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Operator
Ladies and gentlemen, thank you for standing by. Welcome to Instacart’s third quarter 2025 financial results conference call. At this time, all participants are in a listen only mode. After the speaker’s presentation, there will be a question and answer session. To ask a question during the session, you would need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised and we ask to please limit yourself to one question, one follow up so that we will have enough time to address everyone’s questions and to withdraw your question, please press star 11 again. Please be advised that today’s conference is being recorded. I would now like to turn the conference over to Rebecca Yoshiyama, Vice President of Investor Relationship, Capital Markets and Treasury. Please go ahead.
Rebecca Yoshiyama (Vice President, Head of Investor Relations)
Thank you Michelle and welcome everyone to Instacart’s third quarter 2025 earnings call. On the call with me today are Chris Rogers, our Chief Executive Officer and Emily Reuter, our Chief Financial Officer. During today’s call we will make forward looking statements related to our business plans and strategy developments in the grocery industry and our future performance and prospects, including our expectations regarding our financial results and share repurchases. These forward looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those anticipated. You can find more information about these risks and uncertainties in our SEC filings, including our last Form 10Q. We assume no obligation to update these statements after today’s call except as required by law. In addition, we will also discuss certain non GAAP financial measures which have limitations and should not be considered in isolation from or as a substitute for our GAAP results. A reconciliation between these GAAP and non GAAP financial measures is included in our shareholder letter which can be found on our investor relations website. Now I’ll turn the call over to Chris for his opening remarks.
Chris Rogers (Chief Executive Officer)
Thank you Rebecca. Good morning everybody. It’s great to be here as my first call as CEO and I appreciate you taking the time to join us. Over the past six years I’ve had the privilege to build many of the capabilities and partnerships that make Instacart so distinct. That experience gives me a unique perspective on our business, where we are today, what makes Instacart truly differentiated and why I’m so confident in our ability to extend our lead and win in this market. Our business is operating from a position of real strength. We have the leading online grocery marketplace, a best in class suite of enterprise technologies for retailers, and a growing advertising ecosystem that all work better together and have helped us complete more than 1.5 billion lifetime orders. We’re also unlocking new growth opportunities that build on that powerful foundation. I’ll start by discussing our marketplace, which continues to make up the majority of our business and serves as the backbone of our platform. We’ve built the best end to end online grocery marketplace in North America by staying focused on what matters to customers. Great selection, high quality, affordable prices, and the kind of experience that makes everyday life easier. Every quarter we build on those strengths. Expanding how people use our service, improving delivery speed and reliability, and making shopping even more seamless across every touch point. Because of that focus, we’ve built a growing and loyal customer base. We’re attracting new customers to Instacart. We’re retaining customers at higher rates year over year and increasing their order frequency. Moving more customers from occasional use to regular, monthly and weekly shopping. And what we see is the longer the customers stay with us, the more frequently they shop and the more that they spend across multiple vectors through even larger grocery baskets. More top off orders and additional use cases like other retail categories and restaurants. Our most active customers, our Instacart plus members, also continue to grow in number and deepen their engagement. All of this gives us confidence that our strategy is working and that shows that demand for our service remains strong. And all of this growth continues to add to our scale. And that scale makes us more efficient and more profitable over time. To put a finer point on this, our unit economics are positive and continue to strengthen across all basket sizes. We achieve this by relentlessly improving our technology through things like routing and batching and replacements to make orders faster and more accurate. That creates a flywheel, better earning opportunities for shoppers, better experiences for customers and and a lower cost to serve for us. That in turn allows us to reinvest to make the service more affordable and to spend more on marketing to acquire and engage customers while staying disciplined within our guardrails. So our marketplace is healthy and growing. And then we do what nobody else does. We take all of the innovation and scale and learnings that we’ve built on our marketplace and we put that directly in the hands of retailers through our enterprise platform. That’s what truly differentiates Instacart. We are not just a marketplace. We are a technology and enablement partner for the grocery industry through our enterprise platform. Our technologies empower retailers to win on their owned and operated sites and in their physical stores. I want to spend a few minutes on this today because it is a key growth driver for us. And honestly, it’s one of the most underappreciated parts of our business. Our enterprise platform is built around five key pillars. First, our storefront or white label e commerce technologies now powers more than 350 retailer E Commerce storefronts on retailers own websites, from large retailers like Costco, Publix and Sprouts to specialty stores and local independents. Grocery tech is very complex and every retailer is unique in how they operate and how they serve customers, which is exactly why this matters. We’ve built the best grocery specific platform that can handle that complexity at scale and make it simple for retailers to grow online with us. Second, we offer highly versatile and high quality fulfillment services where we enable the picking and packing and delivery for retailers like Kroger and Wegmans and other retailers like Aldi and Sprouts put our picking technology directly in the hands of their employees. Our partners use our best in class technology and our flexible labor network to serve their customers more efficiently. Third is our Carrot ads technology, which brings all of our advertising formats, our tools, our capabilities that we’ve built on the Instacart marketplace as well as all of the advertising demand from the more than 7,500 brand partners and uses that to power ads on more than 240 partner websites. That includes major retailers like Sprouts and Hy Vee as well as other marketplaces like Uber Eats Grocery and retail in the US Thrive Market and more. Fourth, our in store technology brings the power of our data technology and innovation into the physical grocery store where most shopping still happens. We’re doing this with our Caper Carts, which will soon be available in nearly 20% of Wakefern stores as well as with retailers including Kroger and Sprouts and Wegmans. In addition, Foodstorm, which provides retailers with technology to digitize the perimeter aisles of their stores like the Deli and Bakery and