The news: Target is leaning on its fast-growing ecommerce business to fuel—and fund—its turnaround in 2026.

• Digital sales rose 1.9% YoY in Q4 2025, accounting for nearly 1 in 4 of Target’s merchandise sales and slightly offsetting a decline in physical store sales.
• Roundel, the retailer’s advertising network, and Target+ marketplace are expected to be outsized contributors to sales growth this year, and could help Target eventually return operating margins to prepandemic levels, CFO Jim Lee said on the company’s earnings call.

The details: While Target is overhauling much of its business, ecommerce is one area where the retailer believes it has the right formula. The company’s “digital growth flywheel” is deepening shopper engagement and driving sales, while also fueling higher-margin revenue streams like Roundel and Target+.

Target’s digital strategy rests on four pillars.

Marketplace expansion. Target is onboarding more third-party sellers to offer a larger selection of merchandise without increasing costs and inventory, a tactic that is also working well for Walmart and Best Buy.

Advertising growth. Target generated $915 million from advertising in 2025, a 41% increase YoY—slightly more than the 37.3% growth and $890 million in revenues we forecast last year. The marketplace expansion could further boost advertising revenues by increasing the pool of advertisers. Likewise, Target’s early testing of contextual ads in ChatGPT could help it stand out to advertisers in a crowded retail media landscape and bolster its off-site capabilities, which account for 35% of Roundel’s revenues.