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Date
Thursday, August 7, 2025 at 9:00 p.m. ET
Call participants
Chief Executive Officer — Fidji Simo
Chief Financial Officer — Emily Reuter
Vice President, Investor Relations — Rebecca Yoshiyama
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Takeaways
Gross transaction value (GTV)-- Guidance of 8%-10% year-over-year GTV growth for the third quarter of 2025.
Order volume-- Orders grew 17% year over year, driven by increased frequency and user growth.
Average order value-- Decreased 5% year over year in the second quarter of 2025, primarily due to the addition of restaurant orders and the lower $10 minimum for Instacart Plus, partially offset by growth in other basket sizes.
Transaction revenue-- Reached 7.3% of GTV in the second quarter of 2025, attributed to shopper efficiencies; management noted this metric may fluctuate quarter to quarter due to reinvestment and P&L management.
Advertising and other revenue-- Grew 12% year over year in the second quarter of 2025, reaching over $1 billion in annual run rate; segment held steady at 2.8% of GTV in the second quarter of 2025.
GAAP net income-- GAAP net income was $116 million in the second quarter of 2025, increasing 92% year over year.
Adjusted EBITDA-- Adjusted EBITDA was $262 million in the second quarter of 2025, with guidance of $260-$270 million for the third quarter of 2025.
Operating cash flow-- $203 million in operating cash flow for the second quarter of 2025, down $41 million year over year, primarily due to working capital fluctuations.
Stock-based compensation-- $105 million in the second quarter of 2025, up $39 million quarter over quarter, expected to decline in the third quarter of 2025 due to the reversal of certain grants.
Share repurchases-- $111 million in shares repurchased in the second quarter of 2025, with buyback capacity increased by $250 million to a remaining $357 million as of the second quarter of 2025.
Liquidity-- Ended the second quarter of 2025 with approximately $1.7 billion in cash and equivalents.
Retailer network growth-- Forty net new retailers onboarded year-to-date 2025, up from 30 in the prior year period; management indicated acceleration in retailer supply integration.
Instacart Plus membership-- Paid membership and engagement as a share of monthly users continued to rise in the second quarter of 2025; members now average purchases across more than five different retailers.
Operational efficiency-- Median 1,000+ lifetime orders per experienced shopper now covers nearly two-thirds of orders as of the second quarter of 2025; order fulfillment is approximately 25% faster over the past four years, with all-time high fulfillment rates.
Batching and delivery-- Twenty-five percent of priority orders were batched in the second quarter of 2025, contributing to faster deliveries, with some sub-30-minute completions noted.
AI adoption-- Over 80% of code deployed in the second quarter of 2025 was AI-assisted, with a 30% increase in code merges per engineer year over year; AI also automates code reviews and boosts sales and legal team efficiency.
Advertising customer mix-- Diversification offset reductions from one of the largest brand advertisers, as emerging and mid-sized brands filled the gap.
Enterprise segment expansion-- Over 7,500 active brand partners as of the second quarter of 2025 and above 240 Carrot Ads partners; new omnichannel offerings highlighted via integrations with major retailers like Costco and Aldi.
CEO transition-- Chris Rogers to succeed Fidji Simo as CEO; Simo cites confidence in continuity and strategy.
Guidance for next quarter-- Order growth is expected to continue outpacing GTV growth in the third quarter, with anticipated moderation as the restaurant vertical laps its first full comp period.
Summary
Instacart(CART 3.56%) delivered double-digit growth in orders (17% year over year) and GTV (11% year over year) in the second quarter of 2025, with profit metrics (GAAP net income and adjusted EBITDA) expanding faster than topline revenue, while actively managing average order value headwinds resulting from new verticals and targeted affordability initiatives. The company increased paid Instacart Plus penetration and implemented platform enhancements and AI-driven efficiencies that reduced fulfillment times and improved order economics. Share repurchases and meaningful cash generation reflected management’s focus on capital allocation, while diversification in advertiser mix has insulated results from single-customer volatility.
CFO Emily Reuter attributed the decrease in operating cash flow in the second quarter to working capital fluctuations and noted that trailing twelve-month operating cash flow growth remains positive.
CEO Simo said, "our share of sales is more than three times larger than the next player," emphasizing the company’s digital-first sales leadership.
Enterprise solutions such as Carrot Ads and omnichannel integrations are scaling rapidly, with management positioning Instacart as a "top-five retail media network."
AI technology was credited with operational improvements beyond engineering, boosting efficiency for both sales and legal teams.
Management reaffirmed ongoing investments in affordability and strategic partnerships (e.g., with Costco and Uber Eats), asserting these moves have grown both engagement and transaction frequency without cannibalizing large basket activity.
Industry glossary
GTV (Gross transaction value): Total dollar value of transactions processed through Instacart’s platform, excluding certain adjustments such as returns.
Carrot Ads: Instacart’s advertising technology platform that enables retailers to monetize their own digital storefronts through targeted campaign management.
Instacart Plus: Paid membership tier providing customers with benefits such as lower delivery minimums and enhanced service access on the Instacart platform.
Batching: Operation of grouping multiple customer orders into a single fulfillment trip to improve delivery economics and efficiency.
K-pop cards and Kera tags: In-store technologies developed by Instacart to facilitate omnichannel customer experiences and optimized online order fulfillment within physical retailers.
Full Conference Call Transcript
Fidji Simo: Thanks, Rebecca, and hello, everyone. I hope you had a chance to read my shareholder letter where I highlighted yet another strong quarter for Instacart. Our performance reinforces how central we are in helping families save time, money, and effort when it comes to putting food on the table and the vital role we play in building the technology that will power the future of grocery together with our partners. While this is my last earnings call as Instacart's CEO, I can't imagine a better time to step aside. The strength of our business and the opportunities ahead make me incredibly confident in the future we've built for these companies. It's clear our business is firing on all cylinders.
