Instacart stock takes a hit on soft earnings outlookInstacart stock takes a hit on soft earnings outlook

Instacart’s mainly positive fourth-quarter results released Tuesday were not enough to ease investor concerns over the San Francisco-based company’s disappointing outlook for the current quarter, which drove its stock price down by double-digits by Wednesday afternoon.

The grocery-focused tech company beat analyst expectations, reporting earnings of $0.53 per share on revenue of $883 million for the quarter ended December 2024. 

That beat the consensus earnings estimate of $0.37 per share on revenue of $887.76 million, according to Earnings Whispers, but news that its adjusted EBITDA of $220 million to $230 million for the current quarter lagged behind the consensus Wall Street estimate of $237.1 million. 

That sent its stock value plummeting by 12.7% by Wednesday afternoon. 

Instacart Chief Financial Officer Emily Reuter said the company continues to reinvest in affordability for the delivery service, emphasizing changes such as reducing its free delivery threshold from $35 to $10 for members of its loyalty program, Instacart+.

“We continue to see deeper penetration of Instacart+ members among our overall user base, and the engagement of our members has been strong, especially as we've launched new use cases like restaurants and $10 minimum baskets,” Reuter said. “From a cohort perspective, we continue to bring in more new users and GTV (gross transaction volume) in 2024 than we did pre-pandemic.”

Reuter said Instacart is committed to expanding EBITDA, noting “there will be some noise potentially quarter to quarter.”

“Obviously, we talked about Q1, the impact from advertising seasonality, which is normal cyclical seasonality that you see in the overall ads business and also to allow us the flexibility to reinvest when we see opportunity to drive long-term profitable growth,” Reuter added. “But as you saw, obviously in the last year in 2024, we're able to expand EBITDA meaningfully on both of those metrics and we expect to continue to do that although on a somewhat more moderate pace going forward.”

Overall, Instacart had a strong quarter, reporting a 10% year-over-year jump in gross transaction volume to $8.64 billion. Total revenue and transaction revenue were also up 10% year over year for the quarter to $883 million and $616 million, respectively. 

Advertising revenue for the quarter also jumped 10% year over year to $267 million 

Instacart’s full-year financial update was also up around 10% across the board. Gross transaction volume jumped 10% year over year to $33.4 billion in 2024, and total orders increased 9% to 294 million.

Total revenue and transaction revenue both increased by 11% for the full year to $3.37 billion and $2.42 billion, respectively. Advertising and other revenue in 2024 jumped 10% year over year to $958 million.

Instacart CEO Fidji Simo said in a letter to shareholders that consumer expectations are rising, and Instacart is using more than 12 years of customer data to stay ahead of the competition. 

“By leveraging our suite of innovative ad products, powerful ML (machine learning) models, advanced targeting, and measurement tools, our performance remains best in class across a number of key metrics like ROAs, click through rates, and sales lift,” Simo said in the earnings call. “This is exactly what brands are looking for when deciding where to allocate their ad budgets, which is why we've grown to about 7,000 active brand partners on our platform who collectively spend north of $1 billion annual run rate on our platform in Q4.”