Walmart (WMT) recently reported its first quarter fiscal 2026 financial results. While the retail giant once again impressed with its bottom line performance and surpassed the Street’s forecast, concerns around rising tariffs and their impact on its margins remain front and center.

Despite these potential headwinds, Walmart’s continued evolution into a more diversified and higher-margin business could make WMT stock an attractive long-term play.

While tariffs will likely pressure Walmart’s cost structure, possibly leading to higher prices and uncertain demand, the retailer’s growing portfolio of profit drivers will help it absorb these impacts. Walmart has diversified its revenue and earnings and is no longer just a big-box retailer dependent on narrow retail margins. It has transformed into a multi-faceted business powered by e-commerce, marketplace, advertising, and membership programs, which positions it well to grow profits faster than sales.

Walmart’s Margins Are Well Protected

A key focus for Walmart is expanding profit faster than revenue, and that strategy is beginning to pay off. The first quarter marked a significant milestone, as the company achieved e-commerce profitability in the U.S. and its global operations. This was supported by improved last-mile delivery economics and customers paying extra for faster shipping.

Beyond logistics, Walmart’s shift toward higher-margin revenue streams is gaining momentum. Advertising, in particular, has become a standout performer. The company’s ad business surged 50% across all markets, bolstered by the acquisition of Vizio. In the U.S., Walmart Connect posted a 31% increase in ad revenue, while Sam’s Club saw a 21% rise. Internationally, Flipkart led the way with 20% growth.

Membership income is another key contributor to Walmart’s profitability. Across the enterprise, membership fee income climbed nearly 15%. Sam’s Club U.S. saw a healthy 9.6% increase, supported by a growing number of members and higher-tier “Plus” memberships. Walmart+ also recorded double-digit growth. Overseas, Sam’s Club China led the charge with membership income soaring over 40%, thanks to a significant jump in member counts.

Private-label products are also playing a bigger role in Walmart’s margin story. In the U.S., grocery private brand sales outperformed the broader category, with penetration improving by 60 basis points year-over-year. These in-house brands generally carry higher margins than national brands, providing another lever for profitability.

While tariffs may temporarily disrupt pricing and planning, Walmart’s growing capabilities across digital, media, and membership make it more insulated from such pressures than in years past. The company’s scale, operational efficiency, and diversification into higher-margin businesses are helping it protect its bottom line despite cost volatility.

Is Walmart Stock a Buy?

Walmart is better equipped than many of its peers to weather fluctuations in the cost of goods due to tariffs. Its massive scale, global sourcing network, and increasingly efficient e-commerce operations give it strong defenses against supply chain volatility and tariffs.

The retailer’s diversification into high-margin digital ventures and the rise of membership-based income streams (such as Walmart+) are also enhancing its earnings potential.

Additionally, Walmart has significantly scaled its delivery infrastructure, enabling it to reach 95% of the U.S. population with delivery options of three hours or less. In Q1 alone, deliveries made within that short time window surged by 91% year-over-year. In global markets like China and India, Walmart is pushing the envelope even further with delivery times measured in minutes.

Walmart’s strategic focus on value, convenience, and rapid delivery will power consistent growth. The retailer is well-positioned to safeguard its profit margins, and its long-term outlook remains highly attractive despite short-term macroeconomic concerns and trade-related headlines. Its solid U.S. business, growing e-commerce scale, improving profitability, and digital expansion position it well to deliver continued value to shareholders.

Wall Street remains bullish about WMT stock. After the Q1 earnings report, analysts maintain a “Strong Buy” rating on Walmart stock, reflecting confidence in the company's growth strategy and ability to perform across market cycles.