We've extended our supply advantage by building innovative technology that makes our service easier to use and more affordable while deepening our retail power and helping retailers grow faster. This includes launching personalized shopping services, family accounts, loyalty integrations, and digital flyers to higher frequency offerings like our restaurant partnership with Uber Eats and industry-leading $10 minimum basket size for Instacart Plus members to get waived delivery fees. Together, our efforts are driving strong user growth and higher order frequency while also delivering better retention, especially among new 2025 customers compared to last year. Paid Instacart Plus members are also growing, and their engagement as a percent of monthly users continues to deepen too.
We're also fulfilling orders more quickly and accurately, an exceptionally tough challenge when it comes to big basket grocery shopping. This is where our technology, operating scale, and data really set us apart. Whether it's AI-driven inventory prediction, new personalized replacement models, store planograms, or real-time receipt scanning to catch issues, we're relentlessly improving every step of the process from helping you place your order to when it arrives on your doorstep. In addition, experienced shoppers who've completed a median of over a thousand Instacart orders now shop for nearly two-thirds of our orders. Together, over the past four years, these advantages have helped us complete orders approximately 25% faster while achieving all-time highs in sound and fill rates.
Fulfilling customers' desire for convenience while ensuring they get more of what they order keeps customers coming back to our service and gives us a strategic advantage that is incredibly hard for competitors to replicate. Another one of our biggest strengths is our interconnected ecosystem. Improvements we make on our marketplace should directly into our enterprise solutions and vice versa, creating a virtuous cycle. This allows us to offer scalable, flexible tools to help retailers innovate and compete, especially at a time when the rate of technological change is only increasing.
This is evident in the velocity at which we're onboarding new store partners, and our capabilities are also benefiting big B2B players too, like Costco business centers across North America. With in-store technologies like K-pop cards and Kera tags, we're creating omnichannel solutions that bridge digital and physical shopping. Keeper cards, for example, are now deployed in over 15 states and are growing globally with retailers like Aldi and Kohl's. It's still early, but I'm incredibly optimistic about the role Instacart will play as the retail enablement partner that will transform omnichannel retail and accelerate growth across our ecosystem.
Because of all our key advantages, Instacart continues to be the clear share of sales leader amongst digital-first players based on third-party data. To put a finer point on this, our share of sales is more than three times larger than the next player, and we continue to attract the most new GTV to the online category. Our leadership position is driven by our ability to meet customers' full grocery needs, which means winning at big baskets $75 and up because this is worth 75% of grocery sales and even more of the profits consistently lives.
We continue to activate big basket customers at rates multiple of higher than others, and we are also far more effective at converting small basket customers into big basket customers. When looking at our top 20 retailers that have gone nonexclusive, we see that growth on other platforms eventually plateaus. That grocery basket sizes remain under $75, and we remain the share of sales leader among digital-first players that is retailers. This indicates to us that these players are fundamentally serving a use case and further reinforces the importance of our deep retailer integrations and enterprise advantage. Sprouts, in particular, is a retailer that is more leaned into our services.
And based on third-party data, we continue to fuel the strong majority of that online sales, helping them grow faster than our overall platform too. Based on what we've seen to date, even if all our retailers were to sit on other marketplaces, we remain very confident in our ability to remain the clear category leader amongst digital-first players. Overall, the strength of our operating model reinforced our ability to deliver value for retailers and customers, in addition to strengthening our Instacart ads platform. Over the last four years, we scaled advertising and other revenue to now over $1 billion in annual run rate while expanding from now over, 4,000 active brand partners to over 7,500.
By continuing to deliver leading performance and attracting more brands to our ecosystem, while making our platform more resilient and while driving more value to Perotage partners and extending our scale advantage as a top-five retail media network. Beyond our platform, we're also helping brands more effectively attract customers on partner sites like Google, Meta, Pinterest, The Trade Desk, in addition to now monetizing our consumer insights data, which we believe will become even more valuable as AI transforms our business operates. Our strong financial foundation and operational discipline drive all of this. We've achieved this through our relentless focus on scale and efficiency.
We've grown gross profit per order to over $8 in Q2, which includes batching more orders and saving seconds and pennies of our delivery cost per order. At the same time, we've made aggressive but disciplined reinvestment into our business as well as deliberate capital allocation decisions. We've made strategic acquisitions to accelerate the growth and capabilities of our enterprise offering. And cumulatively, as of the end of Q2, we've bought back over $1.6 billion worth of shares, clearly demonstrating our confidence in our ability to execute. Finally, I have to highlight AI once again because it's built into our DNA as a company, improving our customer experiences, enabling faster product launches, and making our teams more impactful.
More than 80% of the code we deployed in Q2 continues to be AI-assisted. And now we've also seen the volume of code deployed per engineer grow significantly with average mergers per engineer up 30% year over year. We're also using AI to automate code reviews and reduce tech debt while transforming nontechnical functions. For example, our sales team has tripled account outreach to high-priority accounts, which resulted in twice as many meetings booked, and our legal team is spending significantly less time triaging weekly emails. Becoming an AI-first company has fundamentally changed how we operate, and we're just getting started.
As we look ahead, I could not be more confident in Chris Rogers as he steps into the role of CEO. He has played a pivotal role in everything we've accomplished, from scaling ads and enterprise partnerships to developing new growth strategies. Our business would not be what it is today without him, and that's why he's the perfect person to lead Instacart into its next chapter and to further our lead in the years ahead. I know he's looking forward to stepping into the role and meeting with investors over the coming weeks, and I can't wait to see the impact that you had in this seat.
I want to say a deep thank you to all our shareholders for your confidence and support. It's been an immense privilege to serve as CEO over the last four years. Thank you, and now I'll pass it over to Emily to cover our financials.
Emily Reuter: Thank you, Fidji. It's been an honor to work with you. And on behalf of the team, we're grateful for the incredible vision, strategy, and edge you've established in Instacart. There's so much momentum for us to build on, and I'm confident in all that's ahead for us. Now let me provide a bit more color on our most recent financial results and outlook. We delivered strong Q2 results across the board. We grew GTV by 11% year over year, driven by 17% growth in orders, which came from both order frequency and user growth.
