In the Red with Zomato’s Q3 FY2025 earnings

January 2025: Becoming the Blinkit company, pausing margin expansion, acknowledging a food delivery slowdown & fighting against shiny new apps (objects?!)

Author

Arjun Juneja
January 24, 2025

Author’s note: Welcome to Episode 11. I write about Zomato’s Q3FY2025 earnings, key insights derived from its earnings call/ report and its focus for H1 2025. Enjoy reading and step out this weekend for fresh air 😮‍💨 . Please reply to my email or comment here with your opinions. I started another newsletter with thoughts on figuring out life (Newsletter link here) if you want to subscribe 🙃 

For greater context (or interview prep), you can read through past newsletter editions: Zomato Q2 FY2025 earnings || Swiggy Q2 FY2025 earnings || Swiggy’s IPO || Overview of Quick Commerce in India.

Table of Contents

Introducing Zomato and the earnings backdrop

We used to live in simpler times. A quick commerce user chose between Swiggy, Blinkit and Zepto, and a food delivery user chose between Swiggy and Zomato. The boundaries were clear and the markets were distinct. Investors, analysts and users breathed easy.

And then, Zepto raised ~₹11,200 crore, Swiggy went public with a ₹4,499 crore​​ fundraise and Zomato raised ₹8,446 crore. 

Zomato’s latest Q3 earnings reflect the heightened competition in QC and food delivery. It is expanding everywhere all at once and so is the competition. This augurs well for consumers as every app vies to serve them.

As an FYI,
Zomato was founded in 2008 as ‘FoodieBay’. It served as an online restaurant discovery platform for its first six years. In 2015, it launched food delivery and has not looked back despite near-death experiences including the Covid-19 lockdown.

Over the years, it has added business lines organically and through acquisitions. The company publicly listed in July 2021 on the back of its food delivery, dining and B2B restaurant supplies verticals. In the last 3+ years, it has acquired and scaled Blinkit as the QC industry leader, and in August 2024, it acquired Paytm Insider, a live events + ticketing business. It launched its District (events and going out app) in November 2024 and Bistro by Blinkit (15 minute food delivery app) in January 2025.

Its present B2C offerings include:

a) Food delivery (Zomato)
b) Quick commerce (Blinkit)
c) Events and Going out (District)
d) Fifteen minute food delivery (Bistro)

Zomato also runs Hyperpure as its B2B arm that enables farm to fork supplies for partner restaurants.

Business in Numbers

a) Key takeaways from Q3 FY2025

i) Blinkit GOV as a % of Zomato GOV has shot up QoQ to 79% from 63%. Zomato food delivery GOV has grown by 5% and 2% in the last two quarters to ₹9,913 crore. Blinkit GOV has grown by 24% and 27% in the same time period to ₹7,798 crore. 

ii) Blinkit has to open an average of 248 stores/ quarter in 2025 to achieve its year-end 2,000 store target. For context, it opened an average of ~139 stores per quarter in the last 12 months. Front loading store openings in H1 2025 will help it capitalise in the festive quarter.

iii) Blinkit can close 2025 with quarterly GOV of ₹17,460 crore and ₹3,132 crore in revenue if it achieves its 2,000 store target and maintains its GOV/ day/ store of ₹9.7 lakh with similar margins

iv) Blinkit drove 79% of Zomato’s capex in Q2 and Q3 as ~₹370 crore were spent for opening 368 stores and establishing 1.3 million sqft of warehousing space. Its top 151 stores (out of 1,007) achieved avg ₹17 lakh in daily sales to drive ₹2,339 crore Q3 GOV.

v) The consolidated cash balance moved to ₹19,235 crore in Q3, up from ₹10,813 crore in Q2 because of its ₹8,446 crore November fundraise. Surprisingly, treasury income dipped to ₹143 crore from ₹227 crore in Q2. Treasury income should rise in subsequent quarters and ease the bottomline pressure.

b) Q3 FY2025 overview (Zomato food delivery and Blinkit)

As of Q3 FY 2025, Zomato achieved a Gross Order Value (GOV) of ₹9,913 crore and adjusted EBITDA of ₹423 crore. Growth stalled in food delivery as GOV ticked up 17% YoY and 2% QoQ. The average monthly transacting users rose 9% YoY and dipped 1% QoQ to 20.5 million (2.05 crore) users-- first QoQ decline in transacting users in the last one year.

Zomato’s weakness in its food delivery core can prove problematic if this blip does not correct in subsequent quarters. If Swiggy does not have a similarly weak Q3, these earning numbers might be the first signal of Swiggy taking market share from Zomato.

As of Q3 FY 2025, Blinkit achieved a Gross Order Value (GOV) of ₹7,798 crore and adjusted EBITDA losses of ₹103 crore that dwarfed cumulative EBITDA losses of ₹48 crore from the preceding three quarters. Heavy investment in capacity building in dark stores/ warehouses combined with increased customer acquisition cost hurt the bottomline.

