Instacart’s revenue and profit climb ahead of public listing

Instacart Inc. generated sharply higher sales and profit in the fourth quarter, according to people familiar with the matter and an internal memo, as the company prepares for its highly anticipated initial public offering of stock.

The grocery-delivery company told employees on Tuesday that its revenue increased more than 50% in the fourth quarter, compared with the same period a year earlier, while gross profit rose more than 80%, according to a memo viewed by The Wall Street Journal.

Instacart’s full-year revenue increased 39% to about $2.5 billion for 2022, people familiar with the matter said, as the company reaped the benefits of a push into advertising while it has struggled to increase order volume at the same pace it did during the height of the COVID-19 pandemic.

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Instacart in 2022 processed $29 billion in overall sales across the platform, a measure known as gross transaction volume, up about 16% from the previous year, the people said. The company in the fourth quarter reported positive net income and generated more than $100 million in adjusted earnings before interest, taxes, depreciation and amortization, the people said.

Instacart shared those numbers Tuesday during a call with investors. During the call, executives said the company was waiting for more cooperative markets to go public.

Instacart, which grew to be one of the most valuable private U.S. startups since its founding in 2012, in 2022 filed confidentially for an IPO with the Securities and Exchange Commission. The company planned to launch its listing late last year before pushing back its plans, citing turbulent market conditions. Instacart told employees then that going public in 2022 had been a priority and that it was waiting for an open market window.

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Since its initial filing, Instacart has provided updated financial information to regulators, meaning it is prepared to launch an IPO at any time, ideally in the next several months, according to people familiar with the matter. 

Instacart and other delivery companies got a boost to their business when COVID-19 spread across the U.S. in 2020 and people stayed at home. That growth cooled as people resumed in-person shopping and dining out at restaurants, but consumers continue to buy more groceries online than they did before the pandemic.

Instacart added more stores to its platform and introduced food-stamp payments last year and its Instacart+ membership grew, according to the memo. The company’s advertising products generate a more than 15% increase in sales for brands and are resonating with companies, according to the memo. 

The memo said Instacart is on track to generate more profitable growth and will focus on expanding its core business while investing in newer areas such as Instacart Health.

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Shares of competitors such as DoorDash Inc. have fallen over the past year, partly as fears of a possible recession grow and their pandemic-driven boom winds down. The food- delivery company said recently its revenue for the three months ended Dec. 31 rose 40% from the same period a year earlier, which it attributed to strong consumer demand. DoorDash said it benefited from having more DashPass subscribers.

Instacart last year told staff that its revenue grew more than 40% in the third quarter of 2022, compared with the same period a year earlier, and gross profit rose more than 45% year-over-year. 

Ticker	Security	Last	Change	Change %
DASH	DOORDASH INC.	128.11	+1.35	+1.07%

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Over the past year, the U.S. IPO market ground to a near halt, with companies raising the least amount of money in traditional offerings in 2022 than in the past two decades, according to Dealogic. 

An important factor behind the slowdown is a sharp reversal in investor sentiment. With interest rates rising, investors have had less incentive to buy shares of risky companies that promise large growth but at high costs. Investors have sold such investments and instead shifted money to slower-growing but profitable businesses. By showing it is profitable, Instacart could appeal to more potential public investors, advisers and investors said.

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