Every Named Part Of Walmart’s Second Engine Outgrew Sales In Q2. Suppliers And Sellers Fund Most Of It.

Walmart’s second quarter release states that marketplace, fulfillment services, membership, advertising and other commerce solutions are strengthening its business and improving the economics of the company. That is the Second Engine: the set of businesses Walmart earns from alongside selling merchandise. The release files it under a financial framework priority of evolving the business mix while diversifying revenue and profit sources.

Consolidated net sales grew 5.0% in constant currency. Global advertising rose 38%, with Walmart Connect in the U.S. up 43% excluding VIZIO and International advertising up 20% led by Flipkart Ads. Marketplace sales in Walmart U.S. grew 52%, and Walmart reported that nearly half of the marketplace business now flows through its fulfillment services. Global membership fee revenue grew 17%, with Walmart+ fee revenue up double digits on record second-quarter net adds, International membership fee revenue up 28%, and Sam’s Club U.S. membership fee revenue up 6%.

Membership is the only named component customers fund

Advertising is supplier and seller budget. Fulfillment services are fees sellers pay Walmart to store and ship their inventory. Marketplace revenue to Walmart is seller commission. Membership is the exception, funded by customers paying for Walmart+ and Sam’s Club.

That is a description of the arrangement, not a complaint about it. The useful part for a supplier is knowing which line their money lands in.

Walmart discloses that in a footnote on the release. Its global advertising business is recorded either in net sales or as a reduction to cost of sales, depending on the nature of the arrangement. That second treatment is why advertising appears in Walmart’s margin discussion rather than only in a revenue line. Consolidated gross profit rate rose 96 basis points, which Walmart attributes to tariff refunds and to favorable business mix led by global advertising.

1P suppliers touch one component, 3P sellers touch three

For a 1P supplier, exposure runs through advertising, and it runs into the line Walmart reports as gross profit. Walmart U.S. gross profit rate rose 158 basis points in the quarter, which the company attributes to tariff refunds and to business mix primarily from growth of digital advertising. That is the same margin structure a supplier negotiates against on cost of goods. A Walmart Connect commitment made inside a joint business plan sits in it, not beside it, and suppliers who plan advertising and trade spend on separate calendars with separate approvers should consider whether that separation matches how the money lands on the other side of the table.

For a Marketplace seller, all three supplier-funded components apply at once. Commission on every sale, fulfillment fees when using Walmart Fulfillment Services, and advertising to win placement. Walmart’s disclosure that nearly half of marketplace volume now flows through fulfillment services means roughly half the marketplace business is paying into two of the three before any advertising. Sellers modeling contribution margin on commission alone are modeling a smaller share of what they pay Walmart than that disclosure suggests they should.

McMillon named two of these components a year ago

Doug McMillon, then Walmart’s chief executive, told analysts in August 2025 that having businesses like advertising and membership growing helps the company with flexibility when it decides to absorb part of tariff cost increases. He named those two, not the full set.

This quarter shows that flexibility in use. Walmart received nearly $2.9 billion in refunds under IEEPA tariff proceedings, delivered more than 11,000 rollbacks in Walmart U.S., and states that its roughly 17% adjusted operating income growth in constant currency included a 750 basis point net benefit from those refunds. Setting the refunds aside, Walmart puts underlying operating income growth at the top end of its 7 to 10% guidance, against 5.0% net sales growth. Reported operating income grew 28.8%, which overstates what the Second Engine contributed.

The adjusted figure is the one worth planning against. Underlying profit grew faster than sales in a quarter when Walmart was actively spending refund proceeds back into price. Rainey said the operating income outlook reflects continued prioritization of the second quarter refunds into customer experience and price investments in the second half, and asked analysts to consider the second and third quarters together to assess underlying growth. The refund benefit is temporary by design. The margin contribution from business mix is not.

The engine is being exported

Walmart raised its fiscal 2027 outlook alongside the quarter, and stated that it expanded its marketplace platform into markets outside the U.S. during the period. In June it opened Walmart.com to international customers with shipping to Mexico.

Rainey told investors in February that advertising and membership fees together accounted for roughly a third of Walmart’s operating income in the fourth quarter of fiscal 2026. Walmart did not repeat that figure this quarter. Every component behind it grew again, and the platform carrying them is now operating in more markets than it was three months ago.

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