Eternal Limited: Q2 FY26 — Strategic Investments Fueling Future Growth Amidst Evolving Market Dynamics

Eternal Limited, formerly Zomato Limited, has unveiled its Q2 FY26 financial results, painting a picture of strategic investments and evolving business models aimed at long-term market leadership. The company reported a consolidated Adjusted Revenue of INR 13,968 crore, marking a substantial 172% year-on-year growth. While this top-line expansion is impressive, the Adjusted EBITDA for the quarter stood at INR 224 crore, reflecting a 32% year-on-year decline but a 30% quarter-on-quarter improvement. This performance underscores the company's deliberate strategy to prioritize market share growth and foundational investments, particularly in its burgeoning quick commerce segment.

The quarter's performance was largely driven by the robust acceleration in the quick commerce business, Blinkit, which continues to be a key growth engine. The food delivery segment showed signs of recovery, with improved profitability, while the Hyperpure B2B supplies business underwent a significant model transition. The 'Going-out' segment, still in its investment phase, continued to incur losses as the company focuses on category creation and expansion into new geographies like the UAE.

Quick Commerce: A Growth Powerhouse

Blinkit, the quick commerce arm, demonstrated exceptional growth, with its Net Order Value (NOV) accelerating to 137% year-on-year and 27% quarter-on-quarter. This marks its highest growth rate in the last ten quarters. The expansion was supported by the addition of 272 net new stores, bringing the total store count to 1,816, and a healthy customer acquisition of 3.9 million average monthly transacting customers. The company's strategic shift to an 'own inventory' model is nearly complete, with approximately 80% of NOV in Q2 FY26 originating from this model, projected to reach 90% in the next quarter. This transition is expected to yield a net margin expansion of about 1 percentage point over the next 4-6 quarters.

Despite the accelerated growth, quick commerce losses decreased quarter-on-quarter to INR 156 crore, and the Adjusted EBITDA margin improved from -1.8% to -1.3% of NOV. Management acknowledged that margin improvement was slower than anticipated due to increased investments in market share growth, including higher marketing spends and accelerated store network expansion. The company aims to reach 2,100 stores by December 2025 and 3,000 stores by March 2027, expecting year-on-year NOV growth to remain above 100% for the next one to two years.

Food Delivery: Steady Recovery and Profitability

The food delivery business showed signs of bottoming out, with NOV growing 14% year-on-year, a slight improvement from the previous quarter. Profitability reached an all-time high, with Adjusted EBITDA margin at 5.3% of NOV, delivering over INR 500 crore in absolute Adjusted EBITDA. This improvement was partly driven by an increase in platform fees. The company also strategically lowered the minimum order value for free delivery for Gold members from INR 199 to INR 99 to cater to budget-conscious customers, expecting the full impact of this change in the December quarter. While a slow uptick in growth is anticipated, management remains focused on creating new use cases and improving the macro environment.

Hyperpure and Going-out: Strategic Adjustments and Investments

The Hyperpure B2B supplies business experienced a significant shift. While the core restaurant business continued to grow steadily at 42% year-on-year to INR 940 crore, the non-restaurant business saw a 94% quarter-on-quarter decline to INR 83 crore. This decline was a direct consequence of the shift to inventory ownership in quick commerce, leading to a planned scale-down of Hyperpure's non-restaurant operations. The core restaurant business is expected to become profitable within the next two quarters. The 'Going-out' business, District, expanded its customer base and launched new categories like 'District stores' and operations in the UAE. However, it continued to incur an Adjusted EBITDA loss of INR 63 crore, as the company invests in category creation, with losses expected to remain rangebound.

Outlook and Strategic Focus

Eternal Limited's Q2 FY26 results highlight a strategic pivot towards aggressive growth in quick commerce, supported by a strong balance sheet. The company is making deliberate investments in network expansion and customer acquisition, even if it means a slower path to overall profitability in the near term. Management's focus remains on sustainable, high-quality growth, disciplined capital allocation, and transparent disclosures. The company is actively adapting to market dynamics, such as GST rate changes, and continuously optimizing its business models to enhance efficiency and customer value. This quarter reflects a foundational strengthening for future scale and profitability.