Instacart’s ad revenue was up 19% in the third quarter of 2023 to $222 million.

The online grocery shopping app also reported modest growth in orders, which rose to 66.2 million – a year-on-year increase of 4%, as well as a 6% year-on-year growth in growth transaction value (GTV).

However, despite performing better than analysts had predicted, Instacart still suffered a $2 billion GAAP net loss in its first earnings report since going public.

Why we care. The numbers indicate rising confidence in Instacart among advertisers, implying a favorable return on investment. With the retailer confirming its continued commitment to developing new ad formats, it may be worth exploring this platform as we approach 2024. Just keep in mind that as Instacart becomes more popular, ad prices might go up.

Overcoming net loss. Instacart has attributed its $2 billion GAAP net loss to a significant $2.6 billion stock-based compensation expense during its initial public offering (IPO) period. Despite this setback, the company’s adjusted EBITDA showed strong growth at $163 million, a 120% increase compared to the previous year. The retailers has claimed it currently has around $2.2 billion in cash, and has initiated a new $500 million share repurchase program to strategically buy back shares when opportunities arise.

Takeaways. Additional key findings from the report include:

• GTV of $7,494 million, up 6% year-over-year.
• Orders of 66.2 million, up 4% year-over-year.
• Total revenue of $764 million, up 14% year-over-year, representing 10.2% of GTV.
• Transaction revenue of $542 million, up 12% year-over-year, representing 7.2% of GTV.
• Advertising & other revenue of $222 million, up 19% year-over-year, representing 3.0% of GTV.
• GAAP gross profit of $561 million, up 16% year-over-year, representing 7.5% of GTV and 73% of total revenue.
• GAAP net loss of $1,999 million, representing 26.7% of GTV and 262% of total revenue, was down $2,035 million year-over-year, reflecting a $2,595 million increase in SBC, which was significantly elevated in the period of our IPO 2 .
• Adjusted EBITDA of $163 million, up 120% year-over-year, representing 2.2% of GTV and 21% of total revenue

What Instacart is saying. Fidji Simo, Chief Executive Officer, said in a statement:

• “I continue to be excited about the long-term outlook for online grocery adoption and the growth initiatives we have in place to further expand our category leadership. At the same time, we are staying relentlessly focused on delivering more profitable growth.”
• “We continue to invest in initiatives that can drive additional fulfillment efficiencies by improving batch rate, average time spent per order, and order quality to reduce appeasements and refunds as well as cancellations and redeliveries.”
• “We are investing in additional measurement tools, capabilities, and ad formats that can deliver more value to our existing and new brand partners and drive further growth in advertising & other revenue. Finally, we will remain disciplined in how we allocate marketing spend and customer incentives – rather than maximizing near-term orders and GTV, we will continue to prioritize initiatives that we expect will lead to incremental, sustainable gross profit.”
• “In summary, I am confident in our strategy and our ability to continue delivering strong earnings – all while pursuing growth opportunities that can generate more value for our partners, our team, and our shareholders.”

Deep dive. Read Instacart’s full Q3 2023 earnings report in full for more information.