In the retail world, the two dominant heavyweights remain Amazon (AMZN 1.31%) and Walmart (WMT +0.96%). In 2025, it was Walmart whose stock outperformed, with it's shares up more than 25%, as of this writing, while Amazon shares were up modestly on the year.
However, let's look at which stock looks poised to outperform in 2026.
Image source: Getty Images.
The case for Amazon
NASDAQ: AMZN
Key Data Points
Amazon is the king of e-commerce, and the company is only expanding its lead through the use of artificial intelligence (AI) and robotics. The company now has more than 1 million robots operating in its fulfillment centers, all of which are coordinated through its Deepfleet AI model to make them more efficient. Meanwhile, it's using AI to also optimize driver routes, help delivery people find difficult-to-locate drop-off points, and determine the best warehouse to store items, all to speed up delivery times and reduce costs.
The company is also using AI to help drive growth. With AI, it's now easier for merchants to list on its site and create better listings. It's also using AI to help boost its high-gross-margin sponsored business by enabling better targeting and improving ad campaigns.
Combined with its warehouse and logistics efficiencies, this is driving strong operating leverage in Amazon's retail segment. Last quarter, its North American revenue rose 11%, while the company's adjusted operating income surged 28%.
E-commerce is just half the story with Amazon, though, as it also operates the largest cloud computing company in the world in AWS (Amazon Web Services). The business is growing quickly, given the demand for AI services, and revenue should start to accelerate as the company spends aggressively building out its data center infrastructure.
From a valuation standpoint, Amazon is currently the cheaper of the two stocks, trading at a forward price-to-earnings (P/E) ratio of around 29 times next year's analyst estimates compared to more than 38.5 times for Walmart.
The case for Walmart
NASDAQ: WMT
Key Data Points
After Amazon came on the scene and started to dominate the world of e-commerce, Walmart made a somewhat subtle shift to its model that helped the retailer reestablish itself. That move was leaning into groceries, which are less impacted by e-commerce sales. Today, Walmart has become the largest grocer in the U.S.
That move is also one of the big reasons why the retail giant has become such a consumer staples stalwart, despite facing tariff headwinds. Everyone needs to eat, and Walmart is the place to shop for basic necessities as it is the low-cost leader. The company is always willing to push prices to win share, and, as a result, it tends to deliver solid results in both good and bad economic times.
More recently, the company has taken a page from Amazon's book, with its Walmart+ membership. Members get perks such as a free streaming service (Peacock or Paramount+) and savings at gas stations; however, the biggest one is free same-day delivery. This, together with some higher-quality food offerings and its everyday low prices, has been helping the retailer woo more affluent shoppers to its stores.
It's also helping Walmart attack Amazon on its own turf with e-commerce. Walmart's e-commerce revenue has risen by 20% or more in seven straight quarters in the U.S. and accounted for nearly all its 4.5% increase in U.S. same-store sales last quarter. Within its e-commerce segment, it also saw a 33% increase in its Walmart Connect advertising revenue.
The verdict
While Walmart is the more defensive stock, given that much more of its sales come from groceries and other necessities, Amazon is the faster-growing and cheaper stock. Amazon also has added growth coming from AWS, which is actually its largest segment by profitability.
Given that, I like Amazon as a strong rebound candidate in 2026 and think it will be the stock to own next year.
