Walmart commits about $6 billion more to Symbotic for automation at 25 distribution centers

Walmart has committed about $6 billion to expand its work with Symbotic, bringing more of the robotics company's automation to 25 of its U.S. regional distribution centers, the two companies announced after the market closed on Oct. 29. Symbotic's release, filed with the SEC, calls it "an initial commitment of approximately $6 billion in spend," covering work over several years at multiple locations. The two have worked together since 2017, Reuters reported.

What Walmart is buying this time is the e-commerce layer. Symbotic's offer to Walmart now includes BreakPack, which picks individual items alongside full cases, and SymMicro, a micro-fulfillment system for online orders. The order lands just after The Wall Street Journal reported that Walmart has struggled to automate its distribution centers, citing boxes too large for some machines and wheeled robots that break down too often, according to Supermarket News. Walmart told the paper that "new technology is never perfect on day one." Its answer to the problem is a bigger bet on the supplier it already has, rather than a second one.

Rob Montgomery, who runs supply chain operations for Walmart U.S., said the work "helps us improve service, grow capacity, simplify work for our associates and lower costs." Symbotic CEO Rick Cohen said the partnership "started with a single product over a decade ago."

$6 billion is more than eight quarters of Symbotic's revenue

For Symbotic, the commitment is outsized. It reported $721 million in revenue for its fiscal third quarter, which ended June 27, and guided to $760 million to $780 million for the fourth. At the third-quarter rate, $6 billion equals more than eight quarters of sales. Symbotic already lists its "dependency on Walmart" among the risks in its results releases, and this agreement ties the two closer still. It has also taken over Walmart's older e-commerce fulfillment system, which it runs at 19 Walmart locations after acquiring the retailer's previous fulfillment partner, Supermarket News reported.

The micro-fulfillment system is still being installed

The strongest case against reading the deal as proof that the robots work is that one of the two named products is new at Walmart. On its August investor call, Symbotic said installation had begun on its first SymMicro system, at the back of a Walmart store in Dallas, and that it expected the system to be running in about six months, Supermarket News reported. BreakPack is further along: Symbotic said it is in about half of Walmart's regional distribution centers.

The next checkpoint is Nov. 23, when Symbotic reports fiscal fourth-quarter results and holds its first call since the agreement.