As we anticipated, our average order value decreased by 5% year over year, primarily due to the addition of restaurant orders and our lower basket minimum of $10 for Instacart Plus members, partially offset by growth in basket sizes elsewhere. Transaction revenue grew 11% year over year, held steady at 7.3% of GTV year over year, an increase from 7.1% quarter over quarter. While this sequential expansion was primarily driven by shopper efficiencies, as a reminder, we expect this metric may fluctuate quarter to quarter as we reinvest in growth opportunities and manage multiple levers across our P&L. Advertising and other revenue grew 12% year over year, modestly outpacing anticipated GTV growth as we expected.
This performance demonstrates the increased resiliency of our ads platform as our diversification efforts are working. For example, in Q2, one of our largest brand partners pulled back from some of their ad spend due to macro uncertainty and reasons specific to their business. A year ago, this pullback would have decreased our advertising and other revenue year-over-year growth rate by several percentage points. But as you saw in our strong results, we were able to more than offset this pressure with growth from emerging and midsized brand partners. In Q2, advertising and other revenue was 2.8% of GTV, which remained flat year over year even as we've scaled restaurants, which contributes to our GTV but is not advertising addressable.
Overall, profitability remains strong. GAAP net income was $116 million, up 92% year over year. And adjusted EBITDA was $262 million, up 26% year over year. We also generated operating cash flow of $203 million, a decrease of $41 million year over year, primarily due to fluctuations in working capital. On a trailing twelve-month basis, operating cash flow was up 21% year over year. In Q2, stock-based compensation was $105 million, up $39 million quarter over quarter, which we expected due to the timing of our annual equity refresh grants. We anticipate stock-based compensation to be lower in Q3 versus Q2, primarily due to just over $20 million of reversals associated with previously announced executive departures.
In Q2, we also bought back $111 million worth of shares and authorized a $250 million increase to our buyback program. We ended the quarter with $357 million of remaining buyback capacity and approximately $1.7 billion in cash and similar assets on our balance sheet. Looking ahead to Q3, we anticipate GTV to range between $9 billion and $9.15 billion, reflecting year-over-year growth of 8% to 10%. During this period, we expect year-over-year orders growth to continue outpacing GTV growth, with some moderation compared to Q2 as we lap the first full quarter of restaurant contribution. We're also guiding to Q3 adjusted EBITDA of $260 to $270 million.
This reflects our expectation of advertising and other revenue growing year over year in line with anticipated GTV growth in the period. A solid outlook given the cautious approach some large brand partners are taking in today's macro environment. This also highlights our continued ability to deliver year-over-year adjusted operating expense leverage. We remain well on track to achieving year-over-year growth in adjusted EBITDA both in absolute terms and as a percentage of GTV in 2025. Overall, our business continues to perform strongly, and we are well-positioned for long-term success. With a solid foundation of operating and business fundamentals, we are making deliberate investments to further drive profitable growth and strengthen our leadership in the category.
With that, we'll open up the call for live questions. Operator, you may begin.
Operator: As a reminder, to ask a question, you will need to press 11 on your telephone. Please limit yourself to one question and one follow-up. Our first question comes from Eric Sheridan with Goldman Sachs. Your line is open.
Eric Sheridan: Thank you for everything and wishing you the best in the roles ahead. I wanted to come back to some of the comments, Fidji, you made about the competitive landscape more broadly. When you think about the array of supply the company is bringing into the ecosystem and widening out the experiences that consumers have, can you talk a little bit about improvement in conversion and frequency of behavior and some of the things that we should be thinking about in terms of LTV across the landscape as we look at how the company evolves in the years ahead? Thanks so much.
Fidji Simo: Thank you so much, Eric. Yeah. So we think of supply in many different ways. First is continuing to onboard more retailers, but also it's going deeper with existing retailers. And that has been a very, very large source for growth. Without that starting to power their enterprise sites, expanding with them into new categories like alcohol, enabling more services with them like EBT Snap, all of these deepening of integrations is a way to unlock more selection and more services with retailers in general. In fact, this is very much working because with all of the technology improvements we've made to our enterprise platform, we are now able to onboard these retailers much faster.
And we had, you know, 40 net new retailers this year alone, compared to 30 last year. So that gives you a sense of the acceleration in bringing that supply not just online, but actually powering their own websites as well. This is a part of the market that we have access to that others don't, and that gives us a very, very strong competitive advantage. In addition to that, we have continued to add new categories to our supply. Obviously, the Uber Eats partnership is contributing a supply of restaurants, which is increasing the types of use cases on Instacart. We continue to grow in retail and in new verticals.
And all of that combined is contributing to the strong user growth that we're seeing and higher order frequencies. It's also contributing to data retention. We call that out, but we are seeing that especially with the new cohorts that we are acquiring in 2025 showing better retention than the 2024 cohort at the same time last year. That's also translating in paid Instacart Plus members growing and deepening in engagement. Because as we unlock more supply, obviously, they have, you know, more selection and more things to do on the site.
We are seeing that Instacart Plus customers have shopped at on average, more than five different retailers, and that shows you that, you know, selection really matters and our selection lead continues to be a very critical advantage over competitors.
Rebecca Yoshiyama: Thank you so much. Our next question comes from Nikhil Devnani with Bernstein. Your line is open.
Nikhil Devnani: Hi there. Thank you for taking my question. I had a couple on growth, please. Maybe for the first one, nice to see the acceleration in the quarter around order growth. Can you just help us understand the composition of that between gross and restaurants? I appreciate you think of it as one ecosystem, but it would just be helpful to understand if grocery orders and GTV also accelerated this quarter. Then I'll follow-up with my second one.
Emily Reuter: Hi there. Thanks so much for the question. This is Emily. Yeah. So as you mentioned, we really do think about the overall ecosystem driving performance both in orders and GTV because there is a reinforcing effect that you get from a product like restaurants in terms of consumers coming to the platform ordering on restaurants. And when they do that, we see them come back and order more frequently from grocery. Now that all said, as we talk about, you know, the impact, if you look over the last, you know, several quarters in terms of order growth, what you've noticed is there has been a meaningful acceleration in orders growth.
