Zaid

So that will let them run ads directly into people's living rooms and I guess collect all the data that you're watching on TV, which is very creepy, but that's what pretty much every company does at this point.

Now, the second reason for Walmart's improved margins is automation and inventory efficiency.

Walmart is now using AI to better manage inventory.

inventory only increased 2.6% in 2025, which was half the rate of their sales growth.

That means that Walmart is getting better at managing inventory, which helps them save on storage costs.

They're also automating their supply chains and their warehouses to save on labor costs.

So that efficiency is resulting in better margins for Walmart.

And finally, the third driver of higher margins is membership revenue.

Now, on top of Walmart Plus, Walmart also owns Sam's Club, which some people say is better than Costco.

Now, personally, I'm a Costco guy.

I haven't been to Sam's Club in so long, but a lot of people I know prefer Sam's over Costco.

If you guys have any thoughts on that, let me know in the comments.

But yeah, memberships is a growing business for Walmart.

They generated $4.3 billion in membership revenue in 2025, which was up 15% from 2024.

And again, that's pure margin right there.

So when you put it all together, Walmart has a booming ads business, tighter inventory control, more automation in their warehouses, and a sticky membership revenue, you understand why operating income is growing faster than sales.

And the cherry on top for investors might be that Walmart is now embracing AI commerce.

Walmart recently announced a partnership with OpenAI that allows ChatGPT users to buy stuff from Walmart directly inside ChatGPT.

So the company continues to innovate.

In fact, Walmart wants investors to treat it like a tech company.