Maplebear Inc. Q3 FY2025 Earnings Call

Ladies and gentlemen, thank you for standing by. Welcome to Instacart's Third Quarter 2025 Financial Results Conference Call. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Rebecca Yoshiyama, Vice President of Investor Relations, Capital Markets and Treasury. Please go ahead.

Thank you, Michelle, and welcome everyone to Instacart's Third Quarter 2025 Earnings Call. On the call with me today are Chris Rogers, our Chief Executive Officer, and Emily Reuter, our Chief Financial Officer. During today's call, we will make forward-looking statements related to our business plans and strategy, developments in the grocery industry, and our future performance and prospects, including our expectations regarding our financial results and share repurchases. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. You can find more information about these risks and uncertainties in our SEC filings, including our last Form 10-Q. We assume no obligation to update these statements after today's call, except as required by law. In addition, we will also discuss certain non-GAAP financial measures which have limitations and should not be considered in isolation from or as a substitute for our GAAP results. A reconciliation between these GAAP and non-GAAP financial measures is included in our shareholder letter, which can be found on our Investor Relations website. Now I'll turn the call over to Chris for his opening remarks.

Thank you, Rebecca. Good morning, everybody. It's great to be here for my first call as CEO, and I appreciate you taking the time to join us. Over the past six years, I've had the privilege to build many of the capabilities and partnerships that make Instacart so distinct. That experience gives me a unique perspective on our business, where we are today, what makes Instacart truly differentiated, and why I'm so confident in our ability to extend our lead and win in this market. Our business is operating from a position of real strength. We have the leading online grocery marketplace, a best-in-class suite of enterprise technologies for retailers, and a growing advertising ecosystem that all work better together and have helped us complete more than 1.5 billion lifetime orders. We’re also unlocking new growth opportunities that build on that powerful foundation. I'll start by discussing our marketplace, which continues to be the majority of our business and serves as the backbone of our platform. We've built the best end-to-end online grocery marketplace in North America by staying focused on what matters to customers: great selection, high quality, affordable prices, and the kind of experience that makes everyday life easier. Every quarter, we build on those strengths, expanding how people use our service, improving delivery speed and reliability, and making shopping even more seamless across every touchpoint. Because of that focus, we've built a growing and loyal customer base. We're attracting new customers to Instacart, retaining customers at higher rates year-over-year, and increasing their order frequency, moving more customers from occasional use to regular monthly and weekly shopping. And what we see is that the longer customers stay with us, the more frequently they shop and the more that they spend across multiple vectors through even larger grocery baskets, more top-off orders, and additional use cases like other retail categories and restaurants. Our most active customers, our Instacart+ members also continue to grow in number and deepen their engagement. All of this gives us confidence that our strategy is working and shows that demand for our service remains strong. This growth continues to add to our scale, and that scale makes us more efficient and more profitable over time. To put a finer point on this, our unit economics are positive and continue to strengthen across all basket sizes. We achieved this by relentlessly improving our technology through things like routing and batching and replacements to make orders faster and more accurate. That creates a flywheel: better earning opportunities for shoppers, better experiences for customers, and a lower cost to serve for us. That, in turn, allows us to reinvest to make the service more affordable and to spend more on marketing to acquire and engage customers while staying disciplined within our guardrails. So our marketplace is healthy and growing. And then we do what nobody else does. We take all of the innovation, scale, and learnings that we've built on our marketplace, and we put that directly in the hands of retailers through our enterprise platform. That's what truly differentiates Instacart. We are not just a marketplace, we are a technology and enablement partner for the grocery industry. Through our enterprise platform, our technologies empower retailers to win on their owned and operated sites and in their physical stores. I want to spend a few minutes on this today because it is a key growth driver for us, and honestly, it's one of the most underappreciated parts of our business. Our enterprise platform is built around five key pillars. First, our storefront or white-label e-commerce technologies now powers more than 350 retailer e-commerce storefronts on retailers' own websites from large retailers like Costco, Publix, and Sprouts to specialty stores and local independents. Grocery tech is very complex, and every retailer is unique in how they operate and how they