India's Eternal's Profit Dive Signals a Strategic Gamble on Quick Commerce Dominance

The Q4 results from India’s Eternal (formerly Zomato) reveal a stark trade-off: a 15% year-over-year drop in net profits as the company funnels $200 million into its quick commerce (or “flash delivery”) infrastructure. While this pivot has spooked short-term investors, the move reflects a bold bet on a sector projected to hit $80 billion in India by 2027. The question now is whether the company’s aggressive investments can secure a lasting edge in this hyper-competitive space—or if the short-term pain will outpace long-term gains.

The Profit-Sacrifice Play

The numbers tell a story of calculated risk. In Q4 2024, Eternal’s operational costs rose 12% due to investments in logistics networks, AI-driven demand forecasting, and last-mile delivery systems. Customer acquisition costs (CAC) surged 25%, reflecting fierce competition for market share. Yet gross merchandise volume (GMV) for quick commerce shot up 40%, a sign that consumers are embracing the service. CEO Priya Sharma framed this as a “strategic trade-off,” emphasizing that the company is prioritizing scale over short-term profitability.

The stock price held steady after the earnings release, suggesting investors are buying into the long-game narrative. Institutional investors already hold significant stakes: foreign institutional investors (FIIs) own 44.36% of the company, with domestic institutions holding an additional 23.47%. This capital backing provides a buffer as Eternal plows money into its infrastructure.

The Quick Commerce Race

The quick commerce sector—where companies promise delivery in under 30 minutes—is a battlefield. Eternal’s Blinkit service, which now partners with 500 new local suppliers, aims to cut procurement costs by 10% in 2025 while reducing delivery times. The company’s plan to invest an additional $150 million this year underscores its ambition to dominate what analysts call a “winner-takes-most” market.

But the risks are clear. Supply chain inefficiencies and labor costs remain stubborn headwinds, while competitors like Swiggy (which has its own hyperlocal delivery arm) are also doubling down. The 40% GMV growth is impressive, but profitability hinges on whether Eternal can turn that volume into sustainable margins. The company’s goal of sub-30-minute delivery times, achievable through better data analytics and optimized supplier networks, will be critical.

The Bottom Line

Eternal’s Q4 results are a microcosm of the tech-driven Indian economy: growth at the cost of near-term profits. With the quick commerce market poised to hit $80 billion in just three years, the company’s $350 million total investment (so far) could pay off handsomely if it secures a leadership position.

Crucially, the stock’s stability post-earnings—and its $2.10 trillion market cap—suggest investors are willing to give management time. But success hinges on execution: reducing operational costs, curbing CAC inflation, and leveraging partnerships to build an unbeatable logistics network.

For now, the bet is in. Whether it’s a masterstroke or a misstep will depend on whether Eternal can turn quick commerce’s fleeting promise into lasting profits. The clock is ticking—and so are the delivery times.