Eternal Ltd. (formerly known as Zomato) posted strong revenue growth in Q1 FY26, outpacing analyst expectations, even as profitability remained under pressure due to ongoing investments and expansion. Management, however, struck a confident tone in its shareholder letter about long-term profitability and growth opportunities.
Q1 FY26 Results: Revenue outperforms, profits under strain
Eternal reported a consolidated revenue from operations of ₹7,167 crore, up 70% year-on-year (YoY) from ₹4,206 crore in the same quarter last year, beating Kotak Securities’ estimate of ₹6,682.2 crore. Including other income, total income stood at ₹7,521 crore versus ₹4,442 crore a year ago.
On the bottom line, net profit fell 90% YoY to ₹25 crore, compared to ₹253 crore last year. However, this was better than Kotak’s forecast of ₹30.9 crore loss. Profit before tax came in at ₹88 crore, down from ₹239 crore in the year-ago quarter.
EBITDA for the quarter stood at ₹73 crore, significantly outperforming Kotak’s estimate of a ₹130.2 crore loss. Nevertheless, the EBITDA margin declined to 13.95%, from 21.5% last year, reflecting margin pressures amid higher costs associated with expansion and delivery operations. Total expenses rose to ₹7,433 crore from ₹4,203 crore, driven by increased employee costs, advertising, delivery charges, and stock-in-trade purchases.
Management commentary: margins likely bottomed, growth to continue
In the shareholder letter, CEO Deepinder Goyal and Albinder Dhindsa addressed investor concerns around profitability and competition.
On margins, management stated that Q1 margins tend to dip seasonally due to lower availability of delivery partners, summer and monsoon-related disruptions, and festivals. Goyal noted that while margins in the past were offset by improvements elsewhere, maturity in the business means such seasonal dips are more visible now. “Long-term profitability of the business is not a concern,” he said. “If the competitive environment stays the same, margins should improve from here as stores mature.”
Albinder added that some cities have already reached 2.5%+ adjusted EBITDA margins as a percentage of Net Order Value (NOV), reinforcing confidence in achieving the 5–6% long-term margin guidance. However, he cautioned that the improvement journey may not be linear due to competitive dynamics.
Expansion beyond 2,000 stores
On store growth, management sees significant room to grow even in markets with high penetration. Delhi, for instance, continues to grow at 70%+ YoY in NOV. The company reiterated its milestone of reaching 2,000 stores by December 2025, with a clear line of sight towards 3,000 stores thereafter.
Smaller cities showing promise
On profitability in smaller cities, Albinder noted that the gap in Net AOV between large and small cities is just ~10%, and after accounting for lower operational costs, margins in smaller cities are expected to be attractive.
Competition
On competitive risks, Goyal emphasized that new entrants and innovations are inevitable but currently do not pose an obvious threat. “We are committed to maintaining our market position while staying focused on the long-term opportunity,” he stated.
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