Amazon Overtakes Walmart as Top US Retailer by GMV

What happened

J.P. Morgan data reveals Amazon became the largest U.S. retailer by gross merchandise value in 2025, unseating Walmart for the first time. Walmart's FY27 Q1 report showed strong top-line growth of 7.3%, but operating income was hit by a 250 bps fuel headwind and free cash flow turned negative $1.9B as inventory swelled 8.9%. The news underscores Amazon's relentless scale in e-commerce and retail media, while Walmart's own advertising business (Walmart Connect) grew 37% but remains a fraction of Amazon's ad revenue. Walmart's valuation at 40x P/E already prices in a successful platform shift, yet the GMV crown loss questions whether its store-based model can keep pace with Amazon's digital flywheel. Investors face a binary: either Walmart's services mix (ads + membership) eventually outgrows its legacy retail drag, or the multiple compresses toward traditional retail levels.

Implication

While Walmart's scale and omni-channel strategy remain formidable, losing the GMV leadership title to Amazon signals a secular shift in retail dominance. The stock's 40x P/E leaves no room for error, especially as free cash flow turns negative and cost headwinds (fuel, fulfillment) persist. Walmart must prove its advertising and membership growth can deliver operating leverage faster than Amazon's ecosystem, or risk multiple compression. The near-term catalyst is Q2 FY27 earnings: any sign of slowing services growth or renewed margin pressure would accelerate de-rating. For now, the wait rating is justified; better entry points emerge if the stock corrects toward $105 or if fuel headwinds abate noticeably.

Thesis delta

The thesis now shifts from Walmart as an unchallenged retail leader to a challenger in a two-horse race where Amazon holds the structural edge in e-commerce and advertising. The GMV data adds urgency to Walmart's need to prove its services mix can drive margin expansion, as the market's platform premium looks less assured. Investors should monitor whether Walmart's advertising growth can sustain >30% and whether free cash flow recovers—otherwise the multiple is vulnerable.