Walmart finds its cushion in advertising as tariffs bite
By Seb Joseph • August 22, 2025 •
Ivy Liu
Walmart has a plan to stay profitable as President Donald Trump’s tariffs push up costs. It’s called advertising.
In the second quarter, Walmart’s ad revenue jumped 46% year over year, a number padded by the addition of Vizio, the smart TV maker it picked up last year. Strip that out, and the U.S. business still looks strong: Walmart Connect, its retail media network, grew 31%.
That’s impressive in any cycle. Right now — in a margin-squeezed retail world — it’s vital half of the retailer’s incremental profit last quarter came from advertising, membership and marketplace fees. Advertising is what lets Walmart absorb higher import costs while keeping prices low enough to pull in shoppers.
“From a business model point of view, the fact that we have businesses like advertising and membership growing obviously helps with flexibility as it relates to when we decide to absorb part of a tariff cost increase,” said Doug McMillon, president and CEO of Walmart, told analysts as the company reported second quarter results Thursday (August 21).
In other words, Walmart’s going to lean harder on advertising. It doesn’t have much choice. The Trump administration’s sweeping tariff hikes are now in effect, hitting imports with the steepest duties in a century. Some categories caught breaks, others dodged, but the broad increases are bad news for retailers that have managed to hold the line so far.
“The way things have played out so far, the impact of tariffs has been gradual enough that any behavioural adjustments by the customer have been somewhat muted,” said McMillon. “But as we replenish inventory at post tariff price levels, we’ve continued to see our costs increase each week, which we expect will continue into the third and fourth quarters.”
It’s a sobering outlook, coming after a quarter where profits fell short of Wall Street expectations. Eventually, Walmart may have to raise prices to boost those numbers, but for now, the goal is to hold them down as long as advertising and membership give it cover.
And Walmart isn’t wasting time. It’s opening up its ad inventory to more programmatic buyers beyond The Trade Desk and hiring aggressively to build out its retail media operations.
“Walmart’s global advertising growth is outpacing the U.S.,” said Sarah Marzano, a principal analyst at eMarketer covering retail and ecommerce. “The company’s marketplace expansion is fueling this, as more sellers and assortment create new advertising opportunities.”
Whether Walmart builds or buys its way to that future is an open question. Quality ad tech is trading at distressed valuations, and speed favors acquisition over a multi-year build. Amazon isn’t waiting. Neither can Walmart.
