Whalesbook
### Profitability Under Pressure Despite Revenue Boom
Zomato Ltd. is expected to report a significant contraction in its bottom line for the third quarter ending December 2025, according to projections from ICICI Securities. Analysts anticipate a 43.6% year-over-year decline in net profit, bringing it down to Rs 99.3 crore. This anticipated profit slump occurs against a backdrop of robust top-line expansion, with net sales projected to skyrocket by 208.1% annually to Rs 17,700.6 crore. While quarter-over-quarter figures show a potential recovery, with net profit forecast to climb 297.3%, the year-over-year comparison highlights a persistent challenge in translating substantial revenue growth into comparable profit gains. Earnings before interest, tax, depreciation, and amortisation (EBITDA) are forecast to increase by a modest 1.2% year-over-year to Rs 288.5 crore, with a sequential increase of 28.8%. These estimates suggest that while operational scale is expanding, the cost of this growth is weighing on overall profitability.
### The Margin Squeeze and Competitive Arena
The divergence between Zomato's revenue and profit growth underscores a critical investor concern: margin compression. The company's aggressive expansion, particularly in quick commerce with its Blinkit subsidiary, appears to be consuming a significant portion of its revenue gains. Blinkit, while showing strong Net Order Value (NOV) growth, has also incurred increased quarterly losses due to accelerated investments in expanding its store network. This strategy, though aimed at capturing market share and achieving future scale, currently places pressure on Zomato's profitability metrics. The food delivery sector itself is intensely competitive, with rivals like Swiggy also investing heavily in growth and operational efficiency. Swiggy, for instance, continues to operate at a net loss, indicating the high cost of market dominance in India's online food delivery sector. Zomato's market capitalization stood around Rs 2.66 lakh crore as of January 2026. The company's price-to-earnings (P/E) ratio, while volatile, has been noted as high, with figures around 1150 or even higher in some reports, suggesting high investor expectations for future growth. This valuation necessitates sustained profitability improvements to justify its market standing.
### Outlook and Analyst Sentiment
Despite the near-term profitability concerns highlighted by ICICI Securities' estimates, the broader analyst sentiment towards Zomato (Eternal Ltd.) remains largely positive. Recent reports indicate that brokerages view Blinkit's evolving business model and improving operational metrics as a key trigger. For instance, CLSA maintains a 'high-conviction outperform' call with a target price of Rs 503, citing Blinkit's contribution per order and Net Order Value (NOV) growth exceeding estimates. Jefferies also holds a 'buy' rating with a target of Rs 480, noting Blinkit's positive EBITDA achievement amidst high competition. This optimism is tempered by the recent leadership transition, with founder Deepinder Goyal stepping down as MD & CEO to focus on AI initiatives, and Albinder Dhindsa taking over as Group CEO. While analysts suggest this transition does not immediately alter the near-term outlook, it will be a key point to monitor. The Indian online food delivery market itself is poised for significant growth, with projections indicating a CAGR of 14.2% to 18.58% from 2025 to 2030 and beyond, reaching potentially over $120 billion by FY2032. Zomato's ability to navigate intense competition, manage its expansion costs effectively, and translate revenue growth into sustainable profits will be crucial for realizing its valuation potential in this expanding market.