 Did Amazon Just Become the Largest Retailer in the World? |
Source |
American Shipper |
Post Date |
02/18/2025 |
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KEY POINTS
?Amazons sales came in close to the high of guidance in the fourth quarter, and analysts are expecting sales to increase about 10% in 2025.
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?Amazons fourth-quarter sales came in ahead of what Wall Street is expecting for Walmarts fourth quarter.
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?Amazon could take over Walmart as the largest company in the world by sales this year.
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Is it official? Amazon (AMZN -0.73%) has been chasing Walmart (WMT -0.96%) as the largest company in the world by sales for years. Amazons sales typically grow at a faster rate than Walmarts, but although the gap has been closing for a while, Walmart has been growing fast enough to maintain its lead.
However, that might be about to change. After Amazons smashing fourth quarter, it might be pulling ahead in the race. Lets see whats happening with these two giants and how that might affect your investing thesis.
Amazon is on a roll
It has never made sense to bet against Amazon, and although the stakes are high right now, I would say that still holds true.
Sales increased 10% year over year in the fourth quarter, and double-digit growth for a company as large as Amazon is truly a feat. I almost wrote a rare feat, but its really unprecedented, because the only other company as large as Amazon is Walmart, and the last time Walmart reported double-digit quarterly growth was in 2007.
Total revenue in the fourth quarter was $187.8 billion. Amazon gives a detailed breakdown of where sales are coming from, and they include:
?$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"
Although it reported a fantastic quarter, with a 61% increase in total operating income, its first-quarter guidance came in below expectations and disappointed investors. Its guiding for revenue to increase 4% to 8% year over year. Amazon usually meets or exceeds guidance, although it may have foreign exchange headwinds, which is the reason management said it didnt come in at the high of guidance, or 11%, in the fourth quarter. Without that headwind, Amazons fourth-quarter sales did increase 11% year over year.
Amazon is buckling down on its artificial intelligence (AI) program, which it sees as the future of all app development. CEO Andy Jassy gave a nuanced explanation of why its so important, and although the company raised eyebrows with its $100 billion expected investment in AI in 2025, its setting itself up for further growth down the line. Analysts are expecting about $155 billion in first-quarter sales and $699 billion in 2025 sales, which implies a nearly 10% increase over 2024.
Walmart continues its steady growth
Walmart reports its fiscal 2025 fourth-quarter and full-year results next week. Analysts are expecting $179 billion in fourth-quarter sales.
If Walmart meets that, or even exceeds it somewhat, it will still be below Amazons results for a similar time period. Walmarts fourth quarter s Jan. 31, so its not totally comparable.
For the full year, Walmart should still be ahead, with $677 billion expected in sales for fiscal 2025, versus $638 billion for Amazon in 2024. For fiscal 2026, the average consensus for Walmart is $695 billion, a hair behind the average consensus for Amazons 2025 results. Heres a visual representation of how the gap is closing.
Does it matter?
It matters to some degree. Walmart is a steady choice for investors because it leverages its unbea retail network to grow and deliver value for shareholders. It pays a growing, reliable divid, and investors can feel confident about its ability to pay it.
And its growth story is far from over. Besides the ability to keep ing stores, which its always doing, Walmart is finding ways to generate engagement from its loyal customers and harness its platform to meet consumer needs. For example, e-commerce is one of its major growth drivers right now, increasing 27% year over year in the third quarter (ed Oct. 31). It has an edge over Amazon in its omnichannel options, which make uses of its 10,000+ stores globally. That doesnt mean its going to take over as the top e-commerce player, but it does mean it can hold its own and present opportunities that will keep it as the second-most important player in U.S. e-commerce.
As long as it continues to demonstrate steady growth, which has been picking up lately, falling into second place shouldnt make a difference to investors beyond losing that cachet.
As for Amazon, it demonstrates that as large as Amazon is, theres a lot more space to grow. As youll notice above, AWS brings in only about 14% of total revenue. With the largest opportunity it has existing in AI, that could go a lot higher.
Now is an excellent time to invest in Amazon, and if youre looking for a solid divid stock, Walmart can still fit the bill.
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