Instacart (CART) Q2 2025: Order Growth Accelerates 17% as AI-Fueled Efficiencies Deepen Competitive Moat
Instacart’s Q2 2025 results spotlight a business scaling both user engagement and operational leverage, with AI and enterprise integrations fueling differentiation. As the company transitions to new leadership, execution on supply depth, ecosystem stickiness, and retail media resilience signal a platform with durable strategic advantages. The outlook points to continued profitable growth, even as macro and CPG headwinds test the ad model’s flexibility.
Summary
- AI-Driven Productivity: Over 80% of code deployed is AI-assisted, enabling faster product cycles and efficiency gains.
- Retailer Integrations Deepen: Storefront, Carrot Ads, and in-store tech adoption are expanding Instacart’s enterprise moat.
- Ad Platform Resilience: Diversification offsets large CPG pullbacks, with emerging brands and mid-sized partners driving growth.
Performance Analysis
Instacart delivered robust top-line growth, with gross transaction volume (GTV) up 11% year over year, powered by a 17% increase in orders. This order momentum reflects both higher user frequency and a growing customer base, as Instacart’s supply-side expansion and product innovation (notably, lower basket minimums and restaurant integration) drive platform engagement. While average order value declined 5% due to mix shift toward restaurants and small baskets, profitability remained strong as operational efficiencies offset revenue headwinds.
Advertising and other revenue climbed 12%, outpacing GTV and demonstrating the platform’s ability to absorb macro-driven CPG spend volatility. Notably, Instacart’s gross profit per order rose to over $8, reflecting gains from batching, AI-driven logistics, and disciplined cost management. Operating cash flow was $203 million, with some working capital fluctuations, but trailing 12-month cash flow remained up 21% year over year.
- Order Mix Shift: Restaurant and small-basket orders accelerated frequency, but pressured average order value.
- Ad Revenue Buffer: Growth from emerging and mid-sized brands offset large CPG pullbacks, highlighting effective diversification.
- Efficiency Leverage: AI-assisted code and operational improvements drove higher shopper productivity and lower delivery costs.
Instacart’s ability to reinvest efficiency gains into customer incentives and product value, while maintaining margin discipline, underscores a model built for both resilience and scale.
Executive Commentary
"We've extended our supply advantage by building innovative technologies that make our service easier to use and more affordable, while deepening our retail partnerships and helping retailers grow faster."
Fidji Simo, Chief Executive Officer
"Advertising and other revenue grew 12% year over year, modestly outpacing anticipated GTV growth as we expected. This performance demonstrates the increased resiliency of our ads platform as our diversification efforts are working."
Emily Reuter, Chief Financial Officer
Strategic Positioning
1. Platform Ecosystem and Supply Depth
Instacart’s core advantage lies in its breadth and depth of supply, built on partnerships with over 1,800 retailers and a rapidly expanding enterprise offering. The company onboarded 40 net new retailers this year, accelerating from 30 last year, as its Storefront platform and seamless integrations enable faster, deeper partner adoption. This supply depth not only increases selection for users, but also entrenches Instacart as the technology backbone for grocers’ digital transformation.
2. AI-First Operations and Productivity
AI is now foundational across Instacart’s business, with over 80% of shipped code AI-assisted and dramatic productivity gains in engineering and sales. AI-driven features—such as inventory prediction, personalized replacements, and automated code review—are materially improving order accuracy, fulfillment speed, and cost structure. These technology investments are also enabling non-technical teams (sales, legal) to scale outreach and reduce overhead, further reinforcing operational leverage.
3. Retail Media Network Expansion
Instacart Ads (Carrot Ads, retail media business) is now a $1B+ run-rate business, serving over 7,500 brand partners and 240+ retail media partners. The company’s ad model is increasingly resilient, able to absorb large CPG spend pullbacks through growth in emerging and mid-sized brands. Off-platform partnerships with Google, Meta, Pinterest, and The Trade Desk extend reach, while universal campaigns and optimized bidding position Instacart as a one-stop shop for CPGs seeking both scale and performance.
4. Membership and Engagement Flywheel
Instacart Plus (membership program) continues to grow as a share of monthly users, with new features (family accounts, lower basket minimums, restaurant integration) driving higher retention and engagement. Plus members now shop at an average of five different retailers, highlighting the importance of broad selection and reinforcing the stickiness of the ecosystem.
