Instacart reported strong Q4 earnings, focusing on innovation and growth in the grocery industry.

From Nasdaq, Inc.: 2025-02-25 22:45:11

Instacart held its Q4 2024 earnings call on February 25, 2025, where they discussed their financial results and future prospects. CEO Fidji Simo highlighted their strong finish in 2024 and their focus on innovation and growth in the grocery industry, catering to customers, retailers, and brands. They have introduced new service options, expanded family accounts, and optimized marketing programs to increase user engagement. Instacart is also helping retailers meet customer needs with solutions like EBT SNAP acceptance and loyalty program integrations, driving growth for both retailers and brands. Instacart has seen tremendous growth with over 7,000 active brand partners spending $1 billion in Q4. They have over 220 ad partners contributing inventory, resulting in increased performance for advertisers. The company remains a category leader in online grocery, capturing the most GTV from new customers. In Q4, Instacart delivered strong financial results, with GTV growing 10% year over year, orders increasing by 11%, and a 10% increase in transaction revenue. They finished the year with solid profitability, including a GAAP net income of $148 million and adjusted EBITDA of $252 million.

Looking ahead, Instacart expects Q1 GTV to be between $9 billion and $9.15 billion, with a year-over-year growth of 8% to 10%. They anticipate a decline in average order value due to restaurant orders and a new $10 minimum basket feature. The company is confident in their ability to maintain a disciplined yet aggressive approach to reinvesting in growth, extending their category leadership position, and delivering profitable growth for stakeholders. The company is focused on delivering steady annual adjusted EBITDA expansion while reinvesting in growth initiatives. They aim to keep stock-based compensation below $425 million in 2025, with Q1 being the lowest quarter. Key investment areas for 2025 include core strengthening, affordability, and enterprise solutions like Caper Carts. The company is excited about the sales lift generated by Caper and plans to invest in storefront and fulfillment technologies. Innovation in advertising is also a priority, with ads revenue projected to grow faster than GTV in Q1. The company plans to expand EBITDA on an annual basis despite potential quarter-to-quarter noise.

In 2024, the platform saw growth in both grocery and non-grocery areas, with the addition of restaurants creating a halo effect on grocery business. The company is excited about the increased stickiness of the product and higher value of Instacart+. They are seeing strength in both grocery and non-grocery sides, with users utilizing the platform in various ways and accepting a wider array of supply. Instacart is seeing positive results from new use cases like restaurants and grocery, leading to increased adoption and growth. They are excited about the potential for continued growth in these areas. Coles Australia partnership with Caper Carts is showing promising results, with potential for international expansion. Instacart’s reduction in free delivery thresholds for Instacart+ is driving an increase in order frequency, total GTV, and higher Instacart+ adoption without impacting bigger basket orders. Affordability initiatives have helped customers save $1.2 billion, with high adoption rates contributing to strong order frequency and growth. Retailers like Schnucks and Heritage Grocers are moving to in-store pricing online, following Kroger’s lead. Instacart is developing tools like pricing optimization to help businesses transition to price parity while maintaining margins. The company is pleased with early results and continues to innovate with solutions like tender-loving baskets. Super Bowl ads are designed to build brand awareness and favorability, with positive early impact. Instacart’s efforts to diversify its advertiser base are working, attracting 7,000 active brands and showing strength in emerging brands. The use of AI to track store inventory and substitutions has led to improved replacements and overall customer satisfaction. Instacart’s scale and market position contribute to the accuracy and success of these AI-driven solutions. The grocery industry is looking to use technology to enhance the shopping experience, with plans to implement computer vision for data extraction. Quality is key to retention, and improvements in sound rate and fill rate have been consistent for 10 quarters. Despite this, new technologies are being introduced to boost numbers even higher. Advertising growth is expected to outpace GTV guide in Q1, as the company competes with larger retail media platforms and navigates a challenging food and beverage market. Shoppers are in good supply, with a waitlist in most cities and high retention rates. Two-thirds of shoppers are female, more than 50% are parents, and the majority of orders are fulfilled by tenured shoppers. Regarding take rate and transaction revenue, the company has been operating in the upper half of its long-term target range. Transaction revenue for the company has fluctuated due to factors like retailer revenue, customer revenue, and delivery costs. The company is focused on reinvesting in the business and driving efficiencies to offer customers better pricing options. They are also ramping up new use cases like restaurants and additional IC+ benefits. Despite fluctuations, the company aims to maintain steady annual adjusted EBITDA progression and operate where they see the best return on every dollar spent. In Q1, they expect orders to grow faster than GTV due to impacts from restaurants and a $10 minimum basket requirement. Instacart is adding a $10 minimum basket requirement for Instacart+ members. The company is focusing on driving selection, affordability, speed, and quality in the business with active management processes. Long-term bets, like Caper Carts, are part of the company’s 2025 budgeting plan. The restaurant adoption is still in the early stages, with more growth expected in 2025 and beyond.

Caper Carts pilot program is showing positive results, with strong customer feedback and increased basket sizes. Thousands of cart commitments are in the works with retailers, promising double-digit sales growth and new revenue streams. The physical deployment of carts will take time, but once operational, the product has the potential to address 87% of grocery sales that haven’t moved online. The ability to reorder carts online from the cart is being tested for multi-channel customer convenience. In Q3 and Q4, order frequency increased with the launch of the restaurants integration. Q4 showed orders growth surpassing GTV growth, a trend expected to continue into Q1. Instacart+ members are driving adoption of restaurants and small baskets. Advertising investments focus on performance, scale, diversification, and innovation, attracting more brands due to leading performance and technology. New formats like sponsored recipes are generating high new to brand sales. The majority of GTV still comes from Instacart+ members, with growth outpacing monthly active orders. No specific subscriber numbers are disclosed, but growth is evident. Instacart+ continues to see deep penetration and strong engagement from members, with added value through partnerships and new features driving success. Instacart also reports positive results from its partnership with Walmart, but expansion plans remain up to Walmart’s discretion. CEO Fidji Simo highlights leading indicators of business success, including increased user acquisition, order frequency, and competitive advantages. Instacart feels confident in its future growth and ability to lead the industry in transitioning from offline to online. The conference call concludes with participants discussing the company’s performance and outlook. 1. The stock market saw a significant increase today, with the Dow Jones Industrial Average rising by 300 points. This increase was attributed to positive earnings reports from several major companies.

2. A new study has found that eating a diet rich in fruits and vegetables can lower the risk of developing heart disease by 20%. This finding reinforces the importance of a healthy diet for overall heart health.

3. The unemployment rate has dropped to 3.8%, the lowest it has been in over a decade. This is a positive sign for the economy and indicates that more people are finding jobs.

4. The FDA has approved a new drug for the treatment of cancer, which has shown promising results in clinical trials. This new treatment option offers hope for patients with certain types of cancer.

5. A new report has revealed that the housing market is booming, with home prices increasing by 10% in the past year. This is good news for homeowners looking to sell, but may pose challenges for first-time buyers.



Read more at Nasdaq, Inc.: Instacart (CART) Q4 2024 Earnings Call Transcript