prepared foods, continues to build momentum with retailers like Ahole, Delhais, Sprouts and the Fresh Market. Finally, our newest pillar, AI Solutions. Just last week we launched a suite of AI products that will help retailers use generative and agentic AI to gain a real competitive advantage across online store shelves, smart carts and more. Every single retailer that I’ve talked to so far has been highly interested in partnering with us on AI. They already see us as their grocery technology partner. And these tools come at the exact moment that retailers need us most as AI transforms how people shop for groceries and feed their families. That’s our enterprise platform. It’s designed to help retailers of all sizes compete and grow by powering every aspect of their digital strategy. It’s built on the same innovation scale and learning that come from running North America’s largest online grocery marketplace that gives retailers a clear advantage. They get access to world class technology and engineering resources that would be impossible to build at the same quality, pace or price. And retailers can customize their approach, picking and choosing products to solve their specific goals and needs while also benefiting from the simplicity of integrating with a single trusted technology partner. Our enterprise platform is also a highly strategic growth lever for Instacart. Each time we land a new enterprise solution with a retailer, we get access to a growing and durable part of their business and we have the opportunity to expand from there. And because the market is still so underpenetrated, we have years of Runway ahead of us to deepen these relationships and layer on additional solutions. These enterprise relationships make us a true technology enablement partner, deeply embedded in retailers operations to drive durable long term growth together. And the benefits are self reinforcing. Every innovation that we build at scale on enterprise strengthens our marketplace and vice versa. As you’ll see in my shareholder letter, we shared a chart that clearly illustrates the power of our enterprise platform and why exclusivity isn’t critical to our strategy. When we partner deeply with retailers across both the marketplace and the enterprise platform, we grow faster together. That’s why we’re not concerned when a retailer like Kroger works with other marketplaces. What matters is the depth of our relationships. Kroger announced last week that they’re doubling down with us as their primary delivery fulfillment partner across all of their digital properties. That’s a great example, a strong vote of confidence in the value that we bring. Moving on to Advertising Our advertising ecosystem enhances our entire platform. When brands advertise with us, they get access to over 1800 retail banners on our marketplace, more than 240 partner websites through Carrot ads, dynamic in store advertising capabilities and increasingly valuable off platform insights that help them drive performance across other channels. This has been a foundational year for our advertising capabilities on our platform. We’ve added new formats unique to the digital iol list world, including occasions and recipes and bundles. We’ve added AI tools like AI generated landing pages, one click recommendations and universal campaigns that make it easier and more effective for brands, especially emerging ones, to advertise with us. And all of this has helped us diversify our advertising base and deepen our partnership with more than 7,500 brands. And we’re proud that across those brands we’re driving real results. On average Our brand partners see a 25% boost in sales when they advertise on Instacart, translating into measurable growth and higher revenue. We’ve also expanded our supply with more Carrot ad partners, entirely new in store services on Capercards, and we’ve established off platform partnerships with TikTok and Pinterest, as well as Google Meta, the Trade Desk and more. These partnerships allow us to help brands optimize their campaigns using the power of our data. Last but not least, we also launched the Consumer Insights Portal to give subscribers another tool to help them make strategic decisions based on our rich data. All of this lays the foundation for a powerful ads and data ecosystem that delivered over 1 billion of ads and other revenue over the past 12 months. Now, while it’s not an easy operating environment for many food and beverage CPGs right now, we’re confident that by improving our offering, expanding our reach and continuing to diversify our advertising partners, we’re positioned well to meaningfully grow our advertising platform over time. When you think about the power of our platform and you really see us as a grocery technology enablement company, you can fully appreciate how scalable our core advantages are and you can imagine the growth opportunities that open up for us in new categories and regions. Let me give you a couple of examples what I mean by this. Our capabilities extend beyond individual customers to businesses and from grocers to B2B distributors. Over the past few years, we’ve built a suite of products tailored to business needs, including features like invoicing and Will Call Delivery, where we leverage our shopper network to complete urgent fill in orders from a distributor’s warehouse. And now we’re rolling out business features beyond our marketplace to our Storefront technology as well so more retailers can benefit from these capabilities and reach more businesses business customers on their own website. This also means our enterprise products are relevant for partners further up the supply chain. We’re partnering with distributors like Gordon Food Services on Will Call, and we recently launched Storefront Pro with Restaurant Depot, a wholesale supplier that sells primarily to food service professionals. Another example is international expansion. Today the vast majority of our success is in just North America, but we see tremendous opportunity to grow internationally with an enterprise led strategy primarily focused on Storefront, KPR and Foodstorm. We know that there’s demand for our technologies because we’ve already started to make inroads in Europe and Australia with Win Shop and with KPer. And we’re in active conversations with more retailers who face the same challenges that we know how to solve. Overall, we are closing out the year with strong fundamentals and we have multiple growth engines for the future. We’re building momentum across our marketplace, enterprise and ads platform and we’re leveraging this foundation to expand to new categories. This gives us confidence in our ability to drive sustainable growth in the short, medium and long term. And we’re doing this while remaining committed to driving long term profit and cash flow per share expansion. I’ll say this one more time because I think it’s so important. We’re not just a marketplace, we’re the leading technology and enablement partner for the grocery industry, transforming and empowering the entire grocery ecosystem to succeed. We’re just getting started and we believe deeply in the strength of this business and the opportunities ahead. That’s why we increased our share repurchase program by 1.5 billion, our largest increase yet. To underscore our confidence in our path forward, we’re leading from a position of strength. We’re focused on execution and we’re building a company designed to create lasting value for our customers, our partners and our shareholders. With that, I’m going to hand it over to Emily to walk through our quarterly results.
