Recently, these two retail powerhouses have been moving in contrasting directions.
Walmart (WMT 1.51%) once dominated U.S. retail, while Amazon (AMZN +2.56%) emerged as a disruptive force through its e-commerce model. Currently, Amazon’s market value exceeds Walmart’s by more than double.
A significant portion of Amazon’s valuation comes from its cloud computing division, Amazon Web Services (AWS), which has thrived with the increasing demand for artificial intelligence (AI) services. However, concerns over its hefty $200 billion budget for capital expenditures by 2026 have led to a sell-off of Amazon shares, as investors worry about returns on this massive investment. In contrast, Walmart’s stock has risen as it’s perceived as less vulnerable to AI disruptions, pushing its valuation past $1 trillion this month.
Given the divergent stock trends, investors may be curious about which company represents a better investment currently.
Walmart’s Robust Performance
Walmart is regaining consumer trust, attracting middle-class shoppers amid economic challenges from President Donald Trump’s tariffs and the encroaching influence of AI. The retailer’s revenue increased by 4.9% in Q4 and 5.1% for the entire year when adjusted for currency fluctuations. Comparable sales rose by 4% for the quarter and 5.1% for the year, driven in part by a 24% surge in its e-commerce segment last quarter.
These figures outshine those from competitors like Amazon, whose in-store sales grew by only 5% last quarter. Amazon’s overall e-commerce revenue—including direct sales, third-party seller services, and advertisements—expanded by approximately 12%.
Walmart’s impressive topline performance has bolstered its earnings and free cash flow, with earnings per share increasing by 13.3%, and free cash flow rising to $14.9 billion from $12.7 billion the prior year. Nevertheless, investors expressed disappointment regarding the company’s 2023 outlook, which anticipates only a 4% sales growth and earnings per share growth ranging between 4% and 8%. Analysts had projected an average of $2.97, whereas Walmart’s midpoint estimate was $2.80.
Today’s Change
(-1.51%) $-1.88
Current Price
$122.99
Key Data Points
Market Cap
$980B
Day’s Range
$121.05 – $123.48
52wk Range
$79.81 – $134.69
Volume
35M
Avg Vol
31M
Gross Margin
25.40%
Dividend Yield
0.76%
Historically, Walmart has been cautious in its financial guidance, and even the optimistic projections may be conservative to allow new CEO John Furner some leeway. However, with the stock priced at about 45 times the projected earnings per share for fiscal 2027, there is little room for error. The stock appears significantly overpriced, particularly since earnings are expected to grow at a high-single-digit rate in the long run. For Walmart’s shares to see substantial gains, the company will need to exceed current expectations.
Amazon’s Significant AI Investments
Amazon’s announcement of a $200 billion capital expenditure commitment this year has overshadowed its positive Q4 results. Though its e-commerce growth lags behind Walmart’s, it is starting from a larger revenue base. Additionally, its profitable advertising segment has been a major growth catalyst throughout 2025, enhancing its retail operating margins.
The standout feature was the strong revenue growth from AWS, which surged by 24% last quarter. This highlights the surprise surrounding the sell-off of Amazon shares when management revealed plans to boost capital expenditures to expand AWS capacity. Notably, AWS has already started providing a significant return on invested capital, and the increased spending is expected to further drive AWS’s growth, given that demand continues to exceed supply, backed by a hefty contracted backlog of $244 billion.
Today’s Change
(2.56%) $5.25
Current Price
$210.11
Key Data Points
Market Cap
$2.3T
Day’s Range
$203.75 – $211.17
52wk Range
$161.38 – $258.60
Volume
66M
Avg Vol
47M
Gross Margin
50.29%
Clearly, Amazon is making a substantial wager on expanding AWS, which may lead to negative free cash flow this year. Nevertheless, the company’s management has a strong track record of increasing investments to build new facilities in both retail and cloud computing. Their expertise in interpreting demand signals and making timely investments generally results in improved free cash flow in the long run.
Currently, investors have the opportunity to buy shares of Amazon at a lower price. The stock is trading at approximately 26 times forward earnings estimates, significantly less than Walmart’s. Although earnings growth is expected to slow this year, it’s anticipated to pick up next year as additional AWS capacity becomes available. Overall, the P/E ratio for Amazon appears fair for a company experiencing a mid-teens growth rate and expanding margins, making Amazon’s shares currently more appealing than Walmart’s.
