Did Amazon Just Become the Largest Retailer in the World?

Is it true? Amazon (NASDAQ: AMZN) has been in competition with Walmart (NYSE: WMT) for quite some time to be recognized as the largest retailer in the world based on sales. While Amazon's sales have generally been growing faster than Walmart's, Walmart has managed to keep its lead by also seeing significant growth.

However, this situation may soon shift. After a strong fourth quarter, Amazon seems to be gaining ground in this competitive race. Let's explore the latest performance of these two retail giants and what it may mean for your investment decisions.

Amazon's Impressive Growth

It has always been risky to bet against Amazon, and while the competition is fierce right now, this still holds true.

In the fourth quarter, Amazon's sales grew by 10% compared to the previous year, which is remarkable for a company of its size. In fact, it is unprecedented for a company as large as Amazon because the last time Walmart reported such strong quarterly growth was back in 2007.

The total revenue for Amazon in the fourth quarter reached $187.8 billion, broken down as follows:

• $75.6 billion from online stores
• $47.5 billion from third-party sellers
• $28.8 billion from Amazon Web Services (AWS)
• $17.3 billion from advertising
• $11.6 billion from subscription services
• $5.6 billion from physical stores
• $1.6 billion from other sources

Despite this impressive performance, Amazon's guidance for the first quarter was below what investors had hoped for, projecting a year-over-year revenue increase of 4% to 8%. Although Amazon usually meets or exceeds its guidance, foreign exchange challenges may have contributed to this lower estimate. Without those challenges, its fourth-quarter sales would have shown an 11% year-over-year increase.

Moreover, Amazon is heavily investing in its artificial intelligence (AI) initiatives, which it sees as essential for future growth in app development. CEO Andy Jassy highlighted the importance of this technology, and although the company announced a substantial investment of $100 billion in AI by 2025, it is setting the stage for further expansion. Analysts expect around $155 billion in sales for the first quarter and $699 billion in 2025, indicating a nearly 10% projected growth over 2024.

Walmart's Steady Progress

Walmart is set to announce its fiscal 2025 fourth-quarter and full-year results soon, with analysts predicting around $179 billion in sales for the fourth quarter.

If Walmart meets or beats this expectation, it will still be short of Amazon's similar results for the same period since Walmart's fourth quarter concludes on January 31, rendering a direct comparison somewhat misleading.

For the full fiscal year, Walmart is expected to report around $677 billion in sales for 2025, outpacing Amazon’s anticipated $638 billion for 2024. For fiscal 2026, projections suggest Walmart might earn about $695 billion, which is slightly below the expected $699 billion for Amazon in 2025. This illustrates how closely matched the two competitors are becoming.

WMT Revenue (TTM) data by YCharts

Does This Really Matter?

To some extent, yes. Walmart provides a stable investment opportunity due to its extensive retail network, which ensures it continues to grow and deliver value to shareholders. It is known for its increasing and reliable dividends, giving investors confidence in its ongoing payment capability.

Furthermore, Walmart's growth story is not finished. The company continues to open new stores while finding innovative ways to engage its loyal customer base and address consumer demands. Its e-commerce division, for example, has seen a year-over-year growth of 27% in the third quarter (ending October 31). Walmart benefits from its extensive omnichannel presence, utilizing its over 10,000 global stores. While it may not outpace Amazon as the top e-commerce player, it remains a strong contender in U.S. online retail.

As long as Walmart demonstrates steady growth, which has been rising lately, falling to second place may not significantly concern investors, aside from losing a bit of prestige.

For Amazon, this development highlights that despite its size, the potential for growth remains substantial. As mentioned earlier, AWS makes up only about 14% of total revenue, with significant growth potential especially in the AI sector.

Now might be an opportune time to invest in Amazon, while Walmart remains an attractive choice for those searching for a reliable dividend stock.

John Mackey, the former CEO of Whole Foods Market, which is a subsidiary of Amazon, sits on the board of directors for The Motley Fool. Jennifer Saibil has investments in Walmart. The Motley Fool holds positions in and recommends both Amazon and Walmart. They maintain a disclosure policy.

Amazon, Walmart, Growth