Zomato Q2FY25: A Tale of Triumphs and Challenges – PAT (Profit After Tax) Soars 389% YoY, but Sequentially QoQ Drops by 30%.

Zomato, one of India’s most successful digital food delivery and quick commerce platforms, has delivered another impressive quarter, cementing its position in the highly competitive food delivery and quick commerce markets. The company’s Q2FY25 results demonstrate not only its financial strength but also its commitment to strategic growth and investment, positioning it for long-term success. With a 389% YoY rise in profit, Zomato’s Q2FY25 has been a landmark period of operational excellence, innovation, and robust growth across segments.

However, what’s more impressive than the numbers is Zomato's ability to simultaneously deliver profitability, invest in future growth areas like quick commerce, and prepare for the challenges that lie ahead in the rapidly evolving digital economy.

1. Zomato’s Profit After Tax (PAT) Jumps 389% YoY: A Testament to Operational Efficiency

Zomato’s Profit After Tax (PAT) grew five-fold, jumping from ₹36 crore in Q2FY24 to ₹176 crore in Q2FY25, a staggering 389% YoY increase. This profit growth was driven by a steady increase in food delivery margins, which improved thanks to cost optimizations, enhanced supply chain efficiency, and economies of scale.

However, despite this sharp YoY growth, the PAT in Q2FY25 is down 30% to ₹176 crore from ₹253 crore in Q1FY25 (Page 12 of Zomato Quarter 2 FY25 Report). The sequential dip in profit seems (Assumption) to be primarily due to the ₹2,014 crore acquisition of Paytm’s entertainment ticketing business, a strategic move aimed at expanding Zomato’s ecosystem to include live events and ticketing services, offering more touchpoints with customers.

2. Revenue Surges 69% YoY: A Broader Consumer Base and Higher Transaction Values

Zomato’s revenue from operations soared by 69% YoY, reaching ₹4,799 crore in Q2FY25, up from ₹2,848 crore in Q2FY24. This growth reflects the company’s strategic initiatives to expand its market share, enhance customer engagement, and optimize its revenue streams across core business segments. On a quarterly basis, the revenue increased by 14% QoQ from ₹4,206 crore in Q1FY25.

The breakdown of revenue growth reveals significant contributions from the food delivery and quick commerce verticals:

• Food delivery accounted for ₹2,340 crore of Zomato’s total revenue in Q2FY25, up from ₹1,938 crore in Q2FY24, marking a 21% YoY growth.
• Quick commerce, driven by Blinkit, posted ₹1,156 crore in revenue, representing a massive 129% YoY growth from ₹505 crore in the same quarter last year.

Zomato’s Gross Order Value (GOV) for its business-to-consumer (B2C) segments grew by 55% YoY to ₹17,670 crore, reflecting the increasing demand for Zomato’s services and its ability to capture a larger share of wallet from its growing consumer base. On a like-for-like basis, excluding the Paytm acquisition, the GOV grew by 53% YoY.

3. Food Delivery: Driving Profitability Through Margins and User Engagement

The food delivery segment remains at the core of Zomato’s business, contributing significantly to both revenue and profitability. The food delivery business recorded:

• A 21% YoY growth in GOV, reaching ₹9,690 crore, up from ₹7,980 crore in Q2FY24.
• Adjusted revenue for food delivery rose to ₹2,340 crore, up from ₹1,938 crore a year ago.
• Adjusted EBITDA for the food delivery segment surged by 67% YoY to ₹341 crore, compared to ₹204 crore in Q2FY24.
• Margins for food delivery improved to 3.5% in Q2FY25, up from 2.6% in the same quarter last year, indicating Zomato’s ability to extract more value from each transaction while controlling costs effectively.

This growth in food delivery is further supported by Zomato’s expanding customer base. The company reported that monthly transacting customers for food delivery increased marginally to 20.7 million in Q2FY25, from 20.3 million in Q1FY25. This steady rise highlights Zomato’s ability to attract and retain a large and loyal customer base.

The growth in the food delivery segment is a testament to Zomato’s ability to maintain operational excellence while scaling its services to meet the growing demand for online food delivery in India. The steady improvement in margins also indicates that Zomato has managed to strike a balance between growing its market share and improving profitability.

4. Blinkit: Rapid Growth in Quick Commerce, But Challenges Remain

Zomato’s quick commerce arm, Blinkit, continues to be a high-growth driver for the company, with a 129% YoY increase in adjusted revenue to ₹1,156 crore in Q2FY25. The GOV for Blinkit rose by 122% YoY, reaching ₹6,132 crore, compared to ₹2,760 crore in Q2FY24.

Despite the impressive growth, Blinkit’s adjusted EBITDA remained negative at ₹-8 crore. While this represents a significant improvement from ₹-125 crore in the same quarter last year, the losses widened sequentially from ₹-3 crore in Q1FY25. The EBITDA margins for Blinkit remained slim at -0.1%, reflecting the challenges of scaling quick commerce profitably.

Blinkit’s average order value (AOV) also increased to ₹660 in Q2FY25, up from ₹625 in Q1FY25, showing that customers are spending more per transaction. Additionally, Blinkit expanded its footprint by increasing the number of dark stores from 639 in Q1FY25 to 791 in Q2FY25, a move that further reinforces its ability to serve customers faster and more efficiently.

