Q1 2025 Earnings Summary
- Advertising Strength and Momentum: Instacart’s ads business is powered by a diversified base with over 7,000 brands onboard, strong performance in ROAS/CTR, and a virtuous cycle driven by innovations like Carrot Ads that are attracting both large and emerging brands.
- Incremental GTV Growth from Pricing Initiatives: The introduction of a $10 minimum basket has boosted order frequency and attracted new, as well as resurrected, users without cannibalizing larger baskets, thereby driving incremental GTV growth.
- Enterprise Integration and Innovation: The expansion of its enterprise solutions—with over 600 retail banners using its Storefront platform—and the launch of AI-powered tools like Universal Campaigns and Smart Shop are enhancing personalization, customer engagement, and offering new revenue opportunities.
- Decline in AOV: The 4% year-over-year drop in average order value—driven by the mix of restaurant orders and the introduction of a $10 minimum basket—could suggest ongoing pressure on revenue quality and unit economics if the trend continues.
- Macro Uncertainty Impacting Ad Spend: Concerns raised by brands over regulatory and trade policy uncertainties might lead advertisers to reduce or reallocate their spending from Instacart’s platform, potentially dampening the strong ad revenue growth seen in Q1.
- Operational and Margin Challenges from Small Basket Orders: The strategic pivot toward smaller, $10 minimum basket orders relies heavily on achieving high order density and efficient batching. If these operational efficiencies falter, the approach could lead to margin compression and increased complexity in cost management.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | 9.4% increase (from $820M to $897M) | Total revenue grew by 9.4% in Q1 2025 as a result of gains across both transaction and advertising revenues. This growth builds on previous period initiatives—such as improved fulfillment efficiencies and increased advertising activity—that helped drive FY24 improvements, indicating consistent progress in underlying business dynamics. |
Transaction Revenue | 7.8% increase (from $603M to $650M) | Transaction revenue increased by 7.8% due to continued growth in order volume and operational efficiencies. While FY24 saw an 11% increase driven in part by a 10% GTV growth and higher order frequency, the slightly more moderated gain in Q1 2025 may reflect the lasting impact of affordability initiatives and changes in average order value that offset some of the growth drivers. |
Advertising and Other Revenue | 13.8% increase (from $217M to $247M) | Advertising and other revenue rose by 13.8% as advertising volume and emerging brand spend picked up. This surge builds on the prior period where macroeconomic uncertainty had tempered spending by large brand partners, suggesting a recovery or shift in advertiser behavior that now complements the continuous rise in platform activity seen in earlier periods. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Gross Transaction Value (GTV) | Q2 2025 | $9 billion to $9.5 billion | $8.85 billion to $9 billion | lowered |
Orders Growth | Q2 2025 | no prior guidance | Anticipated to outpace GTV growth in the period | no prior guidance |
Adjusted EBITDA | Q2 2025 | $220 million to $230 million | $240 million to $250 million | raised |
Advertising and Other Revenue Growth | Q2 2025 | no prior guidance | Expected to modestly outpace the anticipated GTV growth in the period | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Advertising Business Growth and Ad Innovation | Consistently discussed in Q4 2024, Q3 2024, and Q2 2024 with strong revenue growth (10%–11% YoY), innovative ad formats (sponsored recipes, AI integration), and a diversified advertiser base | Q1 2025 saw even stronger performance with 14% YoY revenue growth, continued innovation across ad formats, and robust performance metrics (best-in-class ROAS and CTR) | Consistent and increasingly positive – the topic remains a key growth driver, with higher performance figures and further diversification indicating improved market momentum. |
Pricing Initiatives Impact | In Q4 2024, the introduction of the $10 minimum basket was described positively (increasing order frequency without hurting larger baskets), while Q2 2024 mentioned AOV dynamics without reference to a $10 initiative; Q3 2024 did not address it | Q1 2025 provided detailed insights on the $10 minimum basket’s ability to generate incremental orders and clarified its impact on a 4% YoY AOV decline; emphasis on its role in driving increased order density | Emerging focus with cautious optimism – there is an increased focus on price innovation that drives order frequency despite a slight trade-off in AOV, highlighting a nuanced but positive impact on revenue dynamics. |
GTV Growth and Transaction Revenue Trends | Consistently tracked across Q2, Q3, and Q4 2024 – with steady YoY GTV growth (around 10%–11%) and transaction revenue percentages stabilized near 7%–10%; emphasis was placed on order growth, improved basket sizes, and balancing AOV impacts | In Q1 2025, GTV grew 10% YoY with a 4% decline in AOV due to restaurant orders and the $10 minimum basket initiative; transaction revenue grew 8% YoY and held at 7.1% of GTV | Stable and consistent – while order and transaction revenue growth persist, modest shifts in basket composition (due to new use cases) are prompting slight adjustments, but overall the trajectory remains positive. |
