Zomato Q3 Results: Profit Halves Amid Revenue Surge, Growth Slows in Food Delivery

Zomato Ltd.’s December quarter results, reported on January 20, revealed a sharp decline in net profit. The company’s profit dropped by 57% year-on-year to ₹59 crore, significantly lower than the ₹138 crore reported during the same period last year.

Despite this, Zomato achieved substantial revenue growth, with its earnings crossing the ₹5,000 crore mark, a 64% increase year-on-year to ₹5,404 crore.

Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) improved to ₹162 crore, up from ₹51 crore a year ago.

Additionally, EBITDA margin expanded by 140 basis points, reaching 3% compared to 1.6% in the same quarter last year.

Food Delivery and Blinkit’s Performance

The food delivery business’s Gross Order Value (GOV) grew by 17% year-on-year but showed only a 2% quarter-on-quarter increase. Management attributed the limited growth to a widespread slowdown in demand.

Meanwhile, Blinkit, Zomato’s quick-commerce business, saw a revenue surge of 117% year-on-year and a 21% quarter-on-quarter rise.

However, Blinkit reported an EBITDA loss of ₹30 crore compared to a positive EBITDA of ₹48 crore in the same quarter last year, alongside a net loss of ₹103 crore.

Zomato’s management explained that the losses in the quick-commerce segment were due to advancing growth investments that were initially planned for a staggered timeline.

Despite the losses, Blinkit expanded aggressively, crossing the 1,000-store milestone this quarter and aiming to reach 2,000 stores by December 2025—a year earlier than initially planned.

“The biggest impact of intensifying competition has been the acceleration in customer awareness and adoption of quick commerce,” Zomato stated in its investor presentation.

The company acknowledged a temporary halt in margin expansion due to increased competition.

Share Performance and Market Reactions

Following the announcement of its Q3FY25 results, Zomato’s shares fell sharply, declining by as much as 7.5%. The stock ended Tuesday’s session at ₹214.65 per share, down 11% from its previous close.

Over two sessions, Zomato’s stock price dropped by 13.7%, as analysts revised their earnings estimates and share price targets downward.

In comparison, the BSE Sensex index also experienced a decline, dropping 1.6% on Tuesday.

Analysis of Food Delivery and Quick Commerce Segments

In the food delivery segment, revenue rose 17% year-on-year and 3% quarter-on-quarter to ₹2,413 crore in Q3FY25. GOV for the segment increased 16.8% year-on-year and 2.3% quarter-on-quarter to ₹9,913 crore.

Despite the slowdown, management remains optimistic, projecting over 20% yearly GOV growth in the long term.

Nomura revised its target price for Zomato’s stock to ₹290 from ₹320, citing expectations of 17-20% year-on-year GOV growth in FY25-26 with a contribution margin of 8-9%.

Blinkit’s performance showed a significant rise in revenue, reaching ₹1,399 crore in Q3FY25, with GOV climbing 27% quarter-on-quarter to ₹7,798 crore.

The average order value (AOV) increased from ₹660 in Q2FY25 to ₹707 in Q3FY25. Additionally, the number of dark stores grew from 791 in the previous quarter to 1,007 in Q3FY25.

However, Blinkit’s contribution margin dropped by 80 basis points quarter-on-quarter to 3%, and its adjusted EBITDA margin dipped to -1.3% due to higher marketing expenses and accelerated store expansion.

Future Outlook and Challenges

Management has advanced Blinkit’s store count target, planning to reach 2,000 stores by December 2025 instead of December 2026.

Analysts at Nuvama Institutional Equities noted that while accelerated expansion may hurt short-term profitability, it could result in future profitability gains as new stores mature.

However, Motilal Oswal Financial Services warned that Blinkit may need to add around 4,000 stores between FY25 and FY30, which could increase fixed costs significantly, testing the company’s execution capabilities.

Brokerages, including Nuvama and Nomura, have lowered their EBITDA estimates for Zomato for FY25-FY27, with target prices ranging between ₹270 and ₹300.

Despite the near-term challenges, analysts maintain a positive outlook on Zomato’s long-term potential in food delivery and quick commerce.

Key Takeaways

Zomato’s Q3FY25 results highlight a mixed performance, with robust revenue growth overshadowed by declining profitability and challenges in its quick-commerce business.

As competition intensifies and operational costs rise, Zomato is strategically investing in its future growth while navigating near-term headwinds.