serve customers, which is exactly why this matters. We've built the best grocery-specific platform that can handle that complexity at scale and make it simple for retailers to grow online with us. Second, we offer highly versatile and high-quality fulfillment services, where we enable the picking, packing, and delivery for retailers like Kroger and Wegmans and other retailers like ALDI and Sprouts put our picking technology directly in the hands of their employees. Our partners use our best-in-class technology and our flexible labor network to serve their customers more efficiently. Third is our Carrot Ads technology, which brings all of our advertising formats, our tools, our capabilities that we've built on the Instacart Marketplace as well as all of the advertising demand from the more than 7,500 brand partners and uses that to power ads on more than 240 partner websites. That includes major retailers like Sprouts and Hy-Vee as well as other marketplaces like Uber Eats, grocery and retail in the U.S., Thrive Market, and more. Fourth, our in-store technology brings the power of our data, technology, and innovation into the physical grocery store, where most shopping still happens. We're doing this with our Caper Carts, which will soon be available in nearly 20% of Wakefern stores as well as with retailers, including Kroger, Sprouts, and Wegmans. In addition, FoodStorm, which provides retailers with technology to digitize the perimeter aisles of their stores like the deli and bakery and prepared foods continues to build momentum with retailers like Ahold Delhaize, Sprouts, and the fresh market. Finally, our newest pillar, AI solutions. Just last week, we launched a suite of AI products that will help retailers use generative and agentic AI to gain a real competitive advantage across online, store shelves, smart carts, and more. Every single retailer that I've talked to so far has been highly interested in partnering with us on AI. They already see us as their grocery technology partner, and these tools come at the exact moment that retailers need us most, as AI transforms how people shop for groceries and feed their families. That's our enterprise platform. It's designed to help retailers of all sizes compete and grow by powering every aspect of their digital strategy. It's built on the same innovation, scale, and learning that come from running North America's largest online grocery marketplace. That gives retailers a clear advantage. They get access to world-class technology and engineering resources that would be impossible to build at the same quality, pace, or price. Retailers can customize their approach, picking and choosing products to solve their specific goals and needs while also benefiting from the simplicity of integrating with a single trusted technology partner. Our enterprise platform is also a highly strategic growth lever for Instacart. Each time we land a new enterprise solution with a retailer, we access a growing and durable part of their business, and we have the opportunity to expand from there. Because the market is still so underpenetrated, we have years of runway ahead of us to deepen these relationships and layer on additional solutions. These enterprise relationships make us a true technology enablement partner, deeply embedded in retailers' operations to drive durable long-term growth together, and the benefits are self-reinforcing. Every innovation that we build at scale on enterprise strengthens our marketplace and vice versa. As you'll see in my shareholder letter, we shared a chart that clearly illustrates the power of our enterprise platform and why exclusivity is critical to our strategy. When we partner deeply with retailers across both the marketplace and the enterprise platform, we grow faster together. That's why we're not concerned when a retailer like Kroger works with other marketplaces. What matters is the depth of our relationships. Kroger announced last week that they're doubling down with us as their primary delivery fulfillment partner across all of their digital properties. That's a great example, a strong vote of confidence in the value that we bring. Moving on to advertising. Our advertising ecosystem enhances our entire platform. When brands advertise with us, they get access to over 1,800 retail banners on our marketplace, more than 240 partner websites through Carrot Ads, dynamic in-store advertising capabilities, and increasingly valuable off-platform insights that help them drive performance across other channels. This has been a foundational year for our advertising capabilities. On our platform, we've added new formats unique to the digital aisleless world, including occasions and recipes and bundles. We've added AI tools like AI-generated landing pages, one-click recommendations, and universal campaigns that make it easier and more effective for brands, especially emerging ones, to advertise with us. And all of this has helped us diversify our advertising base and deepen our partnership with more than 7,500 brands. We're proud that across those brands, we're driving real results. On average, our brand partners see a 25% boost in sales when they advertise on Instacart, translating into measurable growth and higher revenue. We've also expanded our supply with more Carrot Ads partners, entirely new in-store services on Caper Carts, and we've established off-platform partnerships with TikTok and Pinterest as well as Google, Meta, the