Instacart Plus Membership and Customer Engagement | Highlighted in previous periods (Q2, Q3, Q4 2024) as driving higher order frequency and deeper penetration, with strong engagement and loyalty among members | Q1 2025 emphasized even stronger Instacart+ adoption; integration of restaurant offerings has led to higher engagement, increased order frequency, and strengthened incremental GTV | Highly positive and reinforcing – membership growth remains a cornerstone for customer engagement with expanding benefits and synergistic new use cases, further enhancing platform stickiness. |
Retail Partnerships and Enterprise Integration | Discussed at length in Q2, Q3, and Q4 2024 with focus on deep integrations (price parity, loyalty, digital flyers), international pilots, and growth in new retailer sites; strong strategic collaborations were underscored | Q1 2025 continued to stress the importance of long-term, deep partnerships and enterprise integrations, including extended technology integrations and strategic acquisitions, reinforcing market position | Consistent and strategic – the focus on integration and partnership remains central, with ongoing enhancements that promise sustained competitive advantages and future growth. |
New AI-Powered Tools | Not mentioned in Q2–Q4 2024 earnings calls | Q1 2025 introduced Universal Campaigns and Smart Shop, marking the debut of AI-powered advertising optimization and personalized shopping enhancements with promising early results | New and promising – these AI innovations represent a fresh strategic thrust that could significantly bolster ad performance and user personalization, with early indicators of positive impact. |
Innovative In-Store Technology (Caper Carts) | Consistently addressed in Q2–Q4 2024; earlier calls reported successful pilots, international launches (with ALDI and Coles), and increasing basket sizes; operational scaling and ad revenue potential were noted | Q1 2025 highlighted that while ads on Caper Carts currently contribute minimally to overall ad revenue, the customer engagement is equivalent to online engagement, signaling strong future monetization potential | Accelerating rollout with promising engagement – operational scaling is progressing well and the high engagement levels reinforce the long-term potential of bridging in-store and online experiences. |
Strategic Investments in New Verticals (Restaurants) | Covered across Q2–Q4 2024, with early traction noted since the June 2024 launch; emphasis was on creating a synergy that increases overall platform stickiness and boosts grocery order frequency | In Q1 2025, the focus on restaurants was reinforced as a strategic investment that drives incremental grocery orders and higher customer engagement, particularly among Instacart+ members | Evolving and synergistic – the expansion into restaurants remains a key strategic initiative that supports the core grocery business, with early positive results suggesting significant future upside. |
Macro Uncertainty and Regulatory Impact on Ad Spend | Largely absent or implicit in Q2 and Q3 2024, with only indirect mentions of challenging macro conditions affecting food and beverage budgets in Q4 2024 | Q1 2025 explicitly highlighted macroeconomic uncertainty and referenced regulatory concerns (e.g., potential policy shifts impacting SNAP and ingredients), though management remains confident due to strong performance metrics | Emerging risk factor – while overall performance remains strong, increased explicit attention to macro uncertainty and regulatory risks introduces a note of caution that will need careful monitoring. |
Operational Efficiency and Margin Management | Continuously discussed across Q2–Q4 2024 with emphasis on cost reduction, improved adjusted EBITDA, shopper efficiencies, and reinvestment strategies; solid operating discipline was noted | Q1 2025 reiterated strong operational fundamentals and highlighted the use of AI (with 87% code development assisted by AI) to unlock further efficiencies, while maintaining controlled margin challenges amid reinvestments | Consistently positive – strong operational efficiency and disciplined margin management remain central themes, with innovative use of AI further enhancing performance amid modest margin pressures. |
Scalability and Service Adoption Concerns | Addressed in Q3 2024 and Q4 2024 with emphasis on healthy shopper supply, waitlists, and deep retailer integrations; service adoption was managed with consistent efforts to optimize delivery operations and integrate new services | Q1 2025 did not specifically discuss these concerns, implying that previous positive results (healthy shopper supply and robust service adoption) continue without new issues emerging | Stable with effective management – previous concerns appear to have been addressed adequately, with ongoing strategic investments ensuring scalability and strong service adoption. |
Management Guidance and Transaction Revenue Sustainability | A core focus across Q2–Q4 2024; guidance on GTV, adjusted EBITDA, and transaction revenue sustainability was provided with clear targets, seasonal considerations, and a commitment to reinvesting efficiencies; confidence was maintained in stable long-term metrics | Q1 2025 continued to deliver firm management guidance with clear projections for Q2 2025 and reaffirmed that while transaction revenue remains vulnerable to minor seasonal fluctuations, it is sustainable within the long-term target range | Clear and consistent – management remains confident with transparent guidance and a sustainable approach to transaction revenue, even as minor fluctuations are acknowledged due to seasonal and operational factors. |
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Enterprise Strategy
Q: How does Wind Shop fit in?
