Zomato’s growth path: Where will the stock be in 3 years?

If there’s one internet stock that’s been hot in the market, it’s Zomato. From food delivery to quick commerce, the company has positioned itself at the heart of India’s digital consumption boom.

The stock has nearly doubled in the last year, rewarding investors who backed its turnaround story.

But with competition heating up and valuations running high, the real question is—can Zomato keep serving up strong returns over the next three years, or are the best already behind it?

Breaking down the growth story

Zomato’s journey from a restaurant discovery platform to a dominant food delivery and quick commerce player has been fuelled by multiple growth drivers.

The food delivery business expanded rapidly, driven by changing consumer behaviour, aggressive restaurant onboarding, and improved logistics.

Premiumization—targeting high-frequency, high-value users—helped boost order values and margins. Over time, Zomato optimized its take rates, enhancing revenue while maintaining volumes.

Beyond food delivery, Zomato built new revenue streams. Hyperpure, its B2B ingredient supply arm, has scaled profitably as more restaurants seek quality-assured supplies.

The acquisition of Blinkit has been a game-changer, giving Zomato a foothold in the booming quick commerce. Blinkit’s rapid scale-up and Ebitda breakeven have strengthened Zomato’s financials.

Operational efficiency has been another key pillar, with cost controls, better fleet utilization, and a revamped Zomato Gold program boosting profitability.

Consolidation has also worked in Zomato’s favour, with fewer players competing for market share.

Finally, technology has played a crucial role, with AI-driven personalisation, route optimisation, and data analytics improving efficiency across its businesses.

Looking ahead, Zomato’s ability to sustain order growth, expand margins, and scale Blinkit will be critical to maintaining its upward trajectory.

Between 2020 and 2024, sales have skyrocketed, with the company reporting a profit in FY24.

Zomato’s recent performance has also been admirable. The food delivery major has been riding a strong wave across its segments, positioning itself well for the next leg of growth.

Zomato’s Q3 and 9MFY25 Performance

The company continued its strong growth momentum in Q3 FY25, driven by robust performance across its core food delivery business, quick commerce (Blinkit), and B2B supplies (Hyperpure).

Sustained Revenue Momentum

Zomato’s top-line growth remained strong, driven by higher order volumes, increased user engagement, and expansion across verticals.

Blinkit, the company’s quick commerce arm, was a standout performer, recording rapid growth as it scaled its dark store network and expanded into new Tier 1 and Tier 2 cities.

Further Margin Expansion

• Food delivery contribution margins improved, supported by higher order frequency and premiumisation, which led to increased average order values.
• Blinkit’s profitability trajectory strengthened, with better unit economics and improved efficiency in last-mile delivery.
• As a result, Zomato’s overall Ebitda margins improved, signalling sustainable growth with disciplined cost control.

Operational Efficiencies Driving Profitability

Zomato has continued to optimise its cost structure, leading to a reduction in cost per delivery across its platforms.

This was achieved through:

• Better fleet utilization and route optimization in food delivery.
• Lower fulfilment costs in Blinkit, as dark store density improved.
• More efficient procurement and logistics in Hyperpure, reducing wastage and enhancing supplier terms.

Strengthening User Engagement

The Zomato Gold loyalty program has proven to be a key driver of customer retention, encouraging repeat orders from high-value users.

Gold subscribers tend to order more frequently, boosting revenue and reducing the need for deep discounting.

For 9MFY25, revenue growth was strong, driven by Blinkit and the expansion of its food delivery business. Profitability improved significantly and the company continued to report a profit.

Looking Ahead: Zomato’s Next Growth Phase

Looking ahead, Zomato is expanding its core businesses while investing in new verticals.

The food delivery segment has rebounded strongly, driven by an expanding user base and higher ticket sizes, particularly among premium customers. This focus has helped improve contribution margins, making the business more sustainable.

Additionally, Zomato is strengthening its delivery partner ecosystem, with over 1.5 million new partners joining in 2024 and average monthly earnings rising to ₹28,000, backed by expanding insurance coverage.

Meanwhile, Hyperpure, is scaling efficiently, with ₹7200 crore in revenue (73% YoY growth) in Q3FY24. While still in the investment phase, the segment’s positive gross margins and increasing restaurant adoption suggest strong potential for profitability as scale improves.

A key growth driver is Blinkit, which has achieved Ebitda breakeven and continues to benefit from improving unit economics. The business is expanding rapidly, having crossed 1,000 dark stores ahead of schedule, with an ambitious target of 2,000 stores by December 2025. With ongoing investments in logistics and warehousing, Blinkit is set to drive a significant portion of Zomato’s future growth.

Beyond food and commerce, Zomato is making bold moves in the going-out space with its newly launched app, District. The platform, which consolidates services from Zomato, Paytm, Insider, and TicketNew, has already crossed 6.5 million downloads since its November 2024 launch.

The annualised gross order value (GOV) for this segment is now ₹10,000 crore, in line with FY26 guidance. Zomato aims to strengthen its dining-out and entertainment ticketing services, expecting 40%+ YoY growth in this segment.

While early investments in tech, marketing, and team expansion have led to short-term losses in Q3 FY25, District is expected to be a long-term growth driver, creating a more integrated ecosystem beyond food delivery and quick commerce.

Zomato’s steady improvement in Ebitda margins is a key indicator of its future stock performance. The company’s take rate—the commission it earns on orders—is stable, while operational efficiencies are kicking in.

Food delivery contribution margins have expanded significantly, and with Blinkit now profitable at the Ebitda level, the overall financial profile looks healthier than ever.

What sets Zomato apart is its capital-efficient approach—unlike many startups burning cash for growth, the company continues to optimise costs while making targeted investments in logistics, infrastructure, and user experience.

The company’s strong liquidity position is a key pillar of its financial stability. Zomato holds ₹19,235 crore in cash, significantly bolstered by a ₹8,446 crore qualified institutional placement (QIP), providing ample capital for future expansion.

This robust cash reserve allows Zomato to invest aggressively in Blinkit, Hyperpure, and District while maintaining a debt-free balance sheet.

Risks and Weak Spots

Despite its strong position, Zomato is not without risks. Competitive intensity remains high, with Swiggy aggressively expanding and new entrants looking to disrupt the space.

Additionally, any slowdown in discretionary spending could impact order volumes. Regulatory uncertainties, particularly around delivery partner welfare, could also pose challenges.

Valuations

Since Zomato is still in its growth phase, the price to earnings (PE) ratio is expected to remain high.

Zomato’s currently trades at a PE ratio of 300, given its profitability is still low.

Investors will have to take this risk into consideration as there won’t be any comfort on the valuation front in the foreseeable future.

Conclusion

Zomato’s stock performance will likely be a function of three key factors: sustained order growth, margin expansion, and continued execution in quick commerce.

If the company maintains its current trajectory, the market could reward it with a higher valuation multiple. However, any misstep in execution or increased competition could lead to volatility.

Investors betting on Zomato need to track how its different businesses scale, its capital allocation discipline, and whether Blinkit continues its stellar performance.

If all goes well, Zomato could be a long-term compounder.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com