5. Enterprise and In-Store Technology
Enterprise solutions (Storefront, Caper Carts, Carrot Tags) are increasingly vital to retailer partners, enabling omnichannel strategies that bridge digital and physical shopping. Caper Carts are now in 15 states and expanding globally, while Carrot Tags power 10% of orders and improve both shopper efficiency and order accuracy. These capabilities position Instacart as a critical retail enablement partner, not just a marketplace intermediary.
Key Considerations
This quarter’s results reflect a business model that is both defensible and adaptable, with AI and enterprise integrations driving sustainable differentiation. Investors should weigh the following:
Key Considerations:
- Ad Revenue Diversification: Instacart’s ability to offset large CPG pullbacks with growth from emerging brands and new verticals is strengthening ad platform resilience, but large CPG spend remains a cyclical variable.
- Operational Leverage from AI: AI-driven productivity gains are translating into faster product cycles, lower costs, and improved customer experiences—positioning Instacart for scalable margin expansion.
- Membership Stickiness: Instacart Plus engagement metrics indicate deepening ecosystem lock-in, supporting higher order frequency and lifetime value.
- Enterprise Moat: Storefront, in-store tech, and deep retailer integrations are making Instacart an indispensable technology partner, reducing competitive risk from pure marketplaces.
- Affordability Initiatives: Lower basket minimums and dynamic pricing are expanding addressable use cases without cannibalizing large baskets, but require ongoing efficiency gains to preserve unit economics.
Risks
Macro-driven CPG ad spend pullbacks remain a swing factor for ad revenue growth, with large brands taking a wait-and-see approach amid regulatory and profitability pressures. Competitive responses on affordability and fee structures could erode order economics if not offset by continued operational gains. Working capital fluctuations and delayed retailer payments may introduce cash flow lumpiness, though underlying EBITDA conversion remains healthy. Regulatory changes (e.g., SNAP, food labeling) and evolving consumer preferences also present ongoing external risks.
Forward Outlook
For Q3 2025, Instacart guided to:
- GTV of $9 to $9.15 billion, up 8% to 10% YoY
- Adjusted EBITDA of $260 to $270 million
For full-year 2025, management reaffirmed expectations for:
- Year-over-year growth in adjusted EBITDA, both in absolute terms and as a percentage of GTV
Management cited continued order growth outpacing GTV, ad revenue tracking with GTV, and sustained operating expense leverage as key drivers. The primary caution is lapping the first full quarter of restaurant contribution, which will moderate order growth rates sequentially.
Takeaways
Instacart’s Q2 performance demonstrates a platform with expanding operational leverage, deepening retailer partnerships, and a resilient ad business adapting to CPG volatility. The business is executing on both user growth and profitability, with AI and enterprise integrations serving as durable moats.
- Operational Efficiency: AI and batching are driving both cost savings and improved customer experience, enabling reinvestment in growth levers.
- Strategic Partnerships: Deep retailer integrations and omnichannel tech adoption are reinforcing Instacart’s position as a retail enablement leader, not just a marketplace.
- Ad Platform Evolution: Diversification of ad revenue sources is reducing cyclicality risk, but ongoing CPG macro headwinds warrant monitoring.
Conclusion
Instacart exits Q2 2025 with strong momentum in orders, profitability, and platform scale, underpinned by AI-driven execution and deepening enterprise relationships. As leadership transitions, the business appears structurally advantaged, but continued vigilance on ad mix and competitive responses remains critical.
Industry Read-Through
Instacart’s results underscore several key industry trends: The shift toward platform-driven retail enablement is accelerating as grocers seek integrated digital and in-store solutions, with Storefront and in-store tech setting a new bar for omnichannel execution. Retail media networks are becoming more resilient through diversification, but large CPG spend cycles remain a sector-wide risk. AI-led operational leverage is emerging as a critical differentiator, suggesting that competitors without deep tech integration will struggle to match margin expansion and product velocity. The broadening of affordability initiatives and membership models points to a future where frequency and engagement, not just basket size, drive long-term value in online grocery and adjacent delivery verticals.