Whalesbook
Swiggy's Contrasting Performance
Swiggy's core food delivery business is expanding strongly and improving profits. However, its quick commerce service, Instamart, is seeing slower growth and ongoing profit issues. This quarter shows a clear split: the food delivery business is performing exceptionally well, while the newer quick commerce area faces tough competition and changing market conditions.
Food Delivery Hits Strongest Growth in Years
Swiggy's food delivery business had its strongest performance in nearly four years. Gross Order Value (GOV) hit Rs 9,005 crore, up 22.6% year-on-year, surpassing management's forecast. Monthly transacting users (MTUs) increased by 21% to 18.3 million. The adjusted EBITDA margin for this segment rose to 3.3% of GOV. Annual adjusted EBITDA has now exceeded Rs 1,000 crore, a major achievement despite doubts about a wider industry slowdown. The 'Out of Home' (OOH) segment also became profitable for the first time in FY26, with GOV growing 43% year-on-year.
Instamart's Slower Expansion and Market Position
Instamart's GOV grew 68.8% year-on-year to Rs 7,881 crore. However, this growth rate slowed down compared to the previous quarter. Swiggy added only seven dark stores this quarter, bringing its total to 1,143 across 129 cities. This expansion pace is much slower than competitors like Blinkit, which added 216 stores. As a result, Instamart's market share is 25%, trailing Blinkit (46%) and Zepto (29%). While Instamart's Average Order Value (AOV) rose 32.8% to Rs 700, helped by more non-grocery items, profitability in the quick commerce segment is still an issue.
Quick Commerce Rivals: Blinkit Leads the Pack
The quick commerce market is highly competitive. Blinkit, owned by Zomato, leads with a 46% market share, followed by Zepto (29%) and Swiggy Instamart (25%). Blinkit processed 424 million orders in fiscal 2025, compared to Instamart's 286 million. Blinkit also expects a higher average order value of ₹709 in 2026 versus Instamart's ₹619. Blinkit has a higher take rate (20%) than Instamart (15%). Crucially, Blinkit's estimated loss per order is about ₹10, significantly lower than Instamart's ~₹100. Blinkit plans to more than double its stores to 2,157 by 2026, far exceeding Swiggy's projected 1,254.
Analysts Divided on Swiggy's Outlook
Analysts hold varied views on Swiggy's future. Macquarie upgraded the stock to Neutral, noting its post-IPO price correction and strong food delivery performance. Nomura kept a Buy rating but cut its target price to Rs 473. UBS and Citi maintained Buy ratings with targets of Rs 390 and Rs 415, respectively. Morgan Stanley rated it Equal-weight at Rs 322, while Jefferies issued a Buy at Rs 415, citing valuation. Despite positive targets averaging around Rs 400-Rs 527, persistent concerns over quick commerce profitability mean some analysts suggest the stock might trade sideways until future prospects become clearer. Some reports also rate it as a 'HOLD'.
Instamart's Path to Profitability Faces Hurdles
Instamart faces significant hurdles to becoming profitable. Although its adjusted EBITDA margin improved to -10.9% this quarter, the segment still incurred a loss of Rs 858 crore, showing a large cash burn. Instamart's strategy seems more conservative than Blinkit's, which is more aggressive and has a clearer path to profit. With a lower take rate and higher loss per order, Instamart's ability to compete is questionable. The quick commerce sector demands heavy investment in dark stores, logistics, and discounts from rivals like Zomato (Blinkit), Zepto, Reliance, and Flipkart. This intense competition could further squeeze margins and delay profitability. Some analyses point out that Instamart might operate more like a 'managed' business than a fast-moving startup, potentially limiting its strategic flexibility against founder-led rivals. While food delivery is profitable, the company's overall FY26 losses increased 33% to Rs 4,154 crore, indicating continued need for funding.
Outlook: Growth Targets and Breakeven Projections
Swiggy's management reaffirmed its long-term growth target of 18-20% for food delivery. They also aim for Rs 1 trillion in gross order value with a 3-4% EBITDA margin in the medium term. UBS forecasts that quick commerce could break even on contribution margin by Q1FY27, though other analysts remain cautious. The quick commerce market is expected to grow significantly, reaching $35 billion by 2030. Swiggy plans to secure a large part of this growth, targeting over Rs 1 lakh crore in net order value with a 4-5% EBITDA in the medium term, provided it can achieve sustainable unit economics. However, ongoing investment in expansion is anticipated, with capital expenditure (Capex) expected to decrease in FY27 following higher spending in previous years.