And that has been largely driven by two things. The first is the addition of restaurants, which has a higher order frequency use or is a higher frequency use case, as well as more recently the introduction of lower minimum basket size. So just in sort of acknowledging that, of course, what we're saying here is that those are factors that are definitely driving overall orders growth. We also mentioned earlier on the call that, as we move into Q3, we would expect, you know, some moderation in orders growth, and that is, of course, driven by the fact that we are lapping the first full quarter of restaurants contribution from a year ago.
So definitely, you know, playing a role. But, again, what we're happy to be seeing is the fact that our suite of products is driving more engagement on the platform, more order frequency, and then that flywheel back to grocery where we're seeing more engagement on the grocery side as well.
Nikhil Devnani: And then just on the Q3 guide commentary there, so the Uber Eats lapping commentary is clear. On the grocery side of things, are you seeing any moderation or embedding any moderation there as well? Or is it predominantly just the comps in restaurants that you're flagging here?
Emily Reuter: From a guidance perspective, really, the main thing that we wanted to call out was on the restaurant side. I think from an underlying dynamics perspective, we're really pleased with what we're seeing really across the board. Right? So, you know, MAU growth, we're seeing order frequency growth. As well as, as Fidji mentioned, some really great dynamics around customer retention, with customer retention in 2025 stronger than what we saw in the same sort of time period in 2024. So overall and then maybe one more thing to add is just on the Instacart Plus engagement and the penetration of Instacart Plus as a percentage of overall now continue to grow. So nothing to add really specific to grocery.
Again, we do look at it on a platform basis. But as we think about the guide, the primary impact I would think about is on the restaurant side.
Nikhil Devnani: Thanks, Emily, and all the best, Fidji, in the new role.
Fidji Simo: Thank you so much.
Rebecca Yoshiyama: Thank you. Our next question comes from Colin Sebastian with Baird. Your line is open.
Colin Sebastian: Great. Good afternoon. And Fidji, best wishes. Good luck, and hope to cross paths again as well. I guess I'd like to talk about the Instacart platform. We hear a lot about Storefront Pro and priority delivery, but maybe you could talk about which parts of the platform are getting the most interest, how much cross-sell opportunity you have, and how the enterprise pipeline looks like, including even outside of grocery. Thank you.
Fidji Simo: Thank you for the question, Colin. So you are right. A big part of the focus is on storefronts because that's really the kind of first product you want to sell when you expand the platform so that all of these retailers working with us can be powered by our technologies on their own and operated website, and that's why we've invested a lot in this platform.
And now it's paying off both in terms of the ability to onboard more new retailers as well as go deeper and add more functionality for existing retailers and allow them to do more things on their own property, like adding priority delivery, which, you know, we added with Costco, for example, and Kroger recently. And so that's a very big part of what the platform does. But then once you have, you know, that, there's a lot more products that we can upsell. An obvious one is Carrot Ads, where we allow retailers to monetize their storefronts properties.
And even when they're not powered by storefronts, you know, in the case of Schnucks, for example, we can also allow them to use Carrot Ads even if they're not using our storefront technology. And that has been a very, very popular option for retailers who realize that they were going to be too subscale to really operate a retail media on their own. But by joining our network, they are able to create a completely new profit line really over and that has resulted in us having over 240 Carrot Ads partners in a really, like, short amount of time.
Then on top of that, you know, we see retailers asking us to expand beyond powering that online property to powering their stores as well. And that's why we are investing in-store technology with K-pop and K-tags. We are seeing a lot of virtuous circles between these two technologies. So for example, if you are deploying K-pop inside your store, you can tell customers after they're done purchasing in a K-pop card to reorder all the items they just sold out in store. You can, like, ask them to reorder them online on your website and maybe give them, you know, a coupon to be able to do that.
So that drives, you know, the acquisition of multichannel customers, which are more valuable than online-only customers or in-store-only customers. Carrot Tags is another example where by powering, you know, pick-to-light on electronic shelf tags inside retailers' stores, we are able to improve the quality of online orders because it allows our shoppers to find these items a lot faster. And now we have, you know, Carrot Tags powering 10% of all orders, which is really incredible knowing that it increases found rate and sell rate meaningfully. So very excited about all of that.
Really, really glad for the question because on top is one of the most underappreciated parts of our business and a really critical advantage that other competitors are really not able to touch. Thank you.
Rebecca Yoshiyama: Thank you. Our next question comes from Lee Horowitz with Deutsche Bank. Your line is open.
Lee Horowitz: Great. Thanks for the question. I wanted to spend some time on ad revenue. I appreciate the resilience you guys highlighted and the breadth of customers that are allowing you to deliver that. I guess, you know, ad penetration was stable. I think you guys had pointed to that being up. I just wonder if you can give any update on what the CPG ad environment looks like today versus what you had mentioned before. Are there still some concerns? And how do you think that may evolve over the back half of the year and into next year? Thanks so much.
Fidji Simo: Yeah. Thanks for the question. Yeah. We are very proud of the resiliency of our ad revenue and the fact that the diversification strategy is working. The investment rate has indeed remained stable. When it comes to the CPG environment, I would say it's similar to what we've talked about before, which is that there is a lot of uncertainty in the environment. That's not just tariffs, but I would say regulation at large, whether it's SNAP, food dyes, etcetera. And all of these put additional pressure on companies to deliver on their profitability objectives. That comes on top of other business-specific challenges, including ongoing changes in consumer preferences.
Like, for example, we're seeing fast-growing interest in high-protein snacks and breakfast food, lower sugar and natural soda options, less processed foods. So if you have a large CPG that, you know, doesn't have a portfolio that indexes heavily towards that, you are having to make a lot of decisions to kind of reposition your portfolio and really optimize for profitability. And that puts a dampen on your ability to invest. And so that's what we're seeing primarily with the large guys, I would say, who are taking a little bit more of a wait-and-see approach, really trying to figure out how to optimize profitability during, you know, a time of change.
