Walmart’s automation push is paying off.

At Walmart US, over 45 percent of the volume of its e-commerce fulfillment centers is now automated. Around 1,800 stores receive freight from 15 regional distribution centers that are in various stages of automation.

“As a result, our supply chain teams are processing more units through our distribution centers and sales centers,” said John David Rainey, executive vice president and chief financial officer at Walmart. “And while we are spending more on capital expenditures than ever before, we are pleased with the returns on those investments, particularly the automation of our supply chain.”

Walmart expects that about 3,000 of its 4,600 U.S. stores will receive deliveries from the automated facilities by the end of 2024.

“The ability for a store to get a load on pallets is so helpful. As we increase density in these (fulfillment) centers, an associate no longer has to fill a pallet just by aisle, but in many cases by section. I remember working in stores years ago and it was a little bit of a treasure hunt to find the items you needed, the boxes you needed,” said John Furner, president and CEO of Walmart US, who noted that the combination of automated fulfillment and in-store location technology “makes it much easier for our associates to access inventory and get those things in front of people.”

Delivery costs are also being reduced at a rapid pace, helping to reduce global e-commerce losses, particularly at Walmart US and Flipkart. According to Rainey, net delivery costs per order have fallen by almost 40 percent year-on-year.

While in-store pickup is growing faster than sales at Walmart or Sam’s Club stores, deliveries are growing even faster than pickup, CEO Doug McMillon said on the conference call.

Rainey cited another reason for the company’s delivery improvements, pointing out that the stores’ proximity to customers has enabled faster delivery times.

Deliveries directly to stores increased by about 50 percent in the second quarter, Rainey said. Customers are “increasingly choosing and paying for delivery of their e-commerce orders in less than one or three hours.”

America’s largest retailer is pouring billions into automation projects to speed up the order fulfillment and delivery process. The company has already opened four “next-generation” distribution centers in Illinois, Indiana, Texas and Pennsylvania. The company also plans to open a fifth high-tech facility in Stockton, California, by 2026. The fulfillment centers are built to enable next-day or two-day shipping of more products across the U.S. and double the storage capacity of a traditional Walmart warehouse.

These warehouses are powered by robotic technologies that focus on the five-step process of unloading, receiving, picking, packing and shipping customer purchases. Automated forklifts that can move pallets of goods are also a key part of these facilities as part of the company’s partnership with Fox Robotics. Walmart is reportedly investing $200 million in the forklifts.

Beyond its next-generation facilities, Walmart is already retrofitting its 42 regional distribution centers with various automation projects, and the retailer expects this project to be completed by 2030.

Analysts at Jefferies recently estimated that Walmart could increase its earnings before interest and taxes by $20 billion by fiscal 2029, largely due to its efforts in automation and artificial intelligence.

Rainey said generative AI has aided the store-to-home delivery process. “Employees assembling online orders can quickly find what they’re looking for when they’re shown high-quality images of product packaging,” he added.

Overall, Walmart reported a 4.8 percent increase in sales to $169.3 billion in the second quarter, with the U.S. business growing 4.2 percent. Net profit was $4.5 billion.

However, a big area of ​​growth for the company is its Marketplace and Walmart Fulfillment Services (WFS) segments, which have each grown more than 30 percent over the past four quarters. Growth among sellers using Marketplace fulfillment services increased 8 percentage points in the second quarter. The company said more than 40 percent of Marketplace sellers use WFS, which is Walmart’s counterpart to Amazon’s Fulfillment by Amazon (FBA) service.

Walmart continues to add new services to its Marketplace sellers and recently introduced its Walmart Cross Border offering. This service gives sellers who manufacture or source their goods in China full access to Walmart’s ocean freight network.