Walmart vs Costco: This Is The Better Stock To Buy

Walmart (NYSE: WMT | WMT Price Prediction) and Costco (NASDAQ: COST) just delivered earnings that show two very different retail playbooks working at once.

Walmart leaned on advertising, marketplace, and faster delivery to expand its empire. Costco kept doing what it does best: opening clubs, renewing members, and pushing Kirkland deeper into the cart. Both reports beat the Street, but the businesses behind the beats look nothing alike.

Ads and Marketplace Carry Walmart. Memberships Carry Costco.

Walmart’s Q1 FY27 revenue hit $175.684 billion, up 6.08% year over year, with adjusted EPS of $0.66. The real story sits underneath. Global eCommerce climbed 26%, marketplace sales jumped nearly 50% (the best in 10 quarters), and global advertising grew 37%.

New CEO John Furner pointed to “higher-margin commerce solutions” as the strategy, and the numbers back him up. Upper-income shoppers keep showing up, which is unusual for a discount banner.

Costco’s Q3 FY26 looked equally healthy but for different reasons. Revenue reached $70.527 billion, up 11.58%, with EPS of $4.93. Comparable sales rose 9.8% reported, and digitally enabled comps were up 21.5%.

Membership fees, the engine that funds everything, grew 10.7% to $1.373 billion, with a worldwide renewal rate of 89.7%. Executive members now drive 75.0% of net sales. That is a moat.

Wider Net vs. Deeper Loyalty

Walmart is widening the net. Furner is layering ad tech, VIZIO, Sam’s Club, and Flipkart onto a base where Walmart International grew 18% and China popped 22.3%.

Costco is going deeper. Roughly 12 new warehouses are planned for the rest of FY2026, fresh Kirkland items keep landing, and prices on select Kirkland SKUs are actually coming down. One company sells a platform to brands. The other sells trust to households.

Margins and Tariffs Will Decide the Next Earnings Report

I will watch whether Walmart can absorb its 700 bps Health & Wellness headwind from Maximum Fair Pricing without denting the FY27 EPS range of $2.75 to $2.85. Free cash flow already swung to negative $1.946 billion on heavy capex, which is fine if the automation pays back.

For Costco, the question is simpler: can traffic keep growing at 2.4% with tariffs squeezing import categories?

Why I Lean Costco for Quality, Walmart for Optionality

On pure business quality, Costco screens stronger. The membership renewal rate barely moves, and that recurring fee model is the closest thing in retail to a software subscription. You are paying up for it, though. Shares trade at a 48 P/E after a YTD gain of 11.77%, and the stock is down 6.53% over the past month, which tells me others share the valuation worry.

Walmart looks like the better optionality bet. The ads and marketplace flywheel is still early, the $30 billion buyback gives a floor, and the stock’s 22.44% one-year gain reflects real operating momentum.

For a turnaround-style investor it is less interesting, but for someone who wants a defensive name with a hidden ad business, I think Walmart fits. Tariff clarity is the key variable that could re-rate either name from here.