But the good news is that, you know, during this time, what we are also seeing is that when CPGs pull back some spend, it allows emerging brands and challenger brands to really rush in and gain share. And so large CPGs are realizing that's not a good long-term strategy, and that, you know, the right strategy is to capture the online customers as they move online because it's much more expensive to regain them over time.
And so we continue to remain focused on demonstrating that to the large brands, getting them to optimize for the long term, not just for their short-term bottom line, but really for, you know, continuing to maintain or increase our market share in the face of very aggressive, emerging brands that are definitely determined to gain share on our platform.
Lee Horowitz: And then maybe just one follow-up on the online grocery industry writ large. You know, it seems to us that over the past several quarters, sort of digital penetration rates of the industry have gone up quite nicely after being fairly stagnant for some time despite the fact that inflation has remained fairly sticky. I wonder from your CPG what you're maybe seeing that's sort of supporting that for the overall industry where you're able to grow well. Competitors and the like? Any shifts you're seeing in demographic trends, pricing trends, anything that you would maybe point to that's perhaps driving that shift more recently?
Fidji Simo: I think the biggest thing is the one you mentioned, which is, you know, kind of, like, price sort of stabilizing. That's always something that we look closely at, and certainly during a time of inflation, we saw that dampen our ability to grow on penetration for the industry in general. Now that's stabilized, that's certainly much more encouraging. At the same time, the TAM is, like, massive. You know? This remains one of the industries that is the least penetrated online among all of commerce. So there's a lot of runway to go.
And what we're seeing in particular with regards to CPG is that the brands are really seeing the next five years as the biggest opportunity to gain share or lose share depending on how they play that card, given that customers are moving online. And when they move online with a certain brand, they tend to stick to that particular brand online. So it's really critical to capture the online customer as they move online. That's why it's so critical that we continue to have the leading ad performance in the market. So that really allows brands to capture that customer with the highest efficiency.
Lee Horowitz: Very clear. Thanks so much, and best of luck moving forward.
Fidji Simo: Thank you so much.
Rebecca Yoshiyama: Thank you. Our next question comes from Ross Sandler with Barclays. Your line is open.
Ross Sandler: Great, thanks. And Fidji, I know your first job over at the new place is gonna be wiring up operators who can all order our Instacart through the new platform. So just aside, to follow-up on the advertising question. I think we all understand the macro weakness in large CPG. But if we look at stronger growth in emerging brands, and then all this new kind of off-site retail media network stuff with, like, Pinterest and TTD. How should we think about those two areas? The emerging brands and the off-site data deals. In terms of contributing to overall ad revenue growth? Like, one of those gonna be big enough to move the needle relative to the big CPG?
Thank you.
Fidji Simo: Yeah. Thanks for the question. So the way I think about it is, one, diversification is working. We've been talking about it for a while, and we are seeing the results of that in what Emily was talking about in our intro. We saw one of the largest brands really pull back some of their spend, and we were able to more than compensate for that with the strength in both emerging brands and mid-sized brands. So really a lot of strength across these segments, whereas a year ago, it would have, you know, taken us down by several points of growth.
We have built a lot of tools for emerging brands and mid-sized brands for them to be able to ramp up on our platform. A lot of AI tools that are allowing them to operate their campaigns much more efficiently, whether that's AI-generated landing pages, AI optimization, and, you know, new goals so that they can specify that we can optimize for. So all of these new product innovations are really working in attracting emerging brands and allowing them to run very high-performing campaigns on a self-serve basis. On the off-platform side, I would say it's slightly earlier in its journey.
Everything we've done today has been more about establishing very strong foundations of partnerships, and you've seen that with, you know, Google, Meta, the Trade Desk, Pinterest. But we still have to really find the right scale motion to start really ramping up these businesses. We are seeing great performance. We are finally at the point where we have the right integrations. The integration we did with The Trade Desk was really industry-leading this quarter where any brand that advertises on The Trade Desk can now really specify a set of audiences using Instacart data and purchase programmatically directly from The Trade Desk.
So we feel like we have all of the right capabilities in place, all the right measurements, right performance in place with this now to be able to scale. And that's, you know, that's still small now, but we expect it to grow about the future given that we feel like we have nailed the fundamentals now.
Ross Sandler: Thank you.
Rebecca Yoshiyama: Our next question comes from Andrew Boone with Citizens. Your line is open.
Andrew Boone: Thank you so much for taking the question. You highlighted gains in batching on the letter. What I'm trying to understand is whether you guys have now more dollars put towards promotion or customer acquisition or however you want to frame that today versus a year ago. So can you talk about the gains that you're getting from batching and then how you're deploying that and kind of the intensity of that? And then, Fidji, in your prepared remarks, you talked about the efficiency of AI that's coming across kind of the platform on the back end.
Can you connect that either to headcount or OpEx or what should our expectations be as AI is just more broadly deployed across Instacart from a cost perspective? Thank you.
Emily Reuter: Thanks so much for the question. So on the first part, in terms of gains in batching. So what I'd say is, you know, we have had gains sort of broadly in shopper pay. Batching is a piece of the equation that we've talked about. But really finding ways to optimize the shopping journey really from beginning to end. So batching is a piece of the puzzle, but shopper pay broadly is an area that we've driven pretty meaningful leverage over the course of the last few years as we really squeezed out efficiencies. As you pointed out, batching has been a key area where we've been able to do a number of things.
That's increasing the number of orders per batch, but it's also increasing the types of orders that we can batch. So we mentioned that 25% of our priority orders are now batched. And we're still able to complete those in a way that gets those orders to our customers at the same time, which in many cases is under thirty minutes, which is pretty incredible to see. In terms of what are we doing with those savings, we've talked about this in the past. We really are looking for ways to reinvest that across a number of different areas. So you mentioned incentives.
