Instacart (CART)

Online grocery delivery platform Instacart (NASDAQ:CART) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 10.2% year on year to $939 million. Its GAAP profit of $0.51 per share was 2.8% above analysts’ consensus estimates.

Company Overview

Powering more than one billion grocery orders since its founding, Instacart (NASDAQ:CART) is an online grocery shopping and delivery platform that partners with retailers to help customers shop from local stores through its app or website.

Marketplaces have existed for centuries. Where once it was a main street in a small town or a mall in the suburbs, sellers benefitted from proximity to one another because they could draw customers by offering convenience and selection. Today, a myriad of online marketplaces fulfill that same role, aggregating large customer bases, which attracts commission-paying sellers, generating flywheel scale effects that feed back into further customer acquisition.

Instacart competes with other grocery delivery services like DoorDash (NYSE:DASH), Uber Eats (NYSE:UBER), Amazon Fresh (NASDAQ:AMZN), and Walmart's (NYSE:WMT) delivery options, as well as retailers' own delivery services.

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, Instacart’s 17% annualized revenue growth over the last three years was solid. Its growth surpassed the average consumer internet company and shows its offerings resonate with customers, a great starting point for our analysis.

This quarter, Instacart reported year-on-year revenue growth of 10.2%, and its $939 million of revenue exceeded Wall Street’s estimates by 0.5%.

Looking ahead, sell-side analysts expect revenue to grow 9.7% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and indicates its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.

A company’s gross profit margin has a significant impact on its ability to exert pricing power, develop new products, and invest in marketing. These factors can determine the winner in a competitive market.

For online marketplaces like Instacart, gross profit tells us how much money the company gets to keep after covering the base cost of its products and services, which typically include payment processing, hosting, and bandwidth fees in addition to the costs necessary to onboard buyers and sellers, such as identity verification.

Instacart has robust unit economics, an output of its asset-lite business model and pricing power. Its margin is better than the broader consumer internet industry and enables the company to fund large investments in new products and marketing during periods of rapid growth to achieve higher profits in the future. As you can see below, it averaged an excellent 74.9% gross margin over the last two years. Said differently, roughly $74.90 was left to spend on selling, marketing, and R&D for every $100 in revenue.

In Q3, Instacart produced a 73.7% gross profit margin, marking a 1.5 percentage point decrease from 75.2% in the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs have been stable and it isn’t under pressure to lower prices.

Consumer internet businesses like Instacart grow from a combination of product virality, paid advertisement, and incentives (unlike enterprise software products, which are often sold by dedicated sales teams).

Instacart is quite efficient at acquiring new users, spending only 31.2% of its gross profit on sales and marketing expenses over the last year. This efficiency indicates that Instacart has a highly differentiated product offering, giving it the freedom to invest its resources into new growth initiatives.

EBITDA is a good way of judging operating profitability for consumer internet companies because it excludes various one-time or non-cash expenses (depreciation), providing a more standardized view of the business’s profit potential.

Instacart has been a well-oiled machine over the last two years. It demonstrated elite profitability for a consumer internet business, boasting an average EBITDA margin of 27%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Instacart’s EBITDA margin rose by 28.4 percentage points over the last few years, as its sales growth gave it immense operating leverage.

This quarter, Instacart generated an EBITDA margin profit margin of 29.6%, up 3 percentage points year on year. The increase was encouraging, and because its gross margin actually decreased, we can assume it was more efficient because its operating expenses like marketing, R&D, and administrative overhead grew slower than its revenue.

Although EBITDA is undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Instacart has shown terrific cash profitability, driven by its lucrative business model and cost-effective customer acquisition strategy that enable it to stay ahead of the competition through investments in new products rather than sales and marketing. The company’s free cash flow margin was among the best in the consumer internet sector, averaging 22.8% over the last two years.

Taking a step back, we can see that Instacart’s margin expanded by 16.8 percentage points over the last few years. This is encouraging because it gives the company more optionality.

Instacart’s free cash flow clocked in at $272 million in Q3, equivalent to a 29% margin. This result was good as its margin was 8.9 percentage points higher than in the same quarter last year, building on its favorable historical trend.

Companies with more cash than debt have lower bankruptcy risk.

Instacart is a profitable, well-capitalized company with $1.86 billion of cash and $37 million of debt on its balance sheet. This $1.82 billion net cash position is 18.8% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We enjoyed seeing Instacart beat analysts’ EBITDA expectations this quarter. Profit margins also rose year-on-year. Overall, this print had some key positives. The stock traded up 7.5% to $39.50 immediately after reporting.

Updated: December 5, 2025 at 11:04 PM EST

Before making an investment decision, investors should account for Instacart’s business fundamentals and valuation in addition to what happened in the latest quarter.

Instacart is a rock-solid business worth owning. First of all, the company’s revenue growth was solid over the last three years. And while its declining EPS over the last one years makes it a less attractive asset to the public markets, its impressive EBITDA margins show it has a highly efficient business model. Additionally, Instacart’s rising cash profitability gives it more optionality.

Instacart’s EV/EBITDA ratio based on the next 12 months is 10.4x. Scanning the consumer internet space today, Instacart’s fundamentals really stand out, and we like it at this price.

Wall Street analysts have a consensus one-year price target of $50.42 on the company (compared to the current share price of $44.22), implying they see 14% upside in buying Instacart in the short term.