The company has a $100 billion asset that can pave the way for better profits.
With nearly $650 billion in consolidated revenue during its fiscal 2024, Walmart (WMT -0.51%) is already one of the biggest and most valuable companies on earth. As of this writing, its market value is almost $560 billion.
Could Walmart reach a market valuation of $1 trillion by 2030? On one hand, it certainly seems attainable. After all, that only requires a 79% gain from here. On the other hand, 2030 is just six years away. And a 79% gain in six years will likely be challenging for a company as mature as Walmart.
However, while it’s true that Walmart is a mature, slow-growing business on the surface, beneath the surface is a budding new business opportunity that could indeed carry the company over $1 trillion if things go right.
Walmart’s shiny new toy
Before I explain Walmart’s potential path to $1 trillion, I should provide adequate context. The company is the world’s largest retail business, yes. But its retail sales are very low-margin. Consequently, Walmart’s net income has only doubled over the last 20 years.
Through share repurchases, Walmart’s earnings per share (EPS) have grown more than net income. But the chart below shows that profitable growth has been hard to come by during the last two decades.
If Walmart had a way to leverage its enormous scale into a high-margin opportunity, that would be huge. And as it turns out, the company does have a card up its sleeve that most investors have overlooked: e-commerce.
Walmart had over $100 billion in e-commerce sales in its fiscal 2024 (the period that ended in January), and that grew by 23%. Granted, what management includes in its e-commerce number can be a little misleading — buying online and picking up at the store is still considered e-commerce, for example. But these are still digital sales nonetheless, and that’s the key component here.
Now that Walmart has so many of its customers transacting digitally, it can lean into two high-margin opportunities. The first opportunity is digital advertising. And the second opportunity is third-party sales.
Consider that Amazon‘s advertising business is still relatively young, and it’s generated nearly $50 billion in revenue from advertising services in just the last 12 months. And in the most recent quarter, advertising revenue was up a healthy 24%.
For its part, Walmart’s advertising business also grew by 24% in its most recent quarter. Management didn’t provide a dollar amount. But considering it had $3.4 billion in ad revenue in its fiscal 2024, it’s likely now approaching $1 billion in ad revenue quarterly.
Turning to third-party sales, some investors may not realize that independent sellers can list products on Walmart’s e-commerce platform, just like they can with Amazon. This does go hand in hand with digital advertising because sellers can pay to promote their listings. But Walmart also earns commissions when third-party products sell, which is virtually pure profit.
Many merchants are suddenly seeing potential with Walmart’s marketplace. In its fiscal first quarter of 2025, sellers on Walmart’s marketplace were up 50% year over year. This brings more products onto the platform and potentially more buyers. If these products sell successfully, Walmart will profit from commissions and from increased advertising as sellers compete more.
What it means for investors now
For the purposes of this article, let’s assume that Walmart stock is reasonably valued now and has the same valuation in 2030. In other words, if the company reaches a valuation of $1 trillion, let’s assume that it’s the company’s profits that get it there.
In this scenario, Walmart’s profits would need to go up about 80% over the next six years. Right now, the company has about $19 billion in trailing-12-month net income. Therefore, it would need to find an additional $15 billion in annual profit.
The scale of Amazon’s advertising business suggests that Walmart has plenty of room to grow there. And with the rate that sellers are joining its marketplace, commissions from third-party sales could also boom in coming years.
To be fair, Walmart only expects around 6% growth for its operating profits this year — that’s behind the pace it would need to grow its profits 80% by 2030. Therefore, Walmart isn’t guaranteed to become a trillion-dollar company within the next six years. But given the strength and growth of its digital business, I also wouldn’t take the possibility of stronger growth in future years off of the table.
Walmart is one of the biggest retail businesses in the world. And it can become a trillion-dollar company as it leverages its digital platform for higher profits.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Walmart. The Motley Fool has a disclosure policy.
