How Retail Giants Tap Recurring Revenue to Increase Profits: Walmart's 17% Membership Surge Leads the Way

The retail landscape is undergoing a fundamental shift in how companies generate earnings. Membership-driven and advertising-supported revenues are increasingly becoming the profit engine for major players in the sector. Walmart Inc. exemplifies this trend, with its membership business posting a 17% year-over-year jump in the third quarter of fiscal 2026, signaling a strategic pivot toward higher-margin revenue streams.

The Membership Revenue Inflection Point

For Walmart, the numbers tell a compelling story. Membership income contributions surged 17% annually, while the broader membership and ancillary income category grew 9% during the quarter. This growth wasn’t confined to a single geography—international membership income climbed 34%, with Sam’s Club China driving particularly strong penetration. Domestically, Walmart Plus achieved double-digit membership income growth fueled by net member additions and service expansions, while Sam’s Club U.S. posted 7% membership income growth supported by renewed member retention and participation in premium tiers.

The strategic importance of this revenue stream cannot be overstated. Membership fees and advertising now account for approximately one-third of Walmart’s consolidated adjusted operating income, a stark contrast to the lower-margin profile of traditional retail sales. Walmart Plus achieved its strongest quarter for net member additions since launch, driven by service enhancements including accelerated delivery capabilities, the OnePay rewards card, and expanded entertainment offerings.

Retail Peers Follow Similar Playbook

Walmart is not alone in recognizing the profit potential of recurring revenue models. Target Corporation is aggressively building its non-merchandise revenue base, reporting 18% growth in these categories during the third quarter. Membership, advertising networks (Roundel), and marketplace offerings all expanded at double-digit rates, providing crucial margin protection against weaker discretionary spending patterns.

Costco Wholesale Corporation remains the gold standard for membership monetization. The first quarter of fiscal 2026 saw Costco generate $1.329 billion in membership fee income, up 14% year-over-year. With 81.4 million paid members and 39.7 million Executive members, Costco demonstrates how this model can sustain profitability and increase profits across economic cycles.

Valuation and Growth Outlook

From a market perspective, Walmart’s stock has gained 23.9% over the past 12 months, slightly outpacing broader retail sector performance of 23.5%. The forward price-to-earnings multiple sits at 38.45, above the industry average of 35.09, reflecting investor confidence in the company’s profit-generation capabilities. Consensus estimates project Walmart’s fiscal year sales to grow 4.6% and earnings per share to rise 4.8%, suggesting sustained momentum.

The convergence of membership expansion, advertising integration, and marketplace development across major retailers signals a structural shift in how the industry will compete and increase profits going forward. These recurring revenue streams provide both downside protection during consumer spending slowdowns and upside optionality as customer engagement deepens.