What's behind 7% surge in Eternal share price despite 90% drop in Q1 profit?

Eternal share price: Despite a massive 90% year-on-year decline in the first quarter net profit and a sharp drop in the company's operating performance, Eternal (earlier Zomato) shares staged a smart 7% surge in trade on Monday, as investors overlooked the weakness in food delivery business and cheered the earnings show of its quick commerce arm – Blinkit.

Eternal share price traded in the green, almost 3% higher, for the majority of the session, but the sharp spike followed after the announcement of Q1 results. The stock jumped to ₹276.80 in intraday deals, an upside of 7.55%. It finally settled the session with a solid gain of over 5% at ₹271.20 on the BSE.

The rally followed as investors focused on the strong show in the high-growth segments, future scalability, and the company's ability to capture further market share rather than the weakness in its bottom line.

Q1 marked the first quarter where its quick commerce net order value (NOV) exceeded the food delivery NOV for the full quarter. “On an annualised basis, we are now at almost $10 billion of annual NOV across our B2C businesses, and quick commerce is now our largest B2C business, contributing to almost half of this annualised NOV,” Eternal said in a letter to shareholders, highlighting the fast pace of growth for Blinkit.

Blinkit CEO Albinder Dhindsa further informed that Blinkit added 243 net new stores this quarter, taking the store count to 1,544 by the end of Q1. The company, it said, is on track to get to 2,000 stores by December 2025. Blinkit also added 0.4 million sq ft of warehousing space.

“NOV grew 127% YoY, driven by a 123% YoY growth in average monthly transacting customers (MTC) from 7.6 million to 16.9 million over the past year. On the profitability front, the margins improved from -2.4% of NOV in Q4FY25 to -1.8% despite continued investments in new store roll-outs and seasonal factors.”

Meanwhile, commenting on the flagship food delivery business, Deepinder Goyal, CEO of Eternal, said that YoY growth is likely to bottom out now as we recover from the demand slowdown we started seeing in late 2024. “For FY26, it looks unlikely that the business will deliver a 20%+ NOV growth, but we should be north of 15% and hopefully trending towards 20% YoY growth in FY27,” Goyal said.

Zomato, earlier today, posted a 90% fall in its June quarter consolidated net profit to ₹25 crore as against ₹253 crore in the same quarter a year ago. The revenue from operations in Q1FY26 stood at ₹7,167 crore, which was up by 70.4% over ₹4,206 crore in the corresponding quarter of the previous financial year.

The consolidated adjusted EBITDA fell by 42% year-over-year to ₹172 crore in Q1 FY26. This decline was primarily due to ongoing investments in quick commerce and going-out, although it was somewhat balanced by an increase in the food delivery's adjusted EBITDA margin, which rose to 5% from 3.9% the previous year.

Explaining the stock reaction, Harshal Dasani, Business Head, INVasset PMS, said, Eternal's stock rally reflects market optimism around strong revenue growth in key segments. “Hyperpure (B2B) revenue jumped to ₹23 billion, a 90% YoY increase, while quick commerce saw a 153% growth, reaching ₹24 billion, signalling solid demand despite margin pressure,” Dasani said.

He believes that investors are likely to see the revenue acceleration in high-growth segments as a clear indicator of long-term potential, even as B2B faces headwinds.

“With the company’s food ordering and delivery business also growing by 16% YoY, this suggests that Eternal's diversified model is still delivering strong top-line growth despite margin setbacks. While the drop in profitability is concerning, market sentiment seems to be focused on future scalability and the company's ability to capture further market share, justifying the optimistic stock movement,” Dasani added.

Seema Srivastava, Senior Research Analyst at SMC Global Securities, also remains optimistic on Eternal stock. “Despite EBITDA pressure, Eternal Limited's outlook remains optimistic. It balances growth and operational investments while building long-term capabilities, with substantial cash reserves of ₹18,857 crore,” she said.

On technical charts too, Eternal shares look strong, as per Lakshmishree Investments' head of research, Anshul Jain.

“Eternal has been trading around the 260 zone for the past 40 days, consolidating after its earlier breakout at 242. Today’s results have sparked fresh positive traction, reinforcing the bullish structure. The previous breakout set up a measured target of 286, and with the renewed buying interest post-earnings, the stock looks set to resume its upward momentum,” Jain said.

According to him, as long as Eternal share price holds above the 242 breakout level, the structure remains intact, and it is on track to test the 286 zone in the near term.

Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.

Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.

Download the Mint app and read premium stories