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Instacart Surges on Solid Q1 Recovery and Upbeat Q2 Outlook

Shares of Instacart (CART) soared nearly 14% on Friday after the company posted a stronger-than-expected first-quarter performance and issued upbeat guidance for the second quarter. 

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The strong report signals renewed momentum in its core grocery delivery business. The results, while narrowly missing EPS estimates, showed accelerated order growth, robust advertising revenues, and expanding profitability — a much-needed rebound following a disappointing fourth quarter.

Instacart reported Q1 revenue of $897 million, up 9% year-over-year, meeting analysts’ expectations. Orders surged 14%, the fastest growth in ten quarters, while Gross Transaction Value (GTV) rose 10%, slightly exceeding estimates. Despite a 4% decline in average order value — attributed to a rising share of smaller restaurant orders and the newly introduced $10 minimum basket for Instacart+ members — the increase in order volume and advertising efficiency more than compensated.

Advertising revenue rose 14% to $247 million, outpacing GTV growth and underlining Instacart’s ability to monetize its platform through data-driven ad solutions. CEO Fidji Simo noted in the earnings call that both large and emerging brands have ramped up spending, supported by AI-powered tools and expanded inventory through initiatives like Carrot Ads. The company now boasts over 7,000 brands on its ad platform.

Adjusted EBITDA, a key profitability metric, climbed 23% to $244 million, exceeding the company’s own forecast. The jump reflects cost discipline, operational efficiencies in logistics and payments, and resilience in consumer incentives, which did not erode margins.

Enterprise Expansion Through Strategic Acquisition
A major development reinforcing Instacart’s long-term strategy was the acquisition of Wynshop, a provider of e-commerce software for grocers. The deal — Instacart’s sixth — will enhance its enterprise offering by expanding digital storefront capabilities and deepening retailer partnerships. Wynshop will continue to operate independently for now, but its cloud-based personalization and fulfillment tools are expected to integrate into Instacart’s platform over time.

The acquisition aligns with Instacart’s broader enterprise strategy: to become indispensable to mid-tier and regional grocery chains competing with giants like Walmart and Amazon. By embedding itself more deeply into the operations of partner grocers, Instacart can offer value-added services such as fulfillment, advertising, and inventory insights — bolstering both revenue and customer retention.

Analysts at JMP Securities maintained a Market Outperform rating on CART with a $55 price target, emphasizing the vast $700 billion U.S. grocery market and the opportunity for multiple players. They highlighted the strategic edge Instacart gains by powering grocers' online presence while monetizing with software-based solutions.

A Key Holding in D1 Capital's Turnaround Portfolio
Maplebear Inc., Instacart’s parent company, is one of the most significant holdings in Daniel Sundheim’s D1 Capital Partners, which reported a $934 million position in CART as of Q4 2024. The hedge fund, which suffered steep losses in 2022 during a brutal sell-off in tech, has staged a powerful comeback. After rising 19% in 2023, D1’s public portfolio returned 44% in 2024 and gained another 7.7% in January 2025 alone, thanks in part to savvy bets on undervalued technology and European stocks.

Sundheim, a vocal advocate for AI-driven transformation, has emphasized that public companies — especially those with scale — are best positioned to lead the next wave of AI disruption. CART’s embrace of AI across logistics, advertising, and software development (87% of code was AI-assisted in Q1) aligns with D1’s investment thesis. The grocery tech firm is not just a delivery service — it’s evolving into a platform business serving consumers, retailers, and advertisers with AI at its core.

Outlook: Reaccelerating in an Expanding Market
Instacart’s Q2 guidance calls for 8-10% GTV growth and $240–$250 million in adjusted EBITDA — both above Street expectations. The company expects order growth to outpace GTV again, fueled by new initiatives like expanded restaurant delivery and a reinvigorated Instacart+ program. Meanwhile, continued strength in its high-margin advertising segment will support further profitability.

Risks remain, including macroeconomic uncertainty and fluctuating advertising budgets, as well as a coming increase in stock-based compensation. However, Instacart’s strong balance sheet, diversified advertiser base, and rising operational leverage suggest it is well-positioned to withstand external pressures.

With 98% household penetration in North America, accelerating order growth, and enterprise ambitions boosted by its latest acquisition, Instacart is regaining investor confidence — and proving why top hedge funds like D1 Capital are betting big on its future.


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