Walmart's online grocery business remains growth driver in Q1

The retailer expects to offer grocery pickup at 3,100 of its stores and delivery at 1,600 of those locations by year-end.

Walmart continues to gain momentum in its e-commerce business as it ramps up online grocery in its battle against Amazon. The company's first quarter financial results were also bolstered by comparable sales growth of 3.4%, which Walmart said is its best Q1 comp sales in nine years.

Overall, the world's largest retailer ended the quarter with online sales growth of 37%, with online grocery contributing significantly. The company said it added about 350 grocery pickup locations and that pickup and delivery are now available in more than 2,450 and nearly 1,000 locations, respectively. The retailer expects to offer grocery pickup at 3,100 of its stores and delivery at 1,600 of those locations by year-end.

The online grocery and e-commerce strategy lines up with the company's broader omnichannel efforts as it battles Amazon. Walmart announced this week that it will roll out free next day delivery for orders of at least $35. The service will start in Phoenix and Las Vegas before eventually reaching 75% of US residents. The move can be seen as a counter to Amazon's announcement last month that it would offer free, one-day shipping for Prime members.

Walmart is also heavily investing on the technology front. CEO Doug McMillon shed some light on the company's acquisition of Silicon Valley-based Polymorph Lab last month, noting that the ad-tech startup will make it easier for brands to advertise with Walmart and send personalized digital ads to customers. McMillon also touted the company's Store No8 incubator and its work around AI development.

"This lab allows us to explore the possibilities AI can contribute to the store experience through real-world solutions," McMillon said. "The team will initially focus on inventory and shelf availability, and we'll be in data gathering mode early on. I'm excited to see what we'll learn and how we'll scale those learnings to benefit customers across our business."

As for the numbers, Walmart reported net income of $3.84 billion, or $1.33 a share. Revenue came to $123.9 billion with non-GAAP earnings of $1.13 a share. Analysts expected revenue of $124.9 billion and earnings of $1.02 a share. Shares of Walmart were up about 3% in early trading.