That's definitely something that we look at when it's the right opportunity when we think that we can meet the consumer at the right point in their customer journey to change a behavior and ultimately create a more retentive consumer. But, actually, it's broader than that. So a couple of other examples of places, yeah, you will have seen us invest. Obviously, we've talked earlier this year about reducing the minimum basket size. That is something that, you know, ultimately drives down, you know, is a negative to transaction revenue, but we fund that because of the tremendous gains we're able to get on shopper pay.
So that's just one example, but you can imagine a whole host of things that we've done over the course of last year. Making pickup free as an example, as I just mentioned, reducing the minimum basket size, we are ultimately focused on trying to drive affordability for the end consumer. And so if we can drive gains in shopper pay and, you know, give that back to the consumer in forms of cheaper delivery as an example or better-targeted incentives. Those are the kinds of areas that we're looking to double down. Sorry. Can you repeat the second question?
Andrew Boone: AI efficiency isn't anything to note in terms of headcount or OpEx that we should be thinking through as that's further deployed across the platform?
Emily Reuter: Great. Thanks. So at this stage, nothing to call out. I think we are certainly very focused on AI adoption of the company as Fidji mentioned earlier. Definitely, AI first in terms of how we think with, you know, greater than 80% of our code that we're generating today AI-assisted. And, really, it doesn't stop with the engineering team. We gave a couple of examples earlier, but all of our teams are looking for ways to become more efficient. Now, we don't have immediate plans to have that have an impact from an OpEx perspective, but what you've seen us do to date is be able to continue to grow this business while being incredibly disciplined from an OpEx perspective.
And so from, you know, a first principle standpoint, I think that's the first way that you'll see it come through over time as we're able to really translate these gains, maybe that's something we could see, but not something we're committing to at this point in time.
Andrew Boone: Thank you. Thank you.
Rebecca Yoshiyama: Our next question comes from Shweta Khajuria with Wolfe Research. Your line is open.
Shweta Khajuria: Thank you for taking my questions. I have one on advertising. As you develop your ad tech stack, and your advertising business in general, how are you thinking about, you know, on-platform advertising versus perhaps some of the partnerships that you are getting and expanding into, for non-Instacart place ads? And how should we be thinking about it in terms of contribution to your business? Thanks a lot.
Fidji Simo: Yeah. Thanks for the question. So the way we think about it is that we really want to become the one-stop shop for all CPG brands, and we're well on our way to doing that. We have a top-five retail media network. And what we're hearing from CPG brands over and over again is that two things matter, scale and performance. And we are able to reach maximum scale through 1,800 retailers on our marketplace, more than 240 Carrot Ads partners, but also through the off-site partnerships that I mentioned earlier.
And in the future, you know, scaling in-store as well to add on Keeper cards, which are really kind of the holy grail of advertising of combining the advantages of online advertising. But in an in-store environment. And so our view is that advertisers should come to us because we can actually optimize for their goals across our entire network.
And that's why we've really invested in what we call universal campaigns and optimized bidding, which is a way for advertisers to tell us, you know, what their budget is and what their goals are and for us to optimize their campaigns across our entire network, across all of the pieces of the network, both on-platform and outside of the platform. So we're not, we're really thinking about it as, like, one network, and advertisers are thinking about it as one network.
They are telling us that they do not have the bandwidth nor desire to spend, you know, a lot of their energy on sub-retail media networks and to see us as the aggregator for the industry across, you know, all of the different retailers that we already have. And that's a very big part of our value proposition. Intel Media is still very new. We feel like we're very well positioned by being that aggregator.
Shweta Khajuria: Okay. Thanks, Fidji, and wish you all the best.
Fidji Simo: Thank you so much.
Rebecca Yoshiyama: Thank you. Our next question comes from Steven Fox with Fox Advisors. Your line is open.
Steven Fox: Hi. I had two questions too. From a big picture you mentioned personalization in your letter, and I was just curious if there's any KPIs that you're tracking in particular that show success there or anything you can describe as recent and future success. And then, Emily, I was just curious, just on the cash flows, looks like what you're describing for the second half of the year is sort of seasonal from a working capital standpoint. I don't know if that's correct or not, but if you could help on that. Thanks.
Fidji Simo: I'll take the first one. So personalization is one of the biggest advantages of doing grocery online versus in-store. So that's why we really want to lean into it. And all of the advances in AI are really helping us take the thirteen years we have of proprietary data and nearly 1.5 billion lifetime orders and really put that data to use by personalizing the experience. I would say that customers who use Instacart frequently are seeing a ton of personalization across the board.
It starts with the basics like buy it again, which is used by more than three-quarters of our customers to buy at least one item, to the much more sophisticated things we've done more recently, like AI pairings. Well, if you add avocados, we can surface items you may need for guacamole or small shops. Where, we have created, you know, health tags, personalized shopping aisles for, like, organic products, gluten-free products, all the way to, like, new recommendation models for substitution that take into account your dietary needs, all of your pricing, and past preferences.
And so, you know, when we look at kind of how to assess the success of that, we look at it both in terms of does it get existing customers to buy more, add more items to their cart, discover that they weren't used to buying before, which is always, you know, a great sign of success. But also when we, you know, get new customers onboarded on the platform, can we do a better job faster, showing them things that are really relevant for them and help them build the best as well as do the same for lapsed customers as we're redirecting.
And I would say across the board, we are seeing that all of these personalization efforts are working. And are driving more engagement across all of these. So we're really excited about what we're seeing.
Emily Reuter: I can jump in on the cash flow question. So what I'd say about cash flow for us is a little less about seasonality and more about there's certain elements to our business that can drive fluctuations quarter to quarter in terms of flow through to cash flow. So what I mean by that is, you know, occasionally, those are related to just delayed retailer payments. So we saw that. You may recall in the back half of last year where we had a bit of an AR buildup that, you know, we unwinded in Q1. So you saw, you know, some impact there.
Some other areas of the business that just have longer payback periods include alcohol and EBT Snap. So depending on the timing of launches and sales around those categories, those can result in some lumpiness to cash flow. So the way that I think about it is that we will likely expect to have lumpiness over time, over sort of multi-quarter periods. We do sort of trend in line with EBITDA. From a flow-through perspective, you know, if you think about 2024 flow-through, what I just commented on meant that our overall EBITDA to free cash flow rate was slightly depressed because of that AR buildup in the back half of last year.
