Instacart (CART) Q2 2024: Advertising Revenue Climbs 11% as Emerging Brands Offset CPG Weakness
Instacart’s second quarter revealed a business model firing on multiple fronts, with advertising revenue growth and deepening enterprise integrations driving operational leverage. Emerging brands and white-label platform expansion are counterbalancing pressure from large CPG advertisers and shifting partnership dynamics. Management is signaling a multi-year runway for omni-channel retail media and in-store technology, with a disciplined approach to incentives and capital allocation underpinning future growth.
Summary
- Emerging Brands Fuel Ad Growth: Instacart’s ad business outpaced expectations as smaller brands offset large CPG pullback.
- Enterprise Platform Strengthens Flywheel: White-label storefront and in-store tech deepen retailer integration, boosting order density and shopper efficiency.
- Retail Media Ambitions Accelerate: Leadership is investing in omni-channel ad solutions and in-store innovation to cement long-term competitive advantage.
Business Overview
Instacart operates the largest online grocery marketplace in North America, connecting consumers, retailers, and brands through its digital platform. The company monetizes via transaction fees, advertising (Instacart Ads), and enterprise technology solutions for retailers, including white-label e-commerce and in-store tech like smart carts and electronic shelf labels. Major segments include marketplace (direct-to-consumer orders), enterprise (white-label and in-store retailer tech), and advertising, with a growing presence in non-grocery verticals and restaurant delivery.
Performance Analysis
Instacart delivered a robust quarter, driven by 10% year-over-year GTV (gross transaction value) growth and a notable 11% increase in advertising and other revenue. The outperformance in ad revenue was primarily attributed to strong momentum from emerging brands, which now number over 6,000 active advertisers, more than offsetting reduced spend by large CPGs facing macro headwinds. Order growth of 7% and average order value (AOV) growth of 3% contributed to GTV gains, with higher club order mix and new customer cohorts reaching larger baskets faster than prior periods.
Profitability metrics were equally strong, with adjusted EBITDA up 89% year-over-year and operating cash flow up 42%. Instacart’s disciplined approach to operating expenses and reinvestment in incentives and affordability options supported margin expansion while maintaining growth investments. Share repurchases continued, with the initial $1 billion program completed and a new $500 million buyback authorized, reflecting confidence in cash generation and capital allocation discipline.
- Advertising Momentum: Emerging brands are now the primary growth engine, with large CPG pullbacks less impactful due to diversification.
- Order Density Drives Efficiency: Deep retailer integrations and white-label storefront growth have improved batch rates and delivery economics.
- Club and Non-Grocery Mix: Higher club order adoption and expansion into non-grocery verticals are increasing both AOV and customer frequency.
Instacart’s core marketplace remains healthy, with underlying cohort behavior normalizing post-pandemic and new use cases, such as restaurants, expanding the addressable market. Management’s focus on habituating infrequent customers and cross-selling across verticals is strengthening the customer funnel and loyalty program penetration.
Executive Commentary
"Our performance reinforces our leading position as the largest online grocery marketplace in North America and highlights our best-in-class customer experience underpinned by industry-leading delivery speed and order quality... These advantages don't just apply to our marketplace, but also extend to our enterprise platform, which is one of the most underappreciated parts of our growth strategy."
Fiji Simo, Chief Executive Officer
"Q2 was a really strong quarter for us, with both GTV and adjusted EBITDA beating the high end of our guidance ranges. We delivered GTV growth of 10% year over year, comprising orders growth of 7% and average order value growth of 3%. Order growth was in line with our expectations, while basket size was the key driver of our outperformance."
Emily Reuter, Chief Financial Officer
Strategic Positioning
1. Retail Media Network Scale and Diversification
Instacart is rapidly evolving into an omni-channel retail media powerhouse. By enabling CPGs to advertise across its marketplace, retailer sites (via Carrot Ads, Instacart’s white-label ad platform), and external channels (Google, Meta, YouTube), the company is building a unified, high-ROI ad ecosystem. Emerging brands are now a structural pillar of ad revenue growth, reducing dependence on large CPGs and increasing platform resilience.
2. Enterprise and In-Store Technology Expansion
Enterprise solutions are now a core growth lever, with one in five Instacart orders coming through the white-label platform. Newly rebuilt storefront architecture allows retailers to instantly access Instacart’s innovation pipeline, while in-store tech (Kepper Cart, KaraTags, FoodStorm kiosks) is gaining traction with both U.S. and international grocers. These integrations deepen retailer stickiness and create a virtuous cycle of order density and shopper efficiency.
