Eternal Q2 Results: Five reasons why Zomato-parent’s shares fell 4% despite 183% jump in Q2 revenue

The shares of Eternal tumbled 4 percent to close in the deep red on October 16, despite hitting an all-time high earlier during the day. This comes after the parent-company of Zomato released its results for the second quarter of FY26.

The shares saw strong volatility during the day. Immediately after the release of the results, the stock jumped 4 percent to hit a lifetime high of Rs 368.45 apiece. The stock then sharply declined 8 percent from that level to close at Rs 340.50 apiece.

Eternal Q2 Results:

Eternal reported a net profit of Rs 65 crore for Q2 FY26. This marks a 63 percent YoY drop from the Rs 176 crore net profit reported in Q2 FY25. Revenue from operations however soared 183 percent YoY to Rs 13,590 crore. Expenses also surged 189 percent YoY to Rs 13,813 crore.

Here are the possible triggers behind the sharp decline in share price:

Slow food delivery growth rate likely in near term:

Zomato has seen a slower recovery growth that what was expected in Q2 FY26, said Eternal Founder Deepinder Goyal. He added that the firm expects a slow uptick in growth rate in the near term. "While we continue to work on inputs to the business (making restaurant food more accessible and affordable for customers), we are also constantly fighting multiple headwinds including soft discretionary consumption in general in India, the impact of quick commerce growth and increasingly volatile weather (extreme heat, extended rains), which continue to weigh on near term growth," he added.

The expectations of slower recovery growth and management hinting at softer discretionary consumption may have dampened investor sentiment.

Blinkit saw lower-than-expected reduction in losses:

Zomato's quick commerce arm Blinkit reported an EBITDA loss of Rs 156 crore in Q2 FY26, higher than the Rs 8 crore loss incurred during the same period last year, on account of the company’s rapid dark store expansion. On a sequential basis, however, the adjusted EBITDA loss was lower than Rs 162 crore recorded in Q1 FY26.

"While absolute losses decreased...the reduction in loss/ margin expansion was below our expectations," said Albinder Dhindsa, Founder of Blinkit. He said that this was largely driven by the firm's investments to drive higher growth and (NOV) market share in the quarter by passing on efficiency gains to customers, investment in higher marketing spends to acquire new customers, accelerated store network expansion and building capacity by expanding warehousing and supply chain.

"This does not change our long term outlook on margins, and we continue to build with a long-term view of the business. If we have to choose between high quality sustainable growth, and a short-term sacrifice of margins, we are in a position to choose the former given our strong balance sheet," he added.

GST reforms to impact food delivery charges:

Zomato said that the latest GST reforms which came into effect in India will push up food delivery charges. "18% GST is now applicable on the delivery charge paid by customers on food delivery orders. This impacts about 25% of our orders where delivery is not free (just to clarify, platform fee is already subject to 18% GST and does not get impacted by this change). This has had a slight negative impact on the growth of the business as we have passed on this tax burden to customers," said Akshant Goyal, CFO of Eternal.

He, however, noted that the reforms bear no impact on Blinkit's delivery charges. They in turn will reduce average GST on Blinkit's typical basket by approximately 3 percentage points, helping drive demand, he added.

Hyperpure revenue declines on shift to inventory ownership in quick commerce:

Hyperpure revenue declined 31 percent YoY and 55 percent QoQ to Rs 1,023 crore during the quarter under review. "The decline was on account of the shift to inventory ownership in quick commerce which led to a scale down in Hyperpure’s non-restaurant business in line with expectations (as mentioned in our last letter). Total Adjusted EBITDA loss was just Rs 5 crore in the quarter (vs Rs 18 crore loss in Q1FY26)," said Goyal.

"Adjusted Revenue grew 172% YoY (85% QoQ) to Rs 13,968 crore but this is not a like to like comparison since the business model in quick commerce has now moved to largely inventory ownership (vs marketplace earlier) where revenue now also includes the full monetary value of goods sold as per Ind AS (and not just the marketplace commission). Like-for-like Adjusted Revenue growth was 65% YoY (22% QoQ) after deducting cost of goods sold in case of own inventory sales in quick commerce and excluding the Revenue from Hyperpure’s non-restaurant business," he added.

Change in Blinkit's business model:

Blinkit is overhauling the way it works with sellers on its platform, shifting to a model where it will directly sell to customers and hold inventory on its books. The Zomato-owned quick commerce company came into effect from September 1, Moneycontrol reported citing people familiar with the development.

Giving an update on the same, CFO Akshant Goyal said, "We have transitioned most of the business to own inventory model, barring a few categories where we don’t plan to own inventory as of now for various reasons. As a result, in Q2FY26 about 80% of the NOV was on our own inventory which is expected to go to a steady state number of about 90% in the next quarter. The transition was done smoothly without any disruption to the business. Kudos to the team for pulling this off in such a short order of time, during a quarter where we clocked our highest growth rate in the last ten quarters, and where we were struggling with incessant rains across the country for an extended period of time."

Eternal's change in Blinkit’s business model makes the overall financial performance incomparable with the past quarters as 73 percent of the current consolidated sales have moved to a new operational model, Informist reported. This not only affects Eternal's profits and depreciation costs, but the shift to inventory-based model from the earlier commission-based model factors in the own cost of goods in the revenue, which was not the case earlier, it added.

Also read: Our LIVE blog on Q2 earningsDisclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.