On a YoY and QoQ basis, the QC offering grew 120% and 27% respectively. The average monthly transacting users grew 96% YoY and 19% QoQ to 10.6 million (1.06 crore) users.

Zomato’s next 6 months

If it was a popularity pageant, Zomato would walk away with the crown. If only stock market success mattered, Zomato would win with its entry into the 30-share BSE Sensex index in addition to a 125% stock uplift in 2024. The company has made few public missteps, and even the recent viral recruitment post added to its allure.

As a 16 year old company, it is still a teenager and these are trying years. The barbarians- Swiggy and Zepto are at the gate. BB Now and Flipkart Minutes are in hot pursuit and Amazon’s Tez is waiting in the wings. The company faces a defining year sandwiched between a public market peer and a public market aspirer, and everyone else.

a) Multiverse of Apps

Everyone likes shiny new objects. Swiggy and Zepto are betting on this as they aim to attract Zomato/ Blinkit’s captive users. Beyond paid performance marketing, their new apps can help draw in users on account of their freshness and single use-case focus.

After 10+ years of a Superapp strategy, the newly public Swiggy is on a bender with a multi-app rollout through Instamart (standalone QC app), Snacc (15 minute food delivery) and Pyng (professional services marketplace). These standalone apps will allegedly better serve existing users who would otherwise access the Superapp and will better target new single use case users.

Zepto jumped in with a new Zepto Cafe app (10 minute food delivery) that is now delivering ~50,000 orders a day.

Zomato has hedged its bets with Blinkit rolling out a new app- Bistro (15 minute food delivery). This is in addition to 15 minute food delivery on the main Zomato app.

Fifteen minute food delivery is still an unknown quantity. Swiggy started its foray with Bolt (on-app) and has gone deeper with Snacc (new app) believing that the target user is distinct from the garden-variety food-delivery user. Zomato’s addressing this through Blinkit’s Bistro app. Its potential failure will not reflect on the core food delivery app and this way if it succeeds, Zomato will have carved out a unique offering for a differentiated user cohort.

b) Pressure on the bottomline

Consolidated adjusted EBITDA fell 14% QoQ owing to hyperscaling initiatives at Blinkit. It would have fallen further if the food delivery EBITDA margin had not risen from 3.5% to 4.3% driven by platform fee hike and other optimisations.

Blinkit brought forward its goal of 2,000 stores in December 2026 to December 2025. Achieving this will require the company to expand at its fastest pace yet. And so, Blinkit will bleed further before it can switch on the burners for margin expansion. It lost ₹103 crore in Q3 after nearing EBITDA breakeven following single digit ₹ crore losses in Q1 and Q2.

Assuming that Blinkit improves its ad offerings, it can better target its sizable user base (10.6M, up from 8.9M in Q2) and earn higher ad income. Increased gross order value theoretically enables Blinkit to derive greater sourcing margins for its dark store network.

With Zomato’s $1 billion QIP fundraise, Blinkit indirectly benefits from increased treasury income as it has greater runway to rack up capex and marketing costs. Zomato (and Blinkit) will need every additional ₹₹ to keep itself in the green in the next 6 months.

c) Scaling Blinkit beyond AOV and store count

Every company believes in measuring the right metrics. At the outset, a firm measures everything in the misguided belief that every number matters. This can result in certain metrics taking on a life of their own and being used to define the company beyond its wishes. 

Netflix had a blowout quarter (October to December 2024) with 18M+ fresh subscribers in its last quarter of publicly reporting subscriber numbers. It took this call because it wants to be publicly appraised for solely revenue and profitability metrics.

Presently, store counts and AOV are used to compare QC firms among other metrics. In Q3, Blinkit achieved its best numbers with a ₹707 AOV and 1,007 stores. These numbers have consistently risen and have led analysts to believe these matter most in measuring Blinkit’s growth trajectory. As and when the AOV dips (due to seasonality or other reasons), the company would be viewed poorly.

In this growth phase, Blinkit is heavily banking on store count which will drive GOV and the AOV is calculated as an outcome of this growth. In the latest earnings call, it called out that AOV trends are yearly (if at all), and should not be tracked QoQ considering product category mix heavily influences AOV. For example, newer stores may take time to add a wider assortment and so this may drive lower store level AOV at the outset.

I believe that Blinkit will start pulling back on sharing critical data points in coming quarters as it seeks out stronger moats. The overall Zomato team was reticent in sharing metrics and upcoming initiatives in its latest earnings call and this trend should only continue with heightened competition.

PS: Average monthly order frequency per user and its progression among user cohorts would be a great metric to track across the QC ecosystem.

Arjun’s picks

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