So I'd say that is sort of on the lower end of what we'd expect to see. But, again, quarter to quarter, we will see fluctuations.
Steven Fox: Great. That's all very helpful. Thank you.
Rebecca Yoshiyama: Our next question comes from Jason Helfstein with Oppenheimer. Your line is open.
Jason Helfstein: Thank you for taking the question. I'll just ask one busy night. So I guess, what will it take for advertising to accelerate? Do you need a healthier CPG spending environment broadly? Or are there actions that Instacart can take to improve to drive more demand? Thank you.
Fidji Simo: Thank you for the question. So I think it's a combination of things. First, I think we have planted all of the right seeds to, you know, make sure that advertising can continue to thrive in the future. And I touched on some of them, but obviously, continuing to have leading performance, continuing to invest in our measurement capabilities to demonstrate our performance, continuing to diversify the business. We're on a great trajectory there. And the more we diversify, the more we can lean into emerging and mid-sized brands, which are growing faster than the rest and investing more of their GTV into advertising than large brands.
And then I also touched on gaining more scale through all of the actions we're taking to expand our network to Carrot Ads, Keeper Ads, and off-site partnerships. So we remain highly confident in our ability to reach, you know, the 4% to 5% investment rate that we had talked about. But on any given quarter, there's gonna be some puts and takes. So sometimes, as you really mentioned, we are seeing, you know, some large brands pull back. We are able to more than compensate for that with the strength in other segments. But, obviously, if we were operating under a better macro, we would see more strength.
We, in fact, saw that in Q1 where, in Q1, we had higher advertising growth, and that's because we saw strength in both emerging brands as well as the large brands in parallel. So certainly, the macro would make things easier, but at the same time, we really believe that with all of the initiatives that we've put into work, we have the levers to grow in the future.
Rebecca Yoshiyama: Thank you. Our next question comes from Michael Morton with MoffettNathanson. Your line is open.
Michael Morton: Thank you for the question. I wanted to talk a little bit about affordability initiatives. We've heard a lot about that from the grocery delivery industry. And what we've seen this year is some of your direct competition has tried to get more competitive by following you into the fee reductions on small baskets. And it's clearly not impacting the momentum in the business. So what I would love to learn some more about is what you've learned in the first half of the year watching this consumer behavior. Maybe you could talk about the stickiness about it and your ability to retain the kind of core customers, but also, if accelerate the business.
And then while we are on the small basket topic, I would love any incremental details you could share about how theoretical small basket unit economics compares for a traditional order. Maybe in regards to, like, some batching rates or ad intensity, take rate, anything would be great. Thank you so much.
Fidji Simo: Great. I'll have Emily and I'll second call, but I'll answer the first. So on our affordability initiatives, first off, I want to clarify that, you know, the change we made to small baskets is one factor, but our affordability strategy is much more broad-based. We are, you know, getting more adoption of flyers, of loyalty linking, of a variety of affordability initiatives. And we are working with all retailers to continue to dynamically adjust our markups and with some, go all the way to price parity, and we've made some progress there with partners like Schnucks, with group in Canada launching at Prosper and more.
And we think that's incredibly important because price parity retailers are growing faster up on the platform than non-price parity retailers. So really, what we see is that it takes a multi-approach of delivering affordability through many different ways to the end customers. And we're very committed to all of these different levers. On the $10 minimum basket change specifically, what we have seen is that it has allowed us to grow GTV overall and grow frequency without cannibalizing large baskets, which is really important because, you know, that's something where we really wanted to address all of the needs and not, you know, shift the mix. And that's certainly what we've seen.
It was very incremental and has allowed us to tap into the kind of top-up use case for this. So we're really excited about what we're seeing. That's why, you know, we're very committed to this change. But I would say, generally, our affordability changes are much broader than this particular change.
Emily Reuter: Yeah. On the small basket unit economics, I think, you know, first and foremost, I would just say, before thinking about unit economics, really, what we're trying to do is create a platform that is there for our customers for all of their shopping needs. And, you know, we know that the majority of shopping happens in large baskets, large weekly shops, but we also know that customers have use cases when they need to do a fill-in shop midweek or forget something or have a sick kid and need something from the pharmacy. And we want to be able to make sure that we're there for them.
And so that's really a big part of the focus on lowering the minimum basket size and really lowering the threshold at which customers think of Instacart as a provider for all of their needs. So that's sort of the starting point. I think how is Instacart able to create a price point that is sort of best in class for a minimum basket size? And that starts with the fact that we have already an existing large network with density of orders at all of these stores.
So when you reduce the minimum basket size, you layer on what are incremental orders to an existing dense network that means we're able to serve these orders out of the gate at economics that are already, you know, much better than you would be if you're starting from scratch. So our starting point, you know, when we did this back in the earlier part of the year, hey, we can do this out of the gate at economics we like. That doesn't mean that's where we're satisfied with, and you've seen that in some of our commentary around strategies like batching. Right? So we've continued to drive up batch rate.
We've increased orders per batch meaningfully over the last couple of years. And you've seen us talk about now batching 25% of priority orders, which we think is again, really incredible because we're still getting these orders to customers, you know, in under, you know, medium fifty minutes, in many cases, thirty minutes. And that is really a key part of our success to driving unit economics here. So we're seeing the engagement we like to see from consumers. We're seeing those incremental orders.
We're not seeing trade down to these orders, which is, I think, is really, really important when you think about the economics because as long as we can do these orders at economics we like, and we're not hurting our existing base of business, then we think of this as, you know, truly additive to the overall ecosystem. And we know that if we engage you more regularly throughout the week, ultimately, what we hope is that drives you back to your weekly shop more regularly. So, really focus on the overall use case, making sure that we're there for customers regardless, and we're very happy with being able to serve those use cases for customers.
