Zomato’s Q3 FY25 financial results are out, and they’ve left investors with a mix of optimism and concern. While the food delivery giant showcased impressive 64% year-on-year (YoY) revenue growth to ₹5,405 crore, its net profit took a sharp 57% dive to ₹59 crore, raising questions about the company’s future strategy and profitability.
For an investor, the numbers reveal both growth potential and significant challenges. Let’s break down the highlights, what’s driving Zomato’s business, and what investors need to know.
Revenue Growth: A Bright Spot Amidst Profit Concerns
Zomato’s top-line performance is undoubtedly impressive. The company reported a 64% YoY jump in revenue, driven by:
- Blinkit’s Stellar Performance:
- Blinkit, Zomato’s quick commerce segment, saw 117% YoY revenue growth, thanks to aggressive store additions and growing order volumes.
- Blinkit contributed ₹1,399 crore in revenue this quarter, marking its position as a major growth driver.
- With plans to open 1,000 new Blinkit stores by December 2025, the segment is poised for exponential growth.
- Hyperpure’s Expansion:
- Hyperpure, Zomato’s B2B arm that supplies ingredients to restaurants, continues to grow steadily, adding diversity to its revenue streams.
- Improved Take Rates:
- Zomato’s commission per order (take rate) increased, highlighting better monetization of its platform despite challenges in its core food delivery business.
Profit Slump: What Went Wrong?
While revenue soared, Zomato’s net profit fell 57% YoY to ₹59 crore. Here’s why:
- Surging Costs:
- Total expenses jumped 63.5% YoY to ₹5,533 crore, with significant increases in delivery and advertising costs.
- Delivery-related expenses rose 36% YoY to ₹1,450 crore as the company expanded its network to support Blinkit’s rapid growth.
- Advertising expenses surged 40% YoY to ₹521 crore, reflecting Zomato’s aggressive push to stay competitive in a crowded market.
- Broad-Based Demand Slowdown:
- Zomato’s core food delivery business experienced slower growth due to a broad-based demand slump in the market.
- Near-Term Loss Outlook:
- Zomato’s CFO, Akshant Goyal, acknowledged that continued investments in Blinkit and other segments could lead to further near-term losses. However, he emphasized that these investments are necessary for long-term profitability.
Stock Market Reaction: Volatility Rules
Zomato’s Q3 results triggered volatility in its stock price. Here’s what happened:
- Shares fell 7.26% intraday, hitting ₹230.70, before recovering to close at ₹240.95.
- Analysts at Kotak Institutional Equities maintained a ‘Buy’ rating, setting a revised target price of ₹305. They believe Blinkit’s growth and Zomato’s operational efficiencies make it a long-term growth story.
- On the technical front, Zomato’s stock remains range-bound between ₹203 and ₹300. A breakout above ₹300 is essential for bullish momentum, while ₹230 acts as a critical support level.
Should Investors Be Worried?
The mixed results raise a natural question: Is Zomato still a good investment?
Reasons for Optimism:
- Blinkit and Hyperpure Driving Growth: These segments are showing strong momentum and are expected to contribute significantly to Zomato’s future revenues.
- Revenue Diversification: Zomato is no longer just a food delivery platform. Its investments in quick commerce and B2B services position it as a diversified business.
- Long-Term Vision: Management’s focus on expanding the Blinkit network and improving take rates reflects a commitment to future growth.
Risks to Consider:
- Profitability Concerns: Rising costs and ongoing investments could pressure margins in the near term.
- Demand Slowdown: Weak demand in the food delivery segment remains a key challenge.
- Competitive Landscape: Aggressive competition from other food delivery platforms and quick commerce players could impact Zomato’s market share.
What Should Investors Do?
If you’re a long-term investor, Zomato still holds potential. The company’s aggressive expansion into new segments and operational efficiencies could translate into significant gains over time. However, short-term traders may need to exercise caution, given the stock’s current volatility and lack of clear profit momentum.
Key Levels to Watch:
- Support: ₹230 (critical level for holding the stock).
- Resistance: ₹300 (a breakout above this level could signal strong bullish momentum).
Conclusion: Is Zomato a Long-Term Bet?
Zomato’s Q3 FY25 results are a tale of two halves: impressive revenue growth versus rising costs and profitability challenges. For investors, the decision boils down to patience.
The company’s long-term potential, driven by Blinkit and Hyperpure, remains intact. However, near-term losses and demand concerns in the food delivery business warrant caution. For those willing to ride the wave, Zomato offers a promising but bumpy journey ahead.
Will Zomato deliver long-term value or face more hurdles? Only time will tell, but the foundation is being laid for a brighter future.
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