Instacart (NASDAQ:CART), the grocery delivery giant, is cutting 250 jobs, or 7% of its workforce, to concentrate on more “promising” initiatives as it attempts to drive upward momentum into the share price.
An uptick in grocery orders led the group to increase its forecast for both its first-quarter gross transaction value (GTV) and core profit, the business said in its fourth-quarter update.
Despite this positive outlook, shares fell around 3% lower in pre-market trading after revenue came in lower than expected due to a deceleration in its advertising business.
Shares are down more than 7% since it was listed on the Nasdaq back in September 2023, having failed to trade higher than its IPO price of US$30.
Instacart (NASDAQ:CART) employed a workforce of 3,486 as of June 2023.
Ad revenues saw a 7% increase in the last quarter, a drop from the 19% growth witnessed in the preceding quarter.
"We are seeing (some weakness among advertisers) in pockets, but it is not widespread," said chief executive Fidji Simo.
This slowdown, noted by CFRA Research's Arun Sundaram, raises concerns given the historically high growth and profitability of the ad segment for Instacart (NASDAQ:CART).
Total revenue rose to US$803 million, narrowly missing the forecasted US$804.2 million.
This was partly due to the slowed growth in transaction revenue, as Instacart (NASDAQ:CART) invested in incentives and promotions to attract customers amidst fierce competition from DoorDash, Uber Eats, Amazon, and Walmart.
However, total orders increased by 5% to 70.1 million in the most recent quarter, indicating growth in Instacart's newer customer base.
Looking ahead, Instacart has set a GTV target of between US$8 billion and US$8.2 billion for the current quarter, surpassing analysts' expectations.
Adjusted EBITDA is also expected to meet forecasts, ranging between US$150 million and US$160 million.
Additionally, the company has launched a US$500 million share repurchase program and anticipates generating positive operating cash flow within the year.