Matt

Walmart just crossed $1 trillion in market cap and nobody can explain the P/E. The answer is sitting in one line of their earnings call. CFO John Rainey said advertising and membership now generate 50% of Walmart’s incremental profit. Read that again. Half the profit growth is coming from a business that didn’t exist five years ago. Walmart Connect did $4.4 billion in ad revenue in fiscal 2025 and grew 31% in Q1 FY26 before you even count VIZIO. Include VIZIO, and global ad revenue jumped 50% in a single quarter. The ad business alone is approaching the size of a mid-cap SaaS company, except it runs on 4,700 physical stores worth of first-party purchase data. The market isn’t pricing Walmart as a retailer anymore. A grocery chain trades at 12-15x earnings. A retail media platform with closed-loop attribution, connected TV inventory, and 270 million weekly shoppers trades like a tech company. Because it is one. Meta trades at 22x forward earnings with ad revenue growing ~20%. Walmart trades at 44x forward earnings with ad revenue growing 50%. The bull case is that Walmart’s ad business is earlier on its S-curve than Meta’s, and the total addressable market keeps expanding as every CPG brand shifts spend from linear TV to retail media. The 20,000% all-time chart looks parabolic because the business model flipped. Walmart spent 60 years optimizing for pennies on grocery margins. Now it monetizes the traffic those groceries generate. Every dollar of ad revenue drops at software-like margins into a business doing $680 billion in sales. The bear case is real: 46x trailing P/E on a company growing top-line revenue at 5% is a bet that advertising and marketplace fees compound for another decade without compression. If ad growth slows to 15-20%, the multiple contracts fast. But right now, the market is pricing the transition, and the transition is actually working.