Instacart (CART, Financial) is experiencing significant gains, despite narrowly missing first-quarter EPS estimates. The company reported a 9% revenue increase to $897 million, aligning with analyst expectations. This was driven by a 14% rise in orders—the fastest in 10 quarters—and a 14% boost in high-margin advertising revenue, reaching $247 million. This marks a recovery from a disappointing Q4, where CART fell short on revenue and issued weak Q1 guidance. The latest Q1 results and optimistic Q2 outlook, particularly in Gross Transaction Value (GTV) and adjusted EBITDA, indicate a turnaround, supported by initiatives like a $10 minimum basket for Instacart+ members and expanded restaurant orders.

• GTV increased by 10%, surpassing the $9.11 billion estimate, up from 8% in Q4. This was driven by new customer cohorts with larger basket sizes and more club orders. However, the average order value (AOV) slightly declined to $110 from $111 last quarter and $113 in Q3, due to more restaurant orders and the $10 minimum basket feature.
• Adjusted EBITDA was a standout, rising 23% year-over-year to $244 million, exceeding CART's guidance of $220-$230 million. This was achieved through disciplined cost management and a focus on high-margin advertising revenue. Operational efficiencies, such as improved shopper logistics and payment processing, further enhanced margins.
• CART's Q2 GTV guidance suggests 8-10% growth, with an adjusted EBITDA forecast of $240-$250 million, surpassing analyst expectations. This reflects confidence in sustained order growth and robust advertising revenue, driven by AI-powered ad tools and high return-on-ad-spend performance.

CART's strong Q2 performance, with 14% order growth and a 23% rise in adjusted EBITDA, underscores robust demand and operational efficiency, recovering from a weak Q4. The positive Q2 guidance, supported by initiatives like Instacart+ and advertising, positions CART well for fiscal year 2025, with potential for further market share gains in the online grocery sector.