Zomato experienced a challenging day on Tuesday, January 21, 2025, as its share price dropped by 8.67%, settling at ₹215.80 per share on the NSE. This steep decline followed the release of its Q3 FY25 results, which painted a mixed picture for the company.
Profit falls despite revenue growth
Zomato’s net profit for Q3 FY25 saw a sharp decline of 57.2% year-on-year, falling to ₹59 crore from ₹138 crore in Q3 FY24. Interestingly, the company’s revenue from operations rose significantly, reaching ₹5,405 crore compared to ₹3,288 crore in the same period last year. However, rising expenses – which climbed to ₹5,533 crore – offset the revenue growth, creating challenges for profitability.
Key highlights from Q3
The food delivery segment witnessed a modest 17% year-on-year growth, with a 2% rise over the previous quarter. However, the company noted signs of a demand slowdown.
Zomato’s quick commerce arm, Blinkit, has shown impressive growth, with 1,007 stores added in just nine months. The company is aiming to increase this count to 2,000 by the end of FY25, showcasing its ambitious expansion plans.
Zomato generates revenue through food delivery, Hyperpure (its B2B supply business), quick commerce, and other ventures.
Market sentiment
The market reacted negatively to the Q3 results, as evidenced by the share price drop. Rising expenses and shrinking profits have raised concerns among investors looking to invest in stocks, particularly in a competitive environment. In its shareholder letter, Zomato acknowledged the pressure on margins but expressed confidence in overcoming these short-term challenges.
Brokerages, however, remain cautiously optimistic, projecting a 17-20% growth in gross order value (GOV) over the next few years. The focus, for now, is on customer acquisition and executing growth strategies effectively.
Looking ahead
On January 21, 2025, at 10:51, Zomato’s share price was down by 9% at ₹219. Its performance reflects the complexities of balancing rapid growth with profitability in a competitive market. Investors may find its growth trajectory promising, but the company’s ability to manage costs and improve margins will be critical to its long-term success.
As the journey unfolds, Zomato’s response to these challenges will define its position in the evolving market landscape.
For android only