The rapid expansion in quick commerce is part of Zomato’s broader strategy to diversify its revenue streams and capture a larger share of the fast-growing quick commerce market. However, the ongoing investments in infrastructure, including new dark stores and large warehouses, continue to weigh on margins, delaying overall profitability in this segment.

5. District App: Zomato’s New Venture into Entertainment and Ticketing

A significant development that aligns with Zomato’s broader strategy is the upcoming launch of its District app, expected to go live within the next four weeks. According to Deepinder Goyal, Zomato’s CEO and co-founder, the District app will consolidate the company’s live events and entertainment ticketing services, following its acquisition of Paytm Insider. The new app will facilitate a smooth migration from Zomato’s existing platform and Paytm’s infrastructure, ensuring that users have a seamless experience when booking tickets for live events.

Zomato’s acquisition of Paytm Insider for ₹2,014 crore was a strategic move aimed at diversifying its offerings beyond food delivery and quick commerce. This expansion into entertainment positions Zomato as a more comprehensive consumer platform, offering a variety of services that enhance the user experience.

While the District app represents a new business venture, Zomato has already shown its ability to integrate acquired businesses efficiently. The launch of this app further underscores Zomato’s commitment to expanding its service ecosystem while tapping into new revenue streams.

6. Investments and Fundraising: Building for the Future

Zomato’s aggressive investment strategy is aimed at driving long-term growth and sustaining its competitive edge in both food delivery and quick commerce. The company’s cash balance dropped by ₹1,726 crore in Q2FY25, from ₹12,526 crore in Q1FY25 to ₹10,800 crore. This decline was primarily due to the ₹2,014 crore acquisition of Paytm’s entertainment ticketing business. This acquisition, aimed at enhancing Zomato’s Going Out business, adds another dimension to its ecosystem by integrating live events and ticketing services.

To strengthen its balance sheet and prepare for future growth opportunities, Zomato’s board has approved raising up to ₹8,500 crore via a Qualified Institutional Placement (QIP) of equity shares. This will be Zomato’s first major fundraising since its IPO in 2021 and will provide the company with a financial cushion to continue scaling its operations, particularly in quick commerce, which is capital-intensive.

Deepinder Goyal, Zomato’s CEO, emphasized that the capital raise is necessary to ensure that Zomato can compete effectively in a fast-evolving market. "While the business is now generating cash, we need to enhance our cash balance given the competitive landscape and the much larger scale of our business today," Goyal explained in a letter to shareholders.

Since its initial public offering (IPO) in 2021, Zomato’s annualized adjusted revenue has grown four-fold, from ₹4,640 crore to ₹20,508 crore as of Q2FY25. However, during the same period, the company’s cash balance has reduced from ₹14,400 crore to ₹10,800 crore, as Zomato has focused on funding its quick commerce expansion and making strategic equity investments.

7. Going Out and Hyperpure: New Growth Pillars

Zomato’s Going Out business, which includes live events and ticketing, saw impressive growth in Q2FY25, largely driven by the acquisition of Paytm Insider. The GOV for this segment increased by 171% YoY to ₹1,849 crore, while revenues grew to ₹154 crore.

Additionally, Zomato’s B2B supplies vertical, Hyperpure, which provides ingredients and essentials to restaurants, reported a approx 17% QoQ increase in revenue to ₹1,473 crore, compared to ₹1,212 crore in Q1FY25. Hyperpure represents a growing opportunity for Zomato as it leverages its vast network of restaurant partners to offer B2B services and expand its influence across the food ecosystem.

Conclusion: Zomato’s Path Forward

Zomato’s Q2FY25 results reflect its ability to drive profitability while strategically investing in new growth areas. The company’s strong performance in food delivery, combined with the rapid expansion of Blinkit and the growing contributions from the Going Out and Hyperpure businesses, positions Zomato as a formidable player in India’s digital economy.

As Zomato continues to scale, the ₹8,500 crore QIP fundraise will provide the necessary capital to support its expansion efforts, particularly in the capital-intensive quick commerce space. With a strong balance sheet and a diversified revenue base, Zomato is well-positioned to continue delivering value to its shareholders while navigating the challenges of a competitive and dynamic market.

Zomato shares have rewarded investors with a return of 135.6 per cent in the past year, sharply outperforming an almost 27 per cent rally in the headline Nifty50 index.  Zomato shares entered the listed space in July 2021. As of October 22, Zomato shares command a premium of 237 per cent over the issue price of the company's IPO. 

Despite short-term challenges, Zomato’s focus on innovation, customer experience, and market expansion signals that it is well-prepared to lead in the evolving digital economy. By raising fresh capital and expanding its ecosystem, Zomato is reinforcing its commitment to sustained growth and competitiveness. As the company continues to navigate the complexities of the market, its proven ability to deliver value, backed by its resilient business model, will undoubtedly keep it at the forefront of India's rapidly growing digital landscape. The journey ahead is bright for Zomato, as it continues to innovate, expand, and excel.

Disclaimer:

The analysis and insights provided in this article are based on publicly available financial data from Zomato’s Q2FY25 results, personal observations, and additional research. The figures, statements, and interpretations are intended for informational purposes only and should not be construed as financial or investment advice. While every effort has been made to ensure accuracy, readers are encouraged to verify the facts and consult with a qualified professional before making any financial or business decisions related to Zomato or its competitors. The opinions expressed in this article are solely my own and do not necessarily reflect the views of Zomato or any associated entities.