Walmart vs. Amazon: Which Retail Giant Offers Better Long-Term Growth?

Walmart (NYSE: WMT) and Amazon (NASDAQ: AMZN) dominate the retail landscape, benefiting their shareholders significantly. Walmart’s market capitalization stands at approximately $750 billion, while Amazon’s exceeds $2 trillion. Both companies are investing in future growth, which is essential for maintaining relevancy in a dynamic market.

To assess which company presents a better long-term return potential, it is crucial to examine their underlying business models and valuations.

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Walmart’s Business Model

Walmart relies on a straightforward strategy focused on reducing costs to offer lower prices to customers. This approach has proven effective since the company opened its first discount store over 60 years ago.

The commitment to low pricing remains consistent as Walmart invests in technology, particularly in developing omnichannel capabilities that improve customer convenience and experience. For example, many locations now provide same-day delivery options.

Walmart’s investment in enhancing its services has yielded positive results. In the fiscal fourth quarter, its core U.S. business reported a 4.6% increase in same-store sales. This growth reflects strong customer traffic, contributing 2.8 percentage points to sales performance. The period in question concluded on January 31.

While some investors express concern over what they perceive as conservative guidance for the current year—expecting sales growth between 3% and 4% and operating income growth of 3.5% to 5.5%—Walmart has a history of exceeding conservative estimates. Last year, it provided similar forecasts that it ultimately topped.

Walmart’s success is evident. Over the past 12 months, its stock appreciated by 58%, while the S&P 500 index gained just under 13%. This rise has elevated Walmart’s valuation, increasing its price-to-earnings (P/E) ratio to 39 from about 30 a year prior. For comparison, the S&P 500’s P/E ratio stands at 29.

Amazon’s Expansive Growth

Amazon started as an online bookstore over 30 years ago but has grown into a vast marketplace selling virtually every product. Known for competitive pricing and swift delivery, it has also diversified its offerings significantly, including devices like Alexa and the Amazon Prime subscription service.

With $638 billion in sales last year, 83% came from North America and international operations. However, Amazon Web Services (AWS)—which accounts for the remaining sales—brings in a majority of the company’s profits, contributing 58%. AWS, which provides cloud computing solutions, has experienced rapid growth, with increasing demand driven by organizations seeking data solutions. This segment stands to benefit as advancements in artificial intelligence continue.

According to Synergy Research Group, cloud infrastructure spending surged 22% year-over-year in the fourth quarter. AWS maintains a commanding 30% market share in this growing industry. Microsoft‘s Azure and Alphabet‘s Google Cloud follow with shares of 21% and 12%, respectively.

In the fourth quarter, AWS’s sales climbed 18.5% to $107.6 billion, while profits increased by 61.7% to $39.8 billion. Over the past year, Amazon’s stock rose by 15.3%. However, its P/E ratio has decreased from over 60 to 36, remaining higher than that of the S&P 500.

The Investment Decision

Selecting between these two giants can be challenging. Both companies have strong arguments for investment. However, if only one choice were available, I would prefer Amazon due to its relatively reasonable valuation and the robust market position of AWS in a rapidly growing sector.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, serves on The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is also on The Motley Fool’s board. Lawrence Rothman, CFA, has no position in any of the mentioned stocks. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Walmart. Additionally, the firm suggests long January 2026 $395 calls and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.