As retail giants Amazon.com Inc. (NASDAQ:AMZN) and Walmart Inc. (NYSE:WMT) enter the crucial holiday shopping season, their diverging growth trajectories and profitability models paint a compelling picture for investors watching the retail space.

The fourth quarter, encompassing Black Friday, Cyber Monday, Thanksgiving, and Christmas shopping, traditionally represents the most critical period for retailers, often accounting for up to 40% of their annual sales.

This extended shopping period, which kicks off with Black Friday deals and continues through post-Christmas clearances, has become increasingly competitive as consumers seek both in-store and online bargains, making it a crucial battleground for retail dominance.

Market data shows Amazon's remarkable rise, with its $2.365 trillion market capitalization now dwarfing Walmart's $740.99 billion. Both companies have delivered strong five-year returns to shareholders, with Amazon up 142.84% and Walmart closely trailing at 140.09%.

The upcoming fourth quarter could mark a historic shift in retail dynamics. According to Forrester analyst Jitender Miglani, Amazon's quarterly revenues are projected to surpass Walmart's for the first time in Q4 2024, with estimates of $186 billion compared to Walmart's expected $180 billion.

December Stock Gains: A Five-Year Snapshot

Historical Q4 Net Sales Performance (in billions of dollars):

Source: Statista

Walmart has significantly expanded its digital presence to compete with Amazon's online dominance. The company has invested heavily in its e-commerce infrastructure, including the launch of the Walmart+ membership program, expansion of online grocery delivery, and the development of its marketplace platform for third-party sellers.

The profitability gap between the two retail giants continues to widen. Wall Street analysts project Amazon's net income to reach $51 billion in 2024, with an 8% margin, while Walmart is expected to achieve $20 billion with a 3% margin in financial year 2025.

Looking ahead, Forrester forecasts the combined U.S. retail sales of Amazon and Walmart to reach $1.5 trillion by 2029, representing one-fourth of the total U.S. retail market. Their combined e-commerce sales are expected to capture two-thirds of total U.S. online retail sales, reaching $1.1 trillion.

Both companies remain significant employers, with Walmart leading at 2.1 million employees compared to Amazon's 1.525 million.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.