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Target is leaning hard into technology as the lever to rebuild profit momentum. Executives say smarter ads, a tighter marketplace and new AI-powered shopping experiences will lift margins faster than revenue alone.
Why Target is prioritizing tech to boost margins
Company leaders repeatedly pointed to technology as a primary growth engine. The finance team expects operating income to expand in the years ahead as digital businesses scale.
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Target projects its operating margin to rise modestly in 2026, improving on last year’s 4.6% rate by roughly 20 basis points. Management believes the figure can eventually return to pre-pandemic levels near 2019’s 6%.
The plan ties investments directly to profitability. Rather than chasing flashy experiments, Target says it will focus on initiatives that help guests find and buy products more easily. That focus informs capital spending and hiring.
Roundel and Target+: the two pillars expected to lift profit
Executives are betting that their retail media arm and marketplace will drive outsized margin gains.
Roundel: scaling ad revenue on and off site
Roundel powers advertising across Target’s app, website and stores. Leaders also buy media on other sites to reach shoppers off platform. That off-site business already accounts for a substantial share of revenue.
- Off-site ads represent roughly 35% of Roundel’s revenue.
- Target says Roundel can grow meaningfully and could double in size over several years.
- Proprietary data from the Circle loyalty program underpins the network.
Executives highlight creative storytelling and brand-safe placements as competitive advantages. They see a chance to convert ad dollars into website visits and higher basket sizes.
Target+: a curated marketplace with big upside
Target+ is the invite-only marketplace that supplements in-store assortment with third-party partners. Unlike open marketplaces, Target vets sellers to preserve quality and brand fit.
- GMV recently passed the billion-dollar mark.
- Target aims to grow the business to more than $5 billion in gross merchandise value within five years.
- The model emphasizes “curation at scale” instead of opening to every seller.
Company leaders describe Target+ as having started like a small venture inside the retailer. Now they plan deeper integration with merchandising, logistics and marketing.
AI and agentic commerce: shopping that anticipates and acts
Target is testing agentic commerce so shoppers can ask for ideas and complete purchases through AI platforms.
Where shoppers can buy with AI today
- Last holiday season, Target launched an app inside ChatGPT for shopping, basket building and checkout.
- Work is underway to enable purchases through Google’s Gemini using the Universal Commerce Protocol.
Target describes the effort as a mix of guest-facing pilots and internal experiments. The aim is a frictionless path from discovery to purchase — a “click, boom, buy” kind of experience.
Partners, in-house systems and an open approach
Executives stress a hybrid model for AI: build where it makes sense, partner where others lead. They point to collaborations with OpenAI and Google while also developing proprietary tools.
That stance mirrors moves at other retailers. For example, Best Buy said it will work with OpenAI to surface its catalog in ChatGPT and adopt Google’s commerce standards.
How stores and digital investments feed one another
Target says physical stores remain central to the customer journey. Investments in stores are framed as investments in digital growth.
- The company plans to boost capital spending by more than $1 billion in 2026.
- Planned uses include brand marketing, new technology, AI pilots, in-store displays and staff training.
- Target will open over 30 new locations and remodel about 130 stores this year.
- The chain will mark the opening of its 2,000th store later this month.
Leaders say a smooth, enjoyable in-store visit converts guests into repeat digital customers. Store experiences are meant to drive app downloads, loyalty and higher lifetime value.
Leadership strategy and the road ahead for execution
New CEO Michael Fiddelke outlined a few clear priorities that center on technology and retail fundamentals.
- Accelerate tech programs, including Roundel, Target+ and Target Circle 360.
- Invest in AI capabilities that improve discovery and fulfillment.
- Reclaim merchandising authority and enhance in-store presentation.
- Strengthen teams and deepen ties to local communities.
Target frames tech as a tool to make frontline teams more effective and guests’ shopping journeys simpler. The company says it will not adopt technology for its own sake.
Across advertising, marketplace expansion and AI pilots, the work is deliberate. Teams are testing, iterating and partnering to shape how consumers discover and buy from Target in more places than before.
