Instacart’s stock experienced a significant surge in after-hours trading on Thursday, climbing 14%, as the online grocery delivery giant unveiled robust fourth-quarter financial results and issued an optimistic outlook for the upcoming quarter. This performance appears to have resonated with investors, suggesting a renewed confidence in the company’s growth trajectory.
For the fourth quarter, Instacart reported revenue of $992 million, exceeding the LSEG consensus estimate of $974 million. While earnings per share came in at 30 cents, falling short of the expected 52 cents, the strong revenue figures and positive forward guidance appear to have outweighed this metric for the market.
Looking ahead to the first quarter, the company projects gross transaction value (GTV) – a key indicator of the total value of goods sold through its platform – to fall within the range of $10.13 billion to $10.28 billion. This forecast surpasses the StreetAccount estimate of $9.97 billion, signaling continued expansion. Furthermore, Instacart anticipates adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to be between $280 million and $290 million, also ahead of the $277 million anticipated by StreetAccount.
The company’s year-over-year revenue growth of 12%, reaching $992 million from $883 million in the prior year, underscores its expanding market presence. Net income for the quarter stood at $81 million, translating to 30 cents per share. Notably, adjusted EBITDA came in at $303 million, surpassing StreetAccount’s expectation of $292 million.
In a shareholder letter, CEO Chris Rogers highlighted the company’s strategic focus on technology and customer-centric initiatives as key drivers of its increasing marketplace engagement and platform growth. He emphasized that “Our execution on what matters most to customers is driving strong momentum on our marketplace, as well as our enterprise platform — which is a real, strategic advantage for us.”
However, the company’s operating expenses saw an increase year over year, attributed to higher general and administrative costs. These were partly influenced by legal and regulatory matters, including a $60 million refund settlement with the Federal Trade Commission concerning allegations of deceptive practices.
Gross transaction value saw a substantial 14% increase from the previous year, reaching $9.85 billion and surpassing the StreetAccount estimate of $9.54 billion. Instacart noted this as its strongest quarterly GTV growth in three years. The platform facilitated 89.5 million orders, exceeding the StreetAccount projection of 87.8 million.
Instacart’s Chief Financial Officer, Emily Reuter, attributed the robust GTV growth to significant advancements in the company’s enterprise platform, which successfully onboarded 70 new retailers in the past year. This expansion of its retail partnerships is a critical component of its overall transaction volume.
The company is also beginning to see a “small” contribution from its investments in emerging growth areas, including infrastructure development, international market expansion, and artificial intelligence initiatives. In the fiercely competitive food delivery landscape, Instacart, like its rivals, has been actively exploring and integrating AI tools to enhance both customer and business experiences. Recent advancements include new AI solutions tailored for grocers and an integration with OpenAI’s ChatGPT.
This push into AI has not been without its challenges. In December, Instacart faced criticism for AI-powered pricing tests conducted with a select group of retailers, which resulted in customers being presented with different prices for identical products. The company subsequently paused these tests, acknowledging that they “missed the mark.”
The competitive pressure in the grocery delivery sector is palpable, with players such as DoorDash and Uber Eats intensifying their efforts. Both companies have expanded their grocery offerings and incorporated more AI-driven features. Notably, Uber Eats recently launched an AI cart assistant designed to help customers curate grocery lists through text or image inputs.
Reuter expressed optimism about the market’s potential, suggesting ample opportunities for multiple players to thrive in what is rapidly evolving into a “huge” market for consumers. She stated, “We are the leader by far amongst digital-first players, and that’s because we have been able to execute across the promise of what most customers want consistently over time.” This positioning, she believes, will continue to solidify Instacart’s market leadership.
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