Zomato (now known as Eternal Ltd.) addressed its shareholders in a Q1 FY26 letter, providing insights into its performance and outlook for its food delivery and quick commerce businesses. While the company posted robust year-on-year growth in revenue, margins saw a sequential decline, prompting questions from investors.
In the letter, CEO Deepinder Goyal attributed the quarter-on-quarter decline in margins to seasonal factors. He explained that every year in Q1, margins are typically impacted in both food delivery and quick commerce segments because of lower availability of delivery partners during festivals, adverse weather conditions like summer heat and monsoon rains, and regional disruptions.
“In the past, margin pressure in Q1s was usually offset by improvements in other areas of the business,” Goyal wrote. “But now that margins have matured in this business, such fluctuations driven by seasonal factors are possible.”
He added that long-term prospects remain intact, and the company sees scope for some margin expansion over time. However, the current focus remains on scaling operations and driving further growth while maintaining margins around the 5% of GOV (Gross Order Value) level.
On the question of potential threats from new entrants, Goyal acknowledged that “new ideas, new entrants, and disruption are inevitable,” but also called it a positive force that keeps the company sharp. “We do not see any innovation in the space that makes us believe the business is under any obvious threat right now,” he added.
