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Instacart (CART) is delivering some big gains today, despite falling just short of 1Q25 EPS estimates, as solid Gross Transaction Value (GTV) growth and encouraging Q2 guidance fuel optimism for solid results moving forward. CART's revenue grew by about 9% to $897 mln, matching analysts' expectations, driven by a 14% surge in orders -- the fastest growth in 10 quarters -- and a 14% increase in high margin advertising revenue to $247 mln. This performance follows a disappointing 4Q24, where CART missed revenue estimates and issued soft Q1 guidance, causing a steep decline in the stock. Last night's Q1 beat and solid Q2 outlook, particularly in GTV and adjusted EBITDA, signal a recovery from Q4's softness, with initiatives like the $10 minimum basket for Instacart+ members and expanded restaurant orders driving the momentum.

• GTV grew 10%, slightly above the $9.11 bln estimate, accelerating from 8% in 4Q24, supported by new customer cohorts achieving higher basket sizes and a higher mix of club orders. This growth, though, was tempered by a slight decline in average order value (AOV), which fell to $110 from $111 last quarter and from $113 in 3Q24. The downtrend is due to a higher mix of restaurant orders and the $10 minimum basket feature, which promotes smaller baskets.
• A standout metric in Q1 was adjusted EBITDA, showcasing CART's improving profitability. Bolstered by disciplined cost management and a focus on higher margin advertising revenue, adjusted EBITDA rose 23% yr/yr to $244 mln, exceeding CART's guidance of $220-$230 mln. Operational efficiencies, such as improved shopper logistics and payment processing optimizations, further bolstered margins. The company’s reinvestment in consumer incentives, like Super Saver and Free Pickup, has not materially pressured profitability, supporting EBITDA expansion.
• CART's Q2 GTV guidance implies growth of 8-10%, while its adjusted EBITDA forecast of $240-$250 mln surpassed analysts' expectations. The outlook reflects confidence in sustained order growth (expected to outpace GTV growth) and continued advertising revenue strength, driven by AI-powered ad tools and high return-on-ad-spend performance.

CART's Q2 performance, marked by 14% order growth and a 23% jump in adjusted EBITDA, reflects robust demand and operational discipline, rebounding from a disappointing Q4. The solid Q2 guidance, buoyed by growth initiatives like Instacart+ and advertising, positions CART well for FY25, with prospects for continued market share gains in the under-penetrated online grocery space.