SAN FRANCISCO - Instacart Inc. (NASDAQ: NASDAQ:CART) shares fell sharply by 10% as the company reported its fourth-quarter earnings. Despite surpassing analyst expectations for adjusted earnings per share (EPS), the company's revenue was nearly in line with estimates, causing investor concerns.
Instacart posted an adjusted EPS of $0.44, significantly beating the analyst forecast of a $0.10 loss per share. However, revenue for the quarter was $803 million, just shy of the consensus estimate of $804.34 million.
The company's fourth-quarter performance showed a 6% increase in total revenue year-over-year (YoY), with gross transaction value (GTV) climbing 7% YoY to $7.891 billion. Orders grew by 5% YoY, indicating a steady demand for the grocery delivery service.
The GAAP net income for the quarter stood at $135 million, which was a decrease from the previous year, primarily due to a one-time tax benefit realized in the prior year.
Looking ahead, Instacart provided guidance for the first quarter, projecting GTV to be between $8,000 million and $8,200 million, which translates to a 7% to 10% YoY growth.
The adjusted EBITDA is expected to range from $150 million to $160 million, amounting to 1.9% to 2.0% of GTV. This guidance reflects the company's focus on order growth over average order value (AOV) and includes the impact of leap day and seasonal variations.
CART also said it will cut 250 nobs as it pursues higher-margin businesses. The company's strategic shift toward high-margin businesses such as advertising, along with efforts to restructure its leadership team and reduce its workforce, suggests a move to bolster profitability.
In light of the earnings release, the CEO stated, "We are making targeted investments in marketing and consumer incentives to drive profitable long-term growth while focusing on high-margin opportunities."
Investors reacted negatively to the mixed results and the future outlook, as evidenced by the 10% decline in Instacart's stock price following the earnings announcement. The market's response indicates concerns over the company's growth trajectory and profitability amid a competitive landscape in the grocery delivery sector.
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