3. Customer Habituation and Incentive Optimization
Instacart is leveraging targeted incentives, affordability features, and new verticals (restaurants, non-grocery retail) to convert infrequent customers into habitual users. The company’s new incentive platform enables more precise, ROI-driven offers, supporting both customer acquisition and retention. The 25 million annual customer base is being systematically funneled toward higher frequency and Instacart Plus adoption, which remains a majority contributor to GTV.
4. Non-Grocery and Restaurant Expansion
Expansion into non-grocery categories (e.g., Home Depot, Sally Beauty) and national restaurant delivery (via Uber Eats partnership) is broadening Instacart’s use cases and cross-sell potential. These verticals are not only incremental but also help convert new customers and increase Instacart Plus value proposition, reinforcing loyalty and frequency.
5. Capital Allocation and Shareholder Returns
Instacart’s buyback activity—repurchasing over 10% of fully diluted shares since IPO—signals confidence in cash flow generation and underlines a disciplined capital return framework. Management continues to balance reinvestment in growth with direct shareholder returns, a notable differentiator in a sector often characterized by heavy reinvestment at the expense of profitability.
Key Considerations
This quarter’s results highlight a business model that is scaling through both product innovation and operational leverage, with several long-term themes now coming into clearer focus.
Key Considerations:
- Advertising Mix Shift: Emerging brands are now driving ad revenue growth, reducing exposure to large CPG cyclicality but requiring continued investment in onboarding and education.
- Enterprise Platform as a Growth Engine: White-label storefronts and in-store tech are increasing order density and deepening retailer relationships, with strong momentum in onboarding new partners.
- Customer Funnel Optimization: 25 million annual customers represent a large top-of-funnel opportunity, with new incentives and expanded verticals supporting higher frequency and Instacart Plus adoption.
- Retail Media Network Ambition: Omni-channel ad solutions and in-store advertising (Kepper Cart) are laying the groundwork for a multi-year growth runway, but require ongoing integration and retailer buy-in.
- Capital Discipline: Buybacks and profitability metrics demonstrate a balanced approach to growth and shareholder returns, but future allocation will depend on sustained cash flow and margin trends.
Risks
Instacart faces several risks, including macro-driven CPG advertising pullbacks, intensifying competition from new entrants and multi-vertical platforms, and the operational complexity of scaling in-store technologies. Partnership dynamics (e.g., with Chase and DoorDash) and the pace of retailer onboarding for enterprise solutions could introduce volatility. Management’s ability to balance reinvestment, incentives, and profitability will be critical as the company navigates evolving consumer and advertiser behavior.
Forward Outlook
For Q3 2024, Instacart guided to:
- GTV of $8.1 to $8.25 billion (8% to 10% YoY growth)
- Adjusted EBITDA of $205 to $215 million
For full-year 2024, management maintained a disciplined guidance philosophy, emphasizing:
- Ongoing strength in core grocery, with modest restaurant order contribution
- Ad revenue expected to grow in line with GTV
Management highlighted several factors that will shape the outlook:
- Order growth as the primary GTV driver, with basket size less of a focus
- Continued leverage from shopper efficiency and targeted reinvestment in incentives
Takeaways
Instacart’s Q2 demonstrates a business model that is both diversifying and consolidating its leadership in online grocery and retail media.
- Emerging Brand Momentum: Ad revenue growth is increasingly driven by emerging brands, supporting platform resilience amid large CPG volatility.
- Enterprise Flywheel: White-label and in-store tech are unlocking new retailer partnerships and operational efficiencies, with positive feedback into marketplace economics.
- Retail Media Network Trajectory: Omni-channel ad ambitions and in-store innovation signal a multi-year growth runway, but execution and integration will be key watchpoints for investors.
Conclusion
Instacart’s Q2 results reinforce its position as the category leader in online grocery, with advertising and enterprise innovation underpinning a robust, multi-lever growth strategy. The company’s ability to balance profitability, reinvestment, and capital returns will be critical as it pursues omni-channel retail media leadership and deeper retailer integration.
Industry Read-Through
Instacart’s quarter signals several industry-wide shifts: The rise of emerging brands in retail media is reshaping digital ad spend, with platforms that can offer measurement and closed-loop attribution gaining share. White-label and in-store tech are becoming must-haves for retailers seeking to bridge online and offline experiences, suggesting that pure-play marketplaces or single-channel solutions will struggle to keep pace. Retail media networks are consolidating, with scale and integration increasingly favored by both CPGs and retailers, as evidenced by Microsoft’s retreat and Instacart’s expanding partner roster. Other platforms in grocery, delivery, and retail tech will need to accelerate omni-channel innovation and deepen brand relationships to remain relevant in this evolving landscape.