Q3 2024 Earnings Summary
- Strong GTV growth with continued momentum into 2025, driven by investments in affordability, marketing, and new initiatives like restaurants and Caper. Instacart has delivered three quarters of double-digit growth and is guiding to 8% to 10% GTV growth in Q4. The company feels confident about driving sustainable growth and is excited about their roadmap for 2025.
- Focus on affordability is leading to increased order growth and customer retention. Instacart increased savings per order by 18% year-over-year to $5.35, offering more value to customers through integrations with grocers' loyalty programs, EBT SNAP, and new service options like Super Saver. Price-sensitive new users use the new fulfillment options for 1 out of 5 orders, resulting in better conversion and retention.
- Expanding advertising business with emerging brands and new ad formats, leveraging technological leadership and existing ad demand. Instacart is seeing strength among emerging brands who are doubling down and growing faster than the overall platform. New ad formats like shoppable recipes enabled advertisers to receive 35% new-to-brand sales and 70% out-of-aisle impressions. Extending supply beyond the marketplace with Carrot Ads, adding 70 new partners in 2023 and nearly 220 retail banners, positions Instacart to capture more advertising revenue.
- Limited Reporting on Service Adoption Among Top Retailers: The company admits it does not provide specific adoption rates of its services among the top 20 retailers, stating, "we don't report specifically on adoption". This lack of transparency may indicate challenges in achieving widespread adoption of key services, which could impact growth prospects.
- Dependence on Retailers for Price Competitiveness: Instacart emphasizes that retailers set prices on their platform and mentions working closely with them to be competitive, saying, "we work very closely with them to help them make the right decisions to be competitive on price". This reliance on retailers may limit Instacart's ability to control pricing and ensure price competitiveness against other platforms.
- Stagnant Shopper Growth Potentially Limiting Scalability: The company's shopper numbers have remained relatively flat, with an analyst noting, "the 600,000 shopper number seems roughly flat quarter-over-quarter". While Instacart focuses on efficiency gains, a flat shopper base could restrict its ability to scale and meet increasing demand.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +12% | The increase was driven by continued growth in transaction revenue, fueled by improved GTV and enhanced fulfillment efficiencies. Although the company benefited from strong advertising and other revenue, some brand partners maintained cautious advertising budgets due to macroeconomic uncertainty. Overall, the prior year’s baseline—which included one-time retailer credits—favored this year’s comparative growth. |
Transaction Revenue | +12% | This metric rose thanks to higher GTV—supported by increased order activity—and batching efficiencies that lowered fulfillment costs. However, the company’s increased consumer incentives partially offset these gains. Higher GTV builds on the previous year’s baseline, which saw substantial transaction revenue expansion. |
Advertising & Other Revenue | +11% | Growth was driven by adoption of new ad products and greater volume from emerging brands, despite reduced spending by some large partners facing economic pressures. This increase builds on the prior period’s results where newer ad offerings were introduced but had not yet reached full traction. |
United States Revenue | +11% | US revenue rose due to the same transaction revenue drivers (higher GTV, fulfillment efficiencies, and the absence of prior one-time credits). The impact of macroeconomic headwinds remains, but domestic consumer demand outpaced the previous period, supporting revenue stability. |
International Revenue | +15% | International markets showed stronger percentage growth, albeit from a smaller base. The company benefited from expanding partnerships and improved brand recognition overseas compared to the prior year, when certain international investments were still ramping up. |
Net Income | $118 million | Despite revenue gains, increased stock-based compensation and higher operating expenses seen in previous quarters have moderated net income. The company, however, remains profitable, leveraging top-line growth while carefully managing expenses. Looking ahead, strategic investments in consumer incentives and new product lines could further affect profitability, depending on macroeconomic conditions. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Gross Transaction Value (GTV) | Q3 2024 | $8.1B – $8.25B (8%–10% YoY growth) | no current guidance | no current guidance |
Adjusted EBITDA | Q3 2024 | $205M – $215M | no current guidance | no current guidance |
Composition of GTV Growth | Q3 2024 | Driven more by orders than basket size | no current guidance | no current guidance |
Advertising & Other Revenue | Q3 2024 | Expected to grow YoY in line with GTV | no current guidance | no current guidance |
Gross Transaction Value (GTV) | Q4 2024 | no prior guidance | $8.5B – $8.65B (8%–10% YoY growth) | no prior guidance |
Adjusted EBITDA | Q4 2024 | no prior guidance | $230M – $240M | no prior guidance |
Advertising & Other Revenue | Q4 2024 | no prior guidance | Expected to grow in line with GTV guidance range for Q4 2024 | no prior guidance |
Stock-Based Compensation (SBC) | Q4 2024 | no prior guidance | Normalizing in Q4 2024; step-up expected in Q2 each year | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Advertising & Other Revenue YoY Growth | Q3 2024 | 8% to 10% YoY growth | (246 − 222) ÷ 222 = 10.8% YoY growth from 222To 246 | Beat |
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Q4 GTV Guidance & Consumer Outlook
Q: Is there anything driving slower Q4 GTV guidance?
A: Management sees strong consumer demand and hasn't observed meaningful changes in spending behavior or trade-downs. The slower Q4 GTV guidance is due to tough year-over-year comparisons, including a strong holiday season last year and increased incentive spending in Q4 of last year, as well as a small impact from Ahold Delhaize's recent outage. They remain excited about consumer demand and note that fundamentals like order growth, order frequency, and Instacart+ subscriber growth are strong. -
Leverage & Future Investments
Q: Can you update us on headcount and key investment initiatives for next year?
