Swiggy, one of India’s leading food delivery and quick-commerce platforms, recently announced its Q3 FY25 financial results, revealing a mixed bag of performance metrics. While the company reported a 31% year-on-year (YoY) increase in revenue, reaching ₹3,993 crore, its net loss widened significantly to ₹799 crore, up from ₹574 crore in the same quarter last year. This financial update sent Swiggy’s shares tumbling by 7.8%, hitting a 52-week low of ₹385.25 before recovering slightly to ₹388.30 at 3:10 PM IST.
The market’s reaction underscores the challenges Swiggy faces in balancing growth with profitability, particularly in the face of intense competition and aggressive expansion strategies.
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Revenue Growth vs. Profitability: A Double-Edged Sword
Swiggy’s revenue growth is undoubtedly impressive, driven by its core food delivery business and the rapid expansion of its quick-commerce segment, Swiggy Instamart. The company’s Gross Order Value (GOV) for its B2C business grew by 38% YoY to ₹12,165 crore, with food delivery GOV increasing by 19.2% YoY to ₹7,436 crore. Swiggy Instamart, the quick-commerce arm, also saw a substantial 88.1% YoY growth in GOV, reaching ₹3,907 crore. These figures highlight Swiggy’s ability to capture market share and drive consumer engagement, particularly through innovations like Bolt (10-minute food delivery) and the expansion of its dark store network.
However, the revenue growth comes at a cost. Swiggy’s net loss widened by 39% YoY, from ₹574 crore in Q3 FY24 to ₹799 crore in Q3 FY25. The company’s EBITDA loss also increased to ₹725.66 crore, up from ₹554.17 crore in the previous quarter. This widening loss is primarily attributed to the aggressive expansion of Swiggy Instamart, which added 86 new dark stores in January 2025 alone, bringing the total to 9 million Monthly Transacting Users (MTUs). While this expansion is crucial for long-term market dominance, it has significantly impacted Swiggy’s short-term profitability.
The Dark Store Dilemma: Growth vs. Margins
The rapid expansion of Swiggy Instamart’s dark store network has been a double-edged sword. On one hand, it has enabled the company to scale its quick-commerce operations and capture a larger share of the market. On the other hand, the costs associated with this expansion have weighed heavily on Swiggy’s margins. According to Nuvama Institutional Equities, Swiggy’s adjusted EBITDA margin for Instamart fell by 420 basis points (bp) quarter-on-quarter (QoQ), while the contribution margin (CM) declined by 270bp QoQ. This margin compression is partly due to the addition of new dark stores, but it also suggests that existing stores are underperforming.
The company’s management has reiterated its commitment to expanding the dark store network, with plans to more than double the active dark store area to 4 million square feet by March 2025, up from 1.5 million square feet in March 2024. While this expansion is expected to drive long-term growth, it has created significant headwinds for Swiggy’s profitability in the near term. The company’s aggressive investment in dark stores and marketing has also intensified competition in the quick-commerce sector, further pressuring margins.
Market Reaction: A Reality Check for Investors
The market’s reaction to Swiggy’s Q3 results reflects investor concerns about the company’s ability to achieve profitability in the face of mounting losses. Swiggy’s shares fell by 7.8% following the earnings announcement, hitting a 52-week low before recovering slightly. Brokerage firms have also expressed caution, with Nuvama Institutional Equities noting that Swiggy’s growth was in line with expectations, but margins were significantly below consensus. Motilal Oswal maintained a ‘Neutral’ rating on the stock, citing the impact of aggressive dark store expansion on profitability.
Despite the near-term challenges, some analysts remain optimistic about Swiggy’s long-term prospects. Bernstein, for instance, has maintained an ‘Outperform’ rating on the stock, albeit with a reduced target price of ₹575, down from ₹635. The firm believes that Swiggy’s food delivery growth is ahead of its competitor Zomato, and the company is well-positioned to expand its market share. CLSA has also maintained an ‘Outperform’ rating, with a target price of ₹750, citing the potential for profitability in the food delivery segment.
Strategic Implications: Balancing Growth and Profitability
Swiggy’s Q3 results highlight the delicate balance between growth and profitability that the company must navigate in the coming quarters. While the expansion of Swiggy Instamart and the introduction of new services like Bolt are critical for capturing market share, they come at a significant cost. The company’s ability to scale its operations while improving margins will be key to restoring investor confidence.
To achieve this, Swiggy may need to focus on optimizing its dark store operations, improving the contribution margins of existing stores, and exploring new revenue streams. Additionally, the company could consider strategic partnerships or acquisitions to strengthen its position in the competitive quick-commerce market.
Swiggy’s Q3 results deliver a sobering reality check for investors, highlighting the challenges of balancing growth with profitability in a highly competitive market. While the company’s revenue growth is commendable, the widening losses and margin compression raise concerns about its path to profitability. As Swiggy continues to expand its operations, it will need to demonstrate a clear strategy for achieving sustainable growth and improving margins to regain investor trust.
