When the Q1 results for Eternal (the company we all still fondly call Zomato) dropped, the headlines were jarring. A 90% plunge in profit? That sounds like a disaster. But at the same time, their revenue shot up by an incredible 70%. It’s a classic case of numbers telling two very different stories, and the real truth, as always, is buried in the details. This isn’t a story of failure; it’s a story of a massive, strategic pivot.
Key Highlights
- ✓ Consolidated net profit dropped a staggering 90% year-on-year to just ₹25 crore.
- ✓ Revenue from operations soared by 70% YoY, reaching a massive ₹7,167 crore.
- ✓ For the first time, Blinkit's Net Order Value (NOV) surpassed the food delivery business for a full quarter.
- ✓ The company is shifting its quick commerce arm to an inventory-ownership model.
- ✓ Despite the profit slump, Eternal shares rallied over 7% after the results were announced.
The Big Picture: Profit vs. Growth
So, let’s get right to it. The company reported a consolidated net profit of just ₹25 crore for the first quarter of FY26. To put that in perspective, the same quarter last year saw a profit of ₹253 crore. That’s a massive 90% drop, and on the surface, it looks pretty grim. But then you look at the other side of the coin: revenue from operations hit ₹7,167 crore, a huge jump from ₹4,206 crore a year ago. How does that even happen?
The answer is simple: investment. Heavy, aggressive, unapologetic investment. According to the company's CFO, Akshant Goyal, the sharp decline in profit is a direct result of "continuing investments in quick commerce and going-out." Essentially, Eternal is pouring money into its fastest-growing segment, Blinkit, sacrificing short-term profits for what it hopes will be long-term market dominance. Their expenses tell the same story, climbing 15% year-on-year to ₹2,137 crore, driven by delivery charges and a big push in advertising.
Blinkit: The New Star of the Show
Let's be honest, the real story here is Blinkit. The growth in the quick commerce arm is nothing short of explosive. We're talking about a 155% year-on-year surge in revenue to ₹2,400 crore. The Net Order Value (NOV) grew by an equally impressive 127% YoY. This growth is being fueled by a massive increase in users; average monthly transacting customers jumped from 7.6 million to 16.9 million in just one year. That's a 123% increase in people actively using the service.
To support this boom, they're on an expansion spree. Blinkit added 243 net new stores in this quarter alone, bringing the total count to 1,544. And they're not stopping there. Blinkit CEO Albinder Dhindsa says they are "on track to reach 2,000 stores by December 2025." This rapid scaling comes at a cost, of course. The segment reported an EBITDA loss of ₹162 crore, but this is viewed as a necessary evil to build the infrastructure for the future.
The Cost of Going Big
While the losses might seem concerning, Dhindsa is quick to downplay them. He pointed out that despite the heavy investments, a large part of the business is already profitable. In fact, some cities are already hitting 2.5%+ in Adjusted EBITDA margins. He sees this as a strong signal that they can reach their long-term target of 5-6% margins. The company is essentially building a massive logistics network, adding over 0.4 million sq. ft. of warehousing space this quarter, and now managing a total of around 10.4 million sq. ft. across its supply chain. You don't build an empire for free.
And What About Food Delivery?
With all the focus on Blinkit, it's easy to forget about the original food delivery business. It's still growing, but the pace has certainly moderated. NOV growth dipped slightly to 13% YoY, down from 14% in the previous quarter. CEO Deepinder Goyal acknowledged the sluggish demand environment that started in late 2024 and doesn't expect the business to hit 20%+ growth for FY26. He's hoping to stay north of 15% and trend back towards 20% in FY27.
To combat this slowdown, they’ve leaned on restaurant-funded discounts, which explains why Gross Order Value (GOV) grew faster than the Net Order Value (NOV). It's a pragmatic move to keep customers engaged. Interestingly, while margins in food delivery expanded year-on-year, they actually declined sequentially. This broke a fantastic 14-quarter streak of continuous improvement. Goyal explained that Q1 is always tough, with festivals and bad weather putting pressure on delivery partner availability. It seems the business has matured to a point where these seasonal dips are now more visible.
A Game-Changing Strategic Shift
Perhaps the most significant long-term news is the strategic shift in the quick commerce business. Eternal is moving from a marketplace model, where it connects buyers and sellers, to an inventory ownership model. This means they will start owning the stock themselves. The transition is expected to take place over the next two to three quarters. This is a massive operational undertaking, but the company believes it will give them much better control and efficiency.
This shift will have some interesting financial effects. It's expected to boost Quick Commerce revenue growth even further and could lead to an EBITDA margin expansion of about one percentage point over time. The company is so confident in this model that if it can hit its target of a 5-6% adjusted EBITDA margin, it expects a very strong Return on Capital Employed (RoCE) of 40%. This move also explains the expected de-growth in their B2B business, Hyperpure, as many of its customers will now be supplied directly through the new inventory model.
On top of all this, the board also approved the creation of a new subsidiary, Blinkit Foods, which will focus on everything from food innovation to delivery. When asked about competition, Deepinder Goyal sounded cool as a cucumber. He basically said that new ideas and entrants are "inevitable" and actually make the business stronger. He doesn't see any innovation right now that poses an "obvious threat." That's the kind of confidence you want to see from a leader who's making such big bets.
Conclusion
So, when you look past the scary headline of a 90% profit drop, a clearer picture emerges. This isn't a company in trouble; it's a company in transition. Eternal is consciously sacrificing today's profits to build tomorrow's empire, and that empire is increasingly built on the foundation of quick commerce. The explosive growth of Blinkit, now the largest segment by order value, combined with the strategic shift to an inventory model, shows a clear and aggressive vision for the future.
The food delivery business remains a stable, mature cash cow, but the energy and investment are clearly focused elsewhere. The market seems to understand this narrative, which is why the stock price actually jumped after the news. It’s a bold, high-stakes strategy, and it’s going to be fascinating to watch how it all plays out over the next few years.
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