Emily Reuter (Chief Financial Officer)
Thank you, Chris. This is an incredibly exciting time for Instacart. We’re executing on a robust strategic roadmap supported by a strong financial foundation. This enables us to confidently reinvest in the business while continuing to drive more profitable growth over time. Now let’s dive into our financial results and outlook. We delivered another strong quarter in Q3. Orders reached 83.4 million, up 14% year over year, driving GTV of $9.17 billion, up 10% year over year. This performance reflects strong operating fundamentals fueled by growth in both users and order frequency. As expected, our average order value decreased 4% year over year. This was primarily driven by growth in restaurant orders and introduction of a $10 basket minimum for Instacart plus members, partially offset by growth in basket sizes elsewhere. Transaction revenue grew 10% year over year and represented 7.3% of GTV, which was flat year over year. This was driven by improved shopper efficiencies and lower consumer incentives, which allowed us to reinvest in affordability initiatives aimed at increasing customer engagement. As a reminder, we manage multiple levers across our P and L, so transaction revenue may fluctuate quarter to quarter as we strategically reinvest in growth. Advertising and other revenue grew 10% year over year, reflecting the strength of our ads platform. Advertising and other revenue represented 2.9% of GTV, which was effectively flat year over year. Even as restaurant orders contributed to overall GTV growth while not being advertising addressable, we continue to demonstrate strong financial discipline and operating leverage. GAAP net income was $144 million up 22% year over year and adjusted EBITDA also grew 22% year over year to $278 million. We generated operating cash flow of $287 million which increased by $102 million year over year, primarily driven by strong operational performance. In Q3 we repurchased $67 million worth of shares and ended the quarter with approximately 1.9 billion in cash and similar assets on our balance sheet. Stock based compensation in Q3 was $82 million, down $24 million quarter over quarter, largely due to just over $20 million in expected reversals tied to executive departures in the period in Q4 we expect stock based compensation to normalize and be more in line with Q2 2025 levels. Now for our Q4 outlook we anticipate GTV to range between 9.45 to $9.6 billion. This represents year over year growth between 9 to 11% with orders growth expected to outpace GTV growth. It also reflects strong customer demand in October, continued momentum from landing and expanding enterprise partnerships and is partially offset by the impact of a variety of EBT snap funding scenarios. We expect advertising and other revenue to grow 6 to 9% year over year. This reflects ongoing strength from emerging and midsize brands, partially offset by some large partners adjusting spend as they manage macro uncertainty and changing consumer trends. While this creates near term pressure, the fundamentals of our ADS ecosystem remain stronger than ever with our performance, reach and diversification. We are confident in returning advertising other revenue to double digit growth in 2026 and meaningfully growing this part of our business over time. We are also guiding to Q4 adjusted EBITDA of 285 to 295 million, reflecting our commitment to disciplined execution and steadily increasing profitability. In summary, we delivered a great Q3 and our momentum continues to build as we look to finish 20:25 strong as a clear category leader operating at tremendous scale and driving efficiencies. We’re taking a disciplined but aggressive approach to investing to further accelerate our growth and advance the broader industry. To underscore our confidence in long term value creation, we authorized a $1.5 billion increase to our share repurchase program bringing our total capacity to $1.65 billion. As of this morning. We plan to enter into a $250 million accelerated share repurchase program while continuing to opportunistically repurchase shares. With that, we will open up the call for live questions. Operator, you may begin.
Operator
Thank you. As a reminder to ask ...
