Zomato’s Q3 Shock: Net Profit Plunges 57% Amid Blinkit’s Costly Expansion, But Analysts See Silver Lining
The December quarter of FY25 brought mixed results for Zomato, as the food tech giant reported a significant 57% drop in net profit.In the same period last year, net earnings were ₹138 crore, while this year they were ₹59 crore. Even while the company’s consolidated sales increased by 64% year over year to ₹5,405 crore, the sharp drop in earnings suggests that it is facing difficulties, especially as a result of its aggressive expenditures in its quick-commerce firm, Blinkit.
Shares Hit Hard on the Street
Zomato’s shares fell sharply when the financial results were announced on January 20. The stock on the Bombay Stock Exchange (BSE) fell by about 4% to close at ₹240.95. During intraday trading, it fell as low as ₹228.80, indicating a total fall of more than 12% since the results announcement. Its decline was the steepest since June 2024.
Blinkit’s Growth Hurts Margins
Zomato’s expansion strategy has been centred around Blinkit, but it has come at a price. Despite a 21% quarter-over-quarter and 117% year-over-year increase in revenue, Blinkit reported a ₹103 crore net loss. Additionally, Blinkit’s EBITDA went from a positive ₹48 crore in the same period previous year to a negative ₹30 crore.
Accelerated expenditures in Blinkit, which aimed to quickly expand its shop network, were blamed by the firm for the higher losses. Blinkit is now aiming for 2,000 stores by December 2025, one year ahead of the prior projection, after surpassing the 1,000 store milestone during the quarter. But Zomato’s margins have been squeezed by this quick expansion, and Blinkit’s losses have affected the company’s total profitability.
Muted Growth in Food Delivery
Zomato’s primary meal delivery company had difficulties as well. Due to a general slowdown in demand, Gross Order Value (GOV) increased by just 2% on a quarterly basis, although growing 17% on an annual basis. Zomato’s meal delivery business shown considerable resiliency in spite of the slow growth, as seen by improved adjusted EBITDA margins to 5% from 1.6% during the same time previous year.
Brokerages Remain Optimistic
Big broking houses like Nomura and Jefferies are still hopeful about Zomato’s prospects for long-term development in spite of the company’s dramatic drop in net profit.
Despite the growing competition in the quick-commerce area, Nomura thinks Blinkit is in a strong position to rank in the top two. The company listed Zomato’s solid balance sheet and excellent performance as its main advantages.
Jefferies emphasised Blinkit’s strong execution skills and the management’s aspirational growth goals. However, because of the sharp drop in profits, it reduced its price target for Zomato by 7% to ₹255 while keeping a “hold” rating.
Future Prospects
Zomato’s bold investments in Blinkit demonstrate its determination to increase its market share in quick-commerce. This approach may set up the business for significant growth in the future, even though it has reduced profitability in the immediate term.
The management is still hopeful that the food delivery company will stabilise at a 5% adjusted EBITDA margin, and Blinkit’s quick store development may help the company maintain its dominant position in the industry.
Conclusion
Zomato’s strategic investments in Blinkit and its emphasis on execution give investors hope even if the company’s Q3 results showed significant problems, notably in combining expansion with profitability. Zomato’s long-term success relies on finding the ideal mix between rapid expansion and steady profitability as it continues to negotiate the competitive environment.
