveraged 72 basis points; Sam's Club operating income +44.3% and International +16.6%; ROA 8.0% and ROI 15.4%; free cash flow $5.5 billion; 42.3 million shares repurchased for $5.1 billion year to date; FY27 guidance of 4.0-5.0% net sales growth, 7.0-8.5% adjusted operating income growth and $2.80-$2.87 adjusted EPS — Q2 FY2027 · publ. August 20, 2026 · source ↗
  5. ReportedWalmart Connect can sell advertising because Walmart Connect reaches more than 150 million weekly American customers and can prove the purchase happened.
    Walmart Connect - the U.S. retail media business reaches more than 150 million weekly customers through omnichannel solutions; Walmart's first-party data states that advertising sellers generate on average seven times the sales of non-advertising sellers and that 83% of top Marketplace sellers advertise on Connect — 2026 · publ. June 22, 2026 · source ↗
  6. ReportedAnd the growth rate is already showing strain at the edges: total advertising grew 38% in the June quarter while Walmart Connect excluding VIZIO grew 43%, which means the $2.3 billion television business Walmart bought to accelerate the category is currently diluting it.
    Walmart second-quarter fiscal 2027 earnings release (Form 8-K exhibit 99.1) - revenue $187.9 billion +5.9% and +5.1% in constant currency; operating income +28.8% and +17.4% adjusted in constant currency; global eCommerce +23%; global advertising +38% with Walmart Connect excluding VIZIO +43%; membership fee revenue +17%; gross profit rate +96 basis points and Walmart U.S. +158; Walmart U.S. comp sales +2.6% and operating income +20.6% with operating expenses deleveraged 72 basis points; Sam's Club operating income +44.3% and International +16.6%; ROA 8.0% and ROI 15.4%; free cash flow $5.5 billion; 42.3 million shares repurchased for $5.1 billion year to date; FY27 guidance of 4.0-5.0% net sales growth, 7.0-8.5% adjusted operating income growth and $2.80-$2.87 adjusted EPS — Q2 FY2027 · publ. August 20, 2026 · source ↗
  7. ReportedWhat tests this facet is membership and other income, which is where the membership fees and much of the rest of this cluster surfaces in the accounts: up from $5,488 million to $6,750 million in two years, growing more than twice as fast as net sales.
    Walmart Form 10-K, fiscal year ended January 31, 2026 - consolidated financial statements and notes (total revenues $713,163M, net sales $706,413M, membership and other income $6,750M, cost of sales $535,395M, operating expenses $147,943M, operating income $29,825M, net income attributable to Walmart $21,893M, diluted EPS $2.73; balance sheet including inventories $58,851M, accounts payable $63,061M, property and equipment net $136,083M, accumulated depreciation $134,587M, depreciation and amortisation $14,203M; segment note; disaggregation of revenue by merchandise category and by market, and eCommerce net sales by segment) — FY2026 (ended January 31, 2026) · publ. March 13, 2026 · source ↗
Sources
Generated September 22, 2026