Michael Morton: Thank you. Thank you.
Rebecca Yoshiyama: Our next question comes from Deepak Mathivanan with Cantor Fitzgerald. Your line is open.
Deepak Mathivanan: Great. Thanks for taking the questions. So, Fidji, you now have a great view into how consumer experiences are going to emerge for the agentic world, how do you think this affects marketplaces like Instacart as maybe agents take a more prominent role in transaction activities directly on the marketplaces. You know? Where would you say Chris and team should be focusing and putting their accelerated product development efforts for, say, the next six to twelve months as they get the tech plumbing ready, potentially for a more independent agentic world. And then the second question, another big picture one.
I mean, we've now seen delivery growth pretty much accelerate across all three large players in The US, including you, Uber, and Dash. I know there are unique aspects for each, but, you know, do you think there is some kind of high-level theme on whether there is a new leg to user growth or consumer behavior for these services that we are finding right now. Thanks so much.
Fidji Simo: Thank you. So on your first question, the main thing that I think is a good principle for Instacart to follow is that we should always be well worth use of our platform. And as long as you can provide a better experience, you can always find a way to monetize that. So in terms of, you know, where to go with agents, I think integrated EGP with these agents so that we can make it easy for agents to, you know, browse off sites and actually pick the right items for the customer is gonna be really critical.
I happen to think that Instacart has a really critical role in an agentic world, thanks to the selection that we bring to the table of, you know, 1,800 different retailers, 100,000 stores, tons of different products. And doing that with, you know, datasets that are incredibly rich that we've collected over, you know, twelve, thirteen plus years. So I think we're really well positioned, and it's really a matter of, you know, figuring out the right integrations, right, you know, user experience, which I think is still very early and embryonic, and then figuring out monetization once, you know, the user experience is nailed. But very, very optimistic about our position there.
In terms of the delivery growth accelerating across the market, I would say, you know, it points to the fact once again that grocery is still very underpenetrated even with this, you know, wave of growth, we are still vastly behind other categories of commerce with lots of room to go. And I think our service is getting better and better, and that's why you're seeing, you know, this accelerated growth. We think that we are improving the experience across all aspects of selection, affordability, speed, and quality, and, obviously, you know, continuing to deepen our lead in our ability to deliver these orders with some best customer experience.
We are also seeing that retailers are really leaning in and realizing that again, the next few years are going to be really big for them to, you know, gain share or lose share. And we're seeing them lean into their enterprise properties, which, again, gives us a very big advantage because we power those. And when retailers are leaning in, they're usually directing their dollars at operated properties more than third-party marketplaces, and so we're benefiting from these retailers really wanting to accelerate their online growth and us powering that online growth. And in general, also, this retail is leaning into affordability, as I mentioned, which is also accelerating market adoption.
Deepak Mathivanan: Got it. Thank you so much. And, appreciate all the help over the last several years.
Fidji Simo: Thank you so much.
Rebecca Yoshiyama: Thank you. And our last question comes from Justin Patterson with KeyBanc.
Miles Jakubiak: Great. Thanks for taking the question. This is Miles on for Justin. I would like to go back to Instacart Plus on your comments of penetration increasing there. You know, you guys have added a lot of value to the membership over the last year. So curious if you could just provide any more information on how you're seeing adoption trend or behavior within members, like retention and order frequency or anything on that. And then one follow-up on the Costco partnership. I thought that was pretty interesting. Should we be expecting more of these unique retailer offerings moving forward, or is that just more of a one-off with Costco being such a big retailer? Thank you.
Fidji Simo: I'll take Costco. I will say that we are doing these types of deep integration with a lot of our retailers. With Costco, obviously, it takes a particular form because they have a specific business model, and we are very excited to be doing a partnership with them to offer a discount for executive members on, you know, any orders on Costco same day or on Instacart. I assume that's the one you're referring to. So very excited to be able to get so much exposure to that tens of millions of executive members.
But if you look back even at the history of our Costco partnership, there have been many times where we have done, you know, these types of integrations with them, whether that's powering their entire same-day site, expanding with, you know, Costco business center, or reach recently in Canada, whether that's, you know, powering Snap for them, whether that's, you know, doing all kinds of integrations. And so I don't think we should consider that a one-off that we do with a lot of our retailers. Another example just this quarter is with Publix, who was powering their storefront app for delivery, but now they integrated that directly into their main app.
It's a very deep integration, very strategic for those companies, and allowing us to drive more growth. So these are the kinds of things that you can do when you are not just simply a marketplace, that, you know, retailers prove their selection on. But you are actually a strategic partner at the table with their strategic leader, their IT department. And really, driving deep integration into the core business of these retailers, instead of, you know, being just a very thin layer of integration.
Emily Reuter: On the Instacart Plus question, I think it's a couple of comments that I would make there. So first of all, Instacart Plus numbers continue to grow. The engagement with the platform has always been strong, so it's accounted for the majority of activity for some time and continues to do so. And the reason it's critical to us and a big focus of ours is that these are the most loyal and high-spending customers that we have. And so for that reason, we, you know, find it attractive to continue to invest in the overall program.
Because we know if you are an Instacart Plus member that, you know, over time, you spend significantly more GTV on average than non-Instacart Plus members. So those are a couple of factors. We are seeing now Instacart Plus members represent more of our monthly users over time, and, you know, that's for a number of reasons. As you mentioned, making Instacart Plus more valuable. We now have over the last roughly year, launched our restaurants product for customers. We've reduced the minimum basket size to $10. We have, you know, reciprocal memberships, things like Peacock and New York Times cooking, etcetera.
And then we've also expanded it so that, you know, family accounts allow, you know, multiple people to participate in a single Instacart Plus membership. And we know that when you shop with others, first of all, it's more convenient. You know, you can shop and all be adding to the same cart, but you also end up spending more too. So we love the Instacart Plus membership. It's an area we'll continue to invest in. But overall has been a continued growing part of our portfolio.
Miles Jakubiak: Great. Thank you both.
Rebecca Yoshiyama: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.