Walmart Inc. (WMT) is increasingly relying on its digital business to drive overall growth, with e-commerce and related commerce solutions playing a bigger role in its financial performance. Advertising has emerged as a key component of this strategy, supported by the company's expanding online presence and digital platform capabilities. In the second quarter of fiscal 2027, Walmart's global advertising business surged by 38%, with Walmart U.S. advertising and Walmart Connect seeing even stronger growth of 38% and 43%, respectively. These gains were accompanied by a 24% increase in Walmart U.S. e-commerce sales, driven by store-fulfilled delivery, advertising, and marketplace services.
The profitability of Walmart's digital operations is also improving. In the first half of fiscal 2027, Walmart U.S. e-commerce achieved double-digit incremental margins. This progress was fueled by strong advertising and membership revenues, along with improvements in delivery-network density, fee-based fast deliveries, and automation benefits. Advertising also contributed to a better business mix during the quarter, helping to boost gross profit. Walmart's acquisition of Vibe, which provides self-service tools for advertisers, further expanded its advertising capabilities.
The second quarter results highlight the growing importance of advertising in Walmart's digital economics. Walmart Connect's 43% growth, combined with continued e-commerce expansion, is supporting the shift toward commerce solutions. Continued progress in these areas will be crucial for sustaining the incremental-margin improvements already achieved in Walmart's U.S. e-commerce business.
From a valuation standpoint, Walmart's forward 12-month price-to-earnings ratio stands at 33.82, higher than the industry average of 30.74. The company is trading at a premium to Target (with a forward 12-month P/E ratio of 15.68) but at a discount to Costco (40.03). Over the past year, Walmart's shares have gained 1.8%, outperforming the industry's breakeven performance. Costco's shares have climbed 1%, while Target has surged 71.4% in the same period.