Eternal Ltd, the parent company of Zomato and Blinkit, has delivered a cautious outlook in its March quarter earnings report, causing concern among investors and analysts. As competition intensifies in both food delivery and quick commerce, Eternal Ltd’s management has signaled increasing losses and a willingness to trade short-term profitability for long-term market share, leading to expected downward pressure on the stock.

Zomato’s Food Delivery Segment Growth Slows Sharply

One of the biggest concerns highlighted in the quarterly update is the continued slowdown in Zomato’s food delivery business. The Gross Order Value (GOV) for this segment grew just 16% in Q4, which is lower than the 16.8% in the previous quarter and significantly behind the 28.5% growth in the same quarter last year. This marks the fifth straight quarter of decelerating growth.

The management attributed this slowdown to two main factors:

• A sluggish demand environment, which has persisted in the food services sector.

• A shortage of delivery partners, which has affected order fulfillment efficiency.

As part of its operational clean-up, Zomato also delisted 19,000 restaurants during the quarter, a move that could further limit variety and user engagement on the platform.

Quick Commerce Boom Comes at a High Cost

While Blinkit, the company's Quick Commerce arm, recorded impressive growth, the profitability side has deteriorated significantly.

• Gross Order Value (GOV) for Blinkit grew 134% year-on-year and 21% sequentially from the December quarter.

• However, EBITDA losses ballooned to ₹178 crore, up from just ₹3 crore at the beginning of FY25.

This surge in losses raises red flags, especially as the management has made it clear that short-term profit targets will be compromised in favor of growing market share.

Expansion Continues Amidst Mounting Losses

Despite financial pressures, Blinkit continues its aggressive store expansion strategy. In the March quarter, the company added 294 net new stores, taking the total to 1,301. While this supports faster delivery and deeper market penetration, it comes with high operational costs that are pressuring margins.

Moreover, the bearish commentary by the management underlined the intense competitive environment that is only expected to get tougher in the near term. The entry of newer players and the aggressive pricing tactics from rivals like Swiggy’s Instamart and Zepto are likely to further strain Blinkit’s ability to maintain growth without deeper losses.

Brokerages Turn Cautious and Lower Estimates

Reacting to Eternal Ltd’s Q4 results, several brokerages have downgraded their outlook on the company. The main reasons cited include:

• Persistent weakness in food delivery GOV growth.

• Sharp EBITDA losses in the Quick Commerce segment.

• An overall uncertain path to profitability in a highly competitive market.

In fact, adjusted EBITDA estimates have been cut by 5% to 15%, reflecting reduced optimism about near-term earnings potential. Most analysts now prefer to stay on the sidelines, awaiting clearer signs of margin stabilization and growth normalization.

Stock Performance and Market Sentiment

Interestingly, ahead of the earnings release, Eternal Ltd's stock ended nearly unchanged, suggesting that investors were waiting for concrete guidance before making moves. Over the past month, however, the stock had gained 9.5%, riding on broader market optimism and expectations of continued order volume growth in Blinkit.

But with the latest disclosure, the sentiment is expected to turn cautious. The emphasis on market share at the cost of profitability and the management’s acknowledgment of rising competition is a signal to the market that short-term pain may persist.

Future Strategy: Market Share Over Margin

Eternal Ltd’s overall strategy is now clearly centered on dominance in both food and quick commerce, even if it means burning more cash in the short run. The company stated that it is prepared to intensify investments, implying continued marketing expenses, delivery partner incentives, and tech enhancements to stay ahead.

While this might help them outpace rivals in terms of reach and convenience, investors and analysts alike are questioning whether this strategy is sustainable without a clear path to profitability.

Conclusion: A Cautious Path Forward

The Q4 update from Eternal Ltd reveals a company willing to sacrifice margins for growth, particularly in Blinkit. With Zomato’s growth slowing and Blinkit’s losses rising despite surging demand, the road ahead appears challenging.

Brokerage downgrades, shrinking investor optimism, and rising competition suggest that Eternal Ltd must now work harder to convince the market of its long-term value proposition.

The focus will remain on:

• Whether food delivery growth can bounce back in the coming quarters.

• Whether Blinkit can turn its rapid expansion into sustainable profits.

• And whether the company’s market share ambitions will be rewarded by the market, or punished for lack of profitability.

Investors and watchers of India’s digital economy will keenly follow the next few quarters to determine if Eternal Ltd's gamble on scale over earnings pays off or backfires.

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