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Investing.com -- Walmart’s long-awaited U.S. e-commerce profitability could arrive as soon as the first quarter of fiscal 2025 (1Q25), according to Morgan Stanley (NYSE:MS). 

In a note on Monday, the firm cited scale benefits in Walmart’s first-party (1P) and third-party (3P) marketplace, advertising, and membership income as key drivers of this milestone.

“We estimate US e-commerce profitability could come as soon as 1Q25, following over a decade of investments in 1P/3P e-commerce, Advertising, Fulfillment and Membership, that are now paying off,” the analysts wrote.

The report follows Walmart’s fourth-quarter fiscal 2024 (4Q24) earnings results, where the company provided new disclosures on e-commerce incremental margins, e-commerce EBIT growth, and membership&other revenue by segment. 

Based on this updated data, Morgan Stanley adjusted its Alternative Profit Model and now sees Walmart (NYSE:WMT) gaining greater control over its profit flow-through.

“This development affords WMT a substantial measure of control to dial adjusted operating income growth based on how much e-commerce profits flow through to the bottom line,” the note added.

While Walmart’s potential for e-commerce profitability would have been a major stock catalyst several years ago, Morgan Stanley believes that it is now largely priced into shares. 

However, the bank emphasizes that this milestone validates Walmart’s long-term omnichannel strategy, reinforcing its ability to compete with digital-first retailers while leveraging its brick-and-mortar footprint.

The report highlights how Walmart’s multi-year investments in fulfillment infrastructure, digital advertising, and subscription-based revenue streams are starting to yield sustainable profit contributions, marking a turning point for the retail giant’s e-commerce business.

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