Amazon has surpassed Walmart in annual revenue for the first time, becoming the company with the highest annual income.
Walmart announced on Thursday that its annual revenue for the most recent fiscal year was $713.2 billion, slightly lower than Amazon's $716.9 billion. In fact, this milestone had been indicated about a year ago when Amazon first surpassed Walmart in quarterly sales.
While this shift in position is largely symbolic, it highlights the competition between these two retail giants to define and keep up with changing consumer preferences. As artificial intelligence reshapes the way businesses operate, their profit models, and how sales are driven, they are entering a new chapter in this competition.
Amazon's rise to the top of the revenue rankings is not solely due to its vast online store operations and commitment to fast delivery. While its core retail business is the largest source of income, its extensive cloud computing, advertising, and seller services also drive sales growth:
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According to the latest annual filings, third-party seller services (including commissions and fees charged by Amazon for fulfillment, as well as shipping, advertising, and customer support costs) are expected to account for about 24% of Amazon's total sales by 2025. Amazon Web Services accounts for about 18%.
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Walmart's loss of the top position is not due to its own weakness, as its revenue has more than doubled over the past 20 years. Walmart relies on its more than 4,600 stores in the U.S. and about 600 Sam's Club locations to drive digital business growth, which grew 27% in the fourth quarter of the most recent fiscal year in the U.S. and has achieved double-digit growth for 15 consecutive quarters.
This expansion occurs as Walmart borrows from Amazon's model, attempting to position itself not just as a retailer but also as a technology company.
Walmart's ambitions are evident in several signs: at the beginning of December, Walmart moved its stock listing from the New York Stock Exchange to the tech-heavy Nasdaq. Earlier this month, Walmart's market value surpassed the $1 trillion mark—an valuation previously achieved almost exclusively by tech companies, including Amazon.
Additionally, Walmart's fourth-quarter earnings report was boosted by digital advertising and third-party marketplace business, reflecting Walmart's strategy to emphasize the development of higher-margin businesses and move beyond a brick-and-mortar retail mindset.
<h2>Amazon and Walmart's Artificial Intelligence Ambitions</h2>
Walmart's recent push for third-party marketplace growth is a response to Amazon's platform dominance. Even as it strives to catch up with Amazon in certain areas, Walmart is also attempting to gain an edge in new frontier fields.
In recent years, Amazon and Walmart have adopted different artificial intelligence strategies to enhance business efficiency and make products more appealing to consumers.
Walmart partnered with OpenAI's ChatGPT in October and collaborated with Google's Gemini in January to make its products easier to discover and purchase. It also has its own AI shopping assistant, Sparky. This virtual assistant, which looks like a smiling face, appears in the Walmart app to help shoppers find products.
Like many companies, Walmart is still in the early stages of AI application, and it remains unclear how this technology will impact its business in the long term
During the earnings call on Thursday, Walmart CEO John Furner stated that when customers use Sparky, their spending increases, with the average order value of customers using Sparky being about 35% higher than those who do not use the tool.
Walmart U.S. CEO David Guggina mentioned during the call that about half of Walmart app users have used Sparky. &#34;Agent-based artificial intelligence is increasingly being embedded across various areas of Walmart. It is enhancing our operations, improving employee productivity, and enhancing the customer experience.&#34;
Walmart CFO John David Rainey indicated that investments in artificial intelligence have been incorporated into the company's annual capital expenditure plan, expected to account for about 3.5% of sales. These expenditures also include investments in automation and store renovations.
However, Walmart's technological ambitions are also limited. When discussing artificial intelligence, Rainey stated that Walmart will rely on the expertise of technology companies rather than developing products in-house:
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&#34;As you can see from the announcements we've made, we are advancing AI development through partnerships. This allows tech companies to do what they do best—develop innovative technologies—while enabling us to focus on what we do best—transforming the best technologies into retail experiences that create value for customers, members, and the business.&#34;
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Similar to Walmart, Amazon is also facing new pressures to respond to the rise of agent-based e-commerce. Chatbot companies like OpenAI, Google, and Perplexity have launched automated e-commerce features aimed at changing the way people shop online.
While companies like Walmart, Etsy, and Shopify have announced shopping partnerships with AI platforms, Amazon has taken a wait-and-see approach. It has blocked agents from accessing its website and increased investment in its own shopping chatbot, Rufus, which is powered by Amazon's own models and Anthropic's chatbot Claude.
Amazon stated that Rufus has been used by over 300 million customers and generated nearly $12 billion in new annualized sales last year. After a slow rollout in beta form two years ago, Amazon has integrated Rufus into more areas of its app and website to encourage shoppers to use the tool.
Amazon CEO Andy Jassy stated last month that Rufus and other AI tools can assist customers in finding products just like physical store employees. &#34;I believe agents will help customers with this discovery. That’s also one of the reasons we’ve invested so much in our shopping assistant Rufus.&#34;
Meanwhile, Amazon is investing heavily in AI infrastructure. Earlier this month, the company announced it would invest up to $200 billion in AI projects this year, surpassing other major cloud service providers, which are collectively expected to spend nearly $700 billion by 2026. Most of Amazon's spending is expected to go towards data centers, chips, and networking equipment.
Amazon's investments are not limited to AI computing power. The company is also allocating significant resources and talent across its business areas to develop AI tools; it has launched a series of AI models and upgraded the Alexa assistant;
Since 2023, it has also invested $8 billion in Anthropic.
However, Wall Street is skeptical about Amazon's capital expenditure plans. After releasing its financial report on February 5, Amazon's stock price fell for nine consecutive days, with a market value evaporating by more than $450 billion

Amazon's financial report, explained in one place!

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Amazon has replaced Walmart to become the company with the highest annual revenue. Walmart announced on Thursday that its annual revenue for the most recent fiscal year was $713.2 billion, slightly lower than Amazon's $716.9 billion. The two companies have taken different strategies in the field of artificial intelligence: Amazon has significantly increased its investment in AI, while Walmart relies more on technology partnerships

- Amazon has surpassed Walmart in annual revenue for the first time, earning $716.9 billion compared to Walmart's $713.2 billion.  
- This shift highlights the intense competition between the two retail giants as they adapt to changing consumer preferences and integrate artificial intelligence into their operations.  
- Despite Walmart's growth, it aims to position itself as a tech company while pushing digital sales, with AI initiatives like the Sparky shopping assistant enhancing customer experience and increasing average order values.

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Amazon's annual revenue surpasses Walmart for the first time, as the retail giants ramp up the AI competition