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Instacart sees upbeat core profit on higher transaction, ad fees

:Instacart on Wednesday forecast fourth-quarter core profit above Wall Street estimates in its first earnings report since going public in September, on higher transaction and advertisement fees, sending its shares up 4 per cent after the bell.

The grocery delivery firm, whose stock has lost more than a third of its value since debut, also announced a $500 million share repurchase program.

It expects current-quarter adjusted EBITDA, a key measure of profitability, to be between $165 million and $175 million. Analysts expect $155.6 million, according to LSEG data.

The company, formally known as Maplebear, also beat third-quarter revenue expectations, benefiting from higher delivery and service fees it charges to customers as well as advertisement spaces it sells, especially to packaged goods companies looking to reach a wider customer base.

“We have significant competitive advantages over newer, smaller entrants into our space,” CEO Fidji Simo said in an interview with Reuters.

Instacart’s gross transaction value (GTV) – the value of products sold based on prices shown – rose 6 per cent over the year earlier to $7.49 billion in the third quarter. Analysts on average estimated $7.46 billion.

Its total orders rose 4 per cent during the quarter. Total revenue increased 14 per cent to $764 million, topping expectations of $736.9 million.

“The results were better than feared,” said CFRA Research analyst Arun Sundaram. “There were some concerns… that the GTV could be pressured given that grocery commerce adoption is slowing… but GTV grew.”

Instacart posted a net loss of $2 billion, or $20.86 per share, in the third quarter, primarily due to the stock-based compensation expense that it incurred during the period of its initial public offering.

For full year 2023, Instacart anticipates GTV to grow in mid-single digits, versus analysts’ estimate of 4.7 per cent growth at $30.18 billion. It expects three times more adjusted EBITDA for the period than the $187 million it had posted in 2022.

Last week, rival DoorDash also projected upbeat fourth-quarter core profit.

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