Bengaluru: Shares of food delivery and quick-commerce major Swiggy fell to a record low on Friday after the company's September-quarter results showed wider losses in its Instamart quick-commerce business, sharpening investor focus on when the fast-growing but cash-hungry segment will turn profitable.
Swiggy's stock tumbled in early trade and eventually closed sharply lower, with the shares hitting their lowest level since the company's listing. The selloff came a day after Swiggy reported its results for the second quarter of financial year 2026-27 (Q2FY27), with the numbers falling short of several analyst expectations.
The company reported a consolidated net loss of Rs 922 crore for the September quarter, compared with Rs 1,092 crore in the same quarter last year — a narrowing of about 16 per cent year on year. However, the loss widened sequentially from Rs 792 crore in the June quarter, and it came in above most analyst estimates. Motilal Oswal, for instance, had expected a loss of around Rs 850 crore.
Revenue from operations grew a robust 36 per cent year on year to Rs 7,571 crore, from Rs 5,561 crore in the year-ago quarter, and came in slightly above consensus estimates. But profitability remained elusive, with the consolidated adjusted EBITDA loss widening to Rs 770 crore from Rs 695 crore a year earlier — about 41 per cent wider than what brokerage Nirmal Bang had estimated.
The pain point for investors was Swiggy Instamart, the company's quick-commerce arm. Instamart's adjusted core loss widened to Rs 895 crore in the second quarter from Rs 849 crore a year earlier, even as gross order value in the segment grew about 31 per cent year on year to Rs 9,230 crore. Net order value grew nearly 35 per cent to Rs 6,594 crore, orders rose 29 per cent to around 130 million, and the monthly transacting user base expanded 23 per cent to 14.8 million.
Instamart's contribution margin stood at minus 1 per cent of gross order value, and management expects a recovery of about 100 basis points in the December quarter, with further improvement from a transition to an inventory-led model in subsequent quarters.
Swiggy's shareholders' letter struck a cautiously optimistic note. "We believe the adjusted EBITDA losses to have peaked out in Q2FY27," the company said, adding that it expects the contribution margin to remain within the range of 0 to minus 100 basis points of gross order value in the third quarter, with sequential improvement thereafter.
The company said month-one retention averaged more than 60 per cent among transacting users for the quarter, while targeted pricing initiatives and a wider assortment helped drive engagement.
"As speed becomes table stakes in quick commerce and aggressive pricing proves unsustainable, we believe differentiated assortment will help us build a unique consumer proposition," the company said.
The food delivery business, by contrast, held steady. Gross order value in the segment grew 17.7 per cent year on year, and the contribution margin expanded 10 basis points quarter on quarter to 7.7 per cent. Revenue from the food delivery business rose 22 per cent year on year to Rs 2,338 crore, and segment EBIT rose 39 per cent to Rs 349 crore, indicating improving operating leverage in the core business.
But the market was not reassured. The stock has now fallen for four straight sessions, and from its offer price of Rs 390 apiece, it has more than halved. Brokerages that cover the stock moved to trim their target prices, even as most retained their buy ratings — a signal that they see value in the long run but want proof that Instamart's cash burn can be tamed.
Jefferies maintained its buy rating but cut its target price to Rs 330 from Rs 435, saying Instamart's losses are a key concern for investors and that the current price does not fully reflect the value of Swiggy's food-delivery business and cash holdings.
Emkay maintained its buy rating but cut its target by 11 per cent to Rs 310, saying sustained double-digit sequential net order value growth in Instamart, along with improving customer retention, monetisation and store utilisation, could help assign a higher valuation. Nomura, Motilal Oswal and Nuvama also retained buy ratings while lowering targets.
The broader context is an intensely competitive quick-commerce market. Swiggy and rival Eternal have been rapidly expanding their networks of small warehouses, known as dark stores, as the segment has emerged as the key growth driver for both companies. Swiggy added 69 dark stores during the quarter, taking its network to 1,240 across 133 cities, compared with 1,102 a year ago.
But the buildout raises fixed costs — rent, staffing and logistics — and margins improve only if each store gets enough orders to keep workers and shelves busy.
Eternal's results earlier in the week had already put the segment under scrutiny, and Swiggy's numbers kept the focus firmly on profitability. The question hanging over the sector is when the aggressive expansion phase will give way to steady, profitable growth.
Market watchers note that quick commerce has become the most contested corner of Indian e-commerce, with deep-pocketed players battling for share in groceries, essentials and now a widening range of categories. The discounts and subsidies that fuel this fight weigh directly on contribution margins, which is why brokerages keep pressing management on the timeline for margin recovery.
Swiggy's bet is that scale, higher store utilisation and a wider, more differentiated assortment will do the heavy lifting — a strategy its rivals share, making execution the decisive factor.
For Swiggy, the path forward rests on three levers: growing order volumes per store, improving customer retention and monetisation, and transitioning to an inventory-led model that management says will lift margins. The company has guided for sequential margin improvement, and investors will be watching the December quarter closely to see whether the promised peak in losses holds.
For investors, the next test comes in the December quarter. If Instamart's losses indeed begin to decline as guided, the worst of the margin pressure may be behind the company — and the stock's steep discount to its listing price could start to look like an opportunity rather than a warning.
(Reporting based on Reuters and Business Standard.)