In a mixed bag of results, Zomato reported a significant 57% drop in net profit for Q3 FY25, falling to ₹59 crore from ₹138 crore in the same period last year. The decline comes despite a 65% surge in revenue year-on-year, highlighting the company’s aggressive investment in Blinkit, its quick commerce arm.
Blinkit's Aggressive Expansion Strains Margins
Blinkit, Zomato’s foray into the fast-growing quick commerce market, has been scaling rapidly. Revenue from the segment more than doubled year-on-year, driven by strong consumer adoption. However, the growth came at a cost: Blinkit posted an adjusted EBITDA loss of ₹103 crore, up from ₹89 crore in Q3 FY24.
This surge in losses is attributed to Blinkit’s aggressive market strategy, which includes opening over 1,000 'dark stores' ahead of schedule to solidify its position in the competitive quick commerce sector. These stores are part of its plan to fulfill ultra-fast deliveries, but their current under-utilization is weighing on margins.
Competitive Landscape Heats Up
India's quick commerce market, valued at nearly $5 billion, has attracted major players like Swiggy’s Instamart, Zepto, and BigBasket. To counter competition, Blinkit is accelerating its network expansion, aiming to hit 2,000 stores by December 2025. This has led to higher operational costs, putting additional pressure on Zomato’s bottom line.
Balancing Short-Term Pain with Long-Term Gain
Zomato CFO Akshant Goyal acknowledged that the aggressive expansion is impacting short-term profitability but emphasized its potential to deliver meaningful growth in Gross Order Value (GOV) over the next few years. “Once our new stores reach optimal utilization, Blinkit is expected to transition from being a drag to becoming a significant contributor to profitability,” he stated during the earnings call.
Investor Concerns Mount
The sharp decline in net profit and the rising cost of Blinkit’s expansion have spooked investors, causing Zomato's shares to fall 3.6% in post-results trading. Analysts are divided, with some expressing concerns over the prolonged timeline for Blinkit’s break-even, while others see the investments as a strategic play to dominate the quick commerce space.
The Bigger Picture
Zomato’s core food delivery segment remained strong, contributing significantly to the company’s overall revenue growth of ₹5,405 crore. This segment grew 22% YoY, reflecting sustained demand and improved order values.
While the short-term financials paint a challenging picture, Zomato is banking on Blinkit to be a game-changer in its portfolio. As the quick commerce battle intensifies, the stakes are high for Zomato to translate its aggressive strategy into sustainable growth.
For now, the company’s focus on scaling Blinkit showcases its commitment to staying ahead in the evolving e-commerce landscape—albeit at the cost of near-term profitability.
