Swiggy Q3 Loss Widens Amid Rising Competition and Aggressive Dark Store Expansion

Swiggy’s shares took a significant hit on February 6, falling over 7 percent to Rs 387 apiece, after the company reported a net loss of Rs 800 crore for Q3FY25, up from Rs 524 crore in the same quarter last year. The widening Swiggy Q3 loss reflects the mounting pressure on its business due to rising competition and its aggressive dark store expansion strategy, which continues to weigh heavily on margins.

UBS Maintains ‘Buy’ Rating Despite Swiggy Q3 Loss

UBS has maintained a “buy” rating on Swiggy’s stock despite the growing Swiggy Q3 loss. The firm has set a target price of Rs 515, although it cautioned that margin pressures are expected to persist. The analyst highlighted that no immediate upgrades are planned for the company’s dark store expansion plans, in contrast to Zomato, which is taking a different approach to network growth.

Macquarie’s Concerns Over Swiggy’s Dark Store Expansion

Macquarie, on the other hand, reiterated its “underperform” rating on Swiggy, forecasting a target price of Rs 325. The firm is particularly concerned about the Swiggy Q3 loss and its aggressive dark store expansion. With intense competition in the quick commerce space and swelling losses, Macquarie expects the competitive phase to persist, making Zomato a more favorable investment at this time.

Nuvama Flags Dark Store Expansion as a Major Concern for Swiggy

Nuvama also pointed out that Swiggy’s dark store expansion is likely to be a significant hurdle in Q4, given the additional strain it places on the company’s margins. With heavy investments in Instamart, Swiggy’s quick commerce arm, the company continues to battle fierce competition from Blinkit and Zepto, both of which are rapidly expanding their market share.

Swiggy’s Performance in Food Delivery Despite the Q3 Loss

While the Swiggy Q3 loss is cause for concern, the company did report a solid 19.2 percent year-on-year increase in its food delivery segment, with Gross Order Value (GOV) rising to Rs 7,436 crore. This growth was driven by an expanding transacting user base and increased order frequency, providing some hope for Swiggy’s prospects in the food delivery business, even as its dark store expansion continues to challenge profitability.

Instamart’s Struggles and the Impact of the Swiggy Q3 Loss

Instamart’s performance is another point of concern, with the segment showing a negative contribution margin of -4.6 percent in Q3FY25, a sharp decline from -1.9 percent in the previous quarter. The growing Swiggy Q3 loss has been exacerbated by the high investments in Instamart, which faces stiff competition from Blinkit and Zepto in the quick commerce market.

Analyst Outlook: Swiggy Faces a Tough Road Ahead

The rising Swiggy Q3 loss, coupled with its aggressive expansion strategy, has analysts divided. While UBS maintains an optimistic outlook, other analysts are concerned about the company’s ability to navigate the hyper-competitive landscape in the coming quarters. The next few months could prove crucial for Swiggy’s ability to regain investor confidence.