A: Management explained that their enterprise strategy is about deep integration with retailers, and the acquisition of Wind Shop boosts their ability to power storefronts and unlock new SaaS and upsell opportunities, reinforcing strategic relationships. -
AOV Impact
Q: Are orders showing trade down?
A: They noted a 4% decline in AOV driven by restaurants and a lowered $10 minimum, but emphasized that it’s truly incremental spend with no clear trade down in larger baskets. -
AOV Baseline
Q: Will AOV remain lower?
A: Management expects the current AOV baseline—impacted by restaurants and the $10 minimum—to persist moderately, with slight dampening as the effects carry forward. -
Price Parity
Q: How are parity strategies evolving?
A: They are seeing price parity retailers grow faster and are employing a nuanced, multi-affordability strategy that allows grocers to balance short‐term earnings with longer-term market share gains. -
Emerging Ads
Q: How do emerging brands use ads?
A: Management described building distinct, AI-powered ad products for emerging brands that enable self-service and simplified campaign management, broadening their advertising base. -
Ad Outlook
Q: What is the future of ad spend?
A: Despite some macro caution, management is confident in their performance-driven ad model, which attracts both large and emerging brands and delivers high ROAS, securing steady ad spend. -
Storefront Adoption
Q: How many retailers use Storefront Pro?
A: They now have over 600 retail banners using their Storefront solution, which enhances omnichannel integration and deepens retailer relationships. -
Carrot Ads Demand
Q: What’s driving Carrot Ads momentum?
A: With more than 220 partners on board, Carrot Ads are fueled by superior ad tech and significant brand demand, creating a virtuous cycle of attractiveness to retailers. -
Consumer Resilience
Q: How robust is consumer behavior?
A: Management stressed that grocery is an essential spend and noted that the customer base closely mirrors the broader U.S. demographics, ensuring strong resilience even if the economy slows. -
Small Basket Economics
Q: Do $10 basket orders need extra incentives?
A: They highlighted that the high density of orders enables efficient batching for $10 minimum baskets, ensuring sound economics without needing extra shopper incentives. -
Basket Incrementality
Q: Are small baskets truly incremental?
A: Management confirmed that these orders are incremental, driving higher overall GTV and increasing order frequency along with improved Instacart+ adoption. -
Uber Eats Adoption
Q: How is Uber Eats integration performing?
A: They are seeing deepening restaurant adoption with Uber Eats, where customers ordering through restaurants are spending more and ordering groceries more frequently, reinforcing the overall model. -
Restaurants Volume
Q: What’s the trajectory for restaurant orders?
A: Although restaurants are integrated with grocery orders, their growth is managed together with grocery volume, and management expects the rise to moderate as the year progresses. -
Caper Ads
Q: How impactful are ads on Caper Carts?
A: The launch of ads on Caper Carts is currently minimal in its impact on overall ad revenue, though engagement levels are on par with other online channels, showing promising future potential. -
Agentic Commerce
Q: What about agent-assisted ordering?
A: They are in the early stages of integrating agentic commerce by leveraging AI to simplify the grocery shopping experience, hoping to accelerate online adoption over time. -
Universal Campaigns
Q: What are early learnings on universal campaigns?
A: Early results show that universal campaigns help emerging brands optimize across formats with a single budget, and tools like SmartShop are personalizing the experience to boost retention and discovery.