A: The company has been aggressively managing costs, reducing headcount since peaking in Q2 2022. They restructured in Q1, reallocating resources to strategic areas like Caper and emerging brand ad sales. They expect to continue investing headcount savings into priority areas while driving non-GAAP OpEx leverage. Future investments include improving the technology stack for an omnichannel experience, focusing on affordability, and building a one-stop-shop ad platform, all while aiming for steady annual EBITDA growth. -
Durability of GTV Growth
Q: How durable are the double-digit GTV growth trends into 2025?
A: Management feels confident about sustaining growth into 2025, attributing it to successful investments in product improvements. Efficiencies generated are being reinvested into initiatives like enhancing affordability, where they continue to see strong ROI, and developing new growth channels through marketing. They are excited about new initiatives like restaurants and Caper, which show promise and are being further fueled. -
Transaction Take Rate & Non-Exclusive Retailers
Q: Does growing non-exclusivity with retailers increase transaction take rates?
A: The majority of retailers are already non-exclusive, and transaction revenue is in the upper half of their long-term target. Recent improvements in transaction revenue are more due to efficiencies on the shopper side than changes in take rates. They often reinvest these gains back into the business. Retailer negotiations are multifaceted, spanning marketplace, white label, advertising, and Caper carts, so it's not straightforward to attribute changes in take rates solely to non-exclusivity. -
Technology Investments & 2025 Priorities
Q: What are your key strategic technology investments for 2025?
A: Depth of integration with retailers is a key growth predictor, so they are investing heavily in technology to deepen this advantage. New services like pickup virtual convenience, EBT SNAP integration, and upgraded platforms like Storefront Pro have led retailers adopting them to grow twice as fast as others. They are building a robust underlying technology platform that benefits both their Marketplace and Enterprise businesses, allowing features developed for one to benefit the other, gaining scale and efficiency. Additionally, they are excited about expanding into in-store technologies like Caper carts, tapping into the 87% of the grocery industry that remains offline. -
Advertising Growth & Innovations
Q: What advertising innovations could accelerate ad growth in 2025?
A: The focus is on demonstrating the performance of ads through strong measurement capabilities, which influences brands to invest more. They are introducing new formats like occasions, bundles, and shoppable recipes, which have shown promising results, such as 35% new-to-brand sales and 70% out-of-aisle impressions in sponsored recipe pilots. They are also expanding ad supply beyond their marketplace through Carrot Ads, extending ads to Caper carts, and expanding partnerships with platforms like Meta, Google, and The Trade Desk. -
Affordability Driving Order Growth
Q: How has affordability led to increased order growth?
A: Affordability efforts, such as integrating with grocers' loyalty programs, offering $0 delivery through Super Saver options, and features like flyers at price parity, have increased savings per order by 18% year-over-year to $5.35. This has driven order growth reaccelerating to over 10% year-over-year. Price-sensitive new users using these options show better conversion and retention, helping to address the total addressable market and fuel future order growth. -
Food Delivery Traction
Q: What traction are you seeing in food delivery?
A: The addition of restaurants has increased platform stickiness, with users who adopt restaurant delivery spending more frequently on both restaurants and grocery. They are not breaking out restaurant contribution separately as the businesses are intertwined. They are seeing higher basket sizes than other platforms, serving families with larger orders, and are driving penetration of the restaurant use case faster than competitors are entering grocery. -
Competitive Dynamics in Retail Media
Q: How is Instacart's Carrot Ads competing in retail media networks?
A: Instacart's advantage lies in their proven ad technology, refined across 1,500 retailers and millions of customers, and their existing ad demand from over 6,000 brands. This creates a virtuous cycle: as they attract more ad dollars, they can extend to more grocers via Carrot Ads, which in turn attracts more brands. They have added 70 new partners in 2023, reaching nearly 220 retail banners, and offer retailers strong technology and demand, differentiating them from competitors who only provide technology without demand. -
Shopper Supply & Efficiency
Q: What's the status of shopper growth and supply?
A: Shopper supply is healthy, with waitlists in many cities. They focus on utilizing existing shopper supply efficiently rather than growing numbers, through measures like batching and optimizing in-store time, with 45% of orders delivered by shoppers already in or near the store. Shoppers have high tenure and retention, differentiating from other gig platforms, and efficiencies here contribute to fulfillment savings. -
Adoption Rates & Price Parity
Q: What's the adoption rate of services among top retailers, and where does price parity stand?
A: Among their top 20 retailers, all have adopted many of their top services like EBT SNAP, pickup, and loyalty integrations. For example, they've added major retailers like Costco and Kroger to EBT SNAP. On price parity, retailers set prices, but Instacart works closely to help them be competitive. Tools like Ever Site help retailers dynamically optimize pricing. Retailers are engaging in more sophisticated pricing strategies, including achieving price parity on key items, which encourages competition and offers more value to customers. -
Caper Carts & Instacart Business Expansion
Q: What are the bottlenecks for Caper carts, and what's the opportunity with Instacart Business?
A: Caper cart deployment is scaling, with the number of carts quadrupling in the last six months across more than a dozen retailers. Bottlenecks are mainly operational, as integrating and piloting new technology takes time. Instacart Business leverages their technology to bring distributors onto the platform and serves 1 million business customers, offering features tailored to businesses and opportunities in B2B advertising through platforms like Cut+Dry. This extends their total addressable market by moving up the supply chain.