Target's Profit Doubles: Ad Network Roundel and Same-Day Delivery Drive the Growth

Major US retailer Target beat expectations in the second quarter, posting net income of $1.87 billion — more than double last year's figure. Nearly $1 billion in tariff refunds contributed to the gain.

Net sales rose 5.3% year over year to $26.5 billion. The biggest gain came from the company's ad business, Roundel, whose revenue jumped 28.6% to $279 million, up from $217 million a year earlier. The broader "non-merchandise" sales segment, which includes the loyalty program and third-party marketplace, grew 20.1% overall.

In-store traffic rose 3.6%, digital sales rose 8.7%, and same-day delivery outpaced last year's figure by more than 25%. CEO Michael Fiddelke, chief commercial officer Cara Sylvester, executive vice president of finance Jim Lee, and COO Lisa Roath discussed the results on the earnings call.

Fiddelke noted that traffic to Target's site referred from AI platforms — OpenAI, Google Gemini, and others — is growing 3.5 times faster than the industry average. The company named its first-ever chief AI officer, Chandu Nair, earlier this year.

For back-to-school season, Target rolled out AI-generated personalized shopping lists for teachers and college students. Sylvester said the number of lists created is up 50% year over year, the number of items added to them is up more than twofold, and conversion on back-to-school pages climbed nearly 20%.

The results were strong enough that the company raised its full-year guidance, now projecting roughly 5% annual net sales growth, a percentage point above its prior forecast. CFO Jim Lee discussed steps to offset tariff impacts, including shifting countries of origin and working with suppliers to find offsetting savings.