As Trumpโs trade war heats up and new tariffs hit stores across the U.S., investors are pouring money into Amazon โ convinced it's better prepared than its competitors, like Walmart.
Even though Walmart just reported strong earnings, Wall Street still seems to believe Amazon is the safer long-term play.
๐ Whatโs Going On?
Walmart said prices will have to go up due to rising costs from tariffs.
Despite that, Walmartโs earnings beat expectations with a 3% jump in revenue compared to last year.
Walmartโs stock is up 53% over the past year โ way more than Amazonโs 12% gain.
But investors think Amazon is better built to handle trade tensions.
๐ต Tariffs Hurt Retailers โ But Amazon Has an Edge
Walmartโs CEO Doug McMillon said, โMost of our products are made in the U.S., but the tariffs are still too big to fully absorb. Our profit margins are already tight.โ
Retailers like Walmart rely heavily on goods from overseas. Amazon, on the other hand, makes a lot of money in ways that donโt involve shipping products across borders.
๐ฆ Amazonโs Secret Weapons:
Cloud services โ๏ธ
Artificial Intelligence ๐ค
Ads ๐ข
Satellite internet ๐
These income sources arenโt affected by tariffs, giving Amazon more stability.
๐ Margin Game: Amazonโs Profits Have Skyrocketed
A decade ago, Amazon and Walmart had similar profit margins (mid-20% range).
Now, Amazonโs gross margin has doubled to 49%, while Walmartโs has stayed the same.
Walmart is catching up with:
Online sales hitting $32.5B last quarter (up 22%)
More ad revenue and subscription services
But those are still closely tied to consumer spending, which can be shaky during economic stress.
๐ผ The Bottom Line: Amazon Makes More
Even though both companies are expected to bring in $700 billion in revenue this year:
**Amazonโs operating income is expected to hit $77B