Trade Desk, and more. These partnerships allow us to help brands optimize their campaigns using the power of our data. Last but not least, we also launched the consumer insights portal to give subscribers another tool to help them make strategic decisions based on our rich data. All of this lays the foundation for a powerful ads and data ecosystem that delivered over $1 billion of ads and other revenue over the past 12 months. While it's not an easy operating environment for many food and beverage CPGs right now, we're confident that by improving our offering, expanding our reach, and continuing to diversify our advertising partners, we're positioned well to meaningfully grow our advertising platform over time. When you think about the power of our platform and you really see us as a grocery technology enablement company, you can fully appreciate how scalable our core advantages are, and you can imagine the growth opportunities that open up for us in new categories and regions. Let me give you a couple of examples of what I mean by this. Our capabilities extend beyond individual customers to businesses and from grocers to B2B distributors. Over the past few years, we've built a suite of products tailored to business needs, including features like invoicing and will call delivery, where we leverage our shopper network to complete urgent fill-in orders from a distributor's warehouse. And now we're rolling out business features beyond our marketplace to our storefront technology as well, so more retailers can benefit from these capabilities and reach more business customers on their own website. This also means our enterprise products are relevant for partners further up the supply chain. We're partnering with distributors like Gordon Food Service on will call, and we recently launched Storefront Pro with Restaurant Depot, a wholesale supplier that sells primarily to foodservice professionals. Another example is international expansion. Today, the vast majority of our success is in just North America, but we see tremendous opportunity to grow internationally with an enterprise-led strategy, primarily focused on Storefront, Caper, and FoodStorm. We know that there's demand for our technologies because we've already started to make inroads in Europe and Australia with Wynshop and with Caper, and we're in active conversations with more retailers who face the same challenges that we know how to solve. Overall, we are closing out the year with strong fundamentals, and we have multiple growth engines for the future. We're building momentum across our marketplace, enterprise, and ads platform, and we're leveraging this foundation to expand to new categories. This gives us confidence in our ability to drive sustainable growth in the short, medium, and long term, and we're doing this while remaining committed to driving long-term profit and cash flow per share expansion. I'll say this one more time because I think it's so important. We're not just a marketplace, we're the leading technology and enablement partner for the grocery industry, transforming and empowering the entire grocery ecosystem to succeed. We're just getting started, and we believe deeply in the strength of this business and the opportunities ahead. That's why we increased our share repurchase program by $1.5 billion, our largest increase yet to underscore our confidence in our path forward. We're leading from a position of strength. We're focused on execution, and we're building a company designed to create lasting value for our customers, our partners, and our shareholders. With that, I'm going to hand it over to Emily to walk through our quarterly results.

Thank you, Chris. This is an incredibly exciting time for Instacart. We're executing on a robust strategic roadmap supported by a strong financial foundation. This enables us to confidently reinvest in the business while continuing to drive more profitable growth over time. Now let's dive into our financial results and outlook. We delivered another strong quarter in Q3. Orders reached $83.4 million, up 14% year-over-year, driving GTV of $9.17 billion, up 10% year-over-year. This performance reflects strong operating fundamentals, fueled by growth in both users and order frequency. As expected, our average order value decreased 4% year-over-year. This was primarily driven by growth in restaurant orders and the introduction of a $10 basket minimum for Instacart+ members, partially offset by growth in basket sizes elsewhere. Transaction revenue grew 10% year-over-year and represented 7.3% of GTV, which was flat year-over-year. This was driven by improved shopper efficiencies and lower consumer incentives, which allowed us to reinvest in affordability initiatives aimed at increasing customer engagement. As a reminder, we manage multiple levers across our P&L, so transaction revenue may fluctuate quarter-to-quarter as we strategically reinvest in growth. Advertising and other revenue grew 10% year-over-year, reflecting the strength of our ads platform. Advertising and other revenue represented 2.9% of GTV, which was effectively flat year-over-year, even as restaurant orders contributed to overall GTV growth while not being advertising addressable. We continue to demonstrate strong financial discipline and operating leverage. GAAP net income was $144 million, up 22% year-over-year, and adjusted EBITDA also grew 22% year-over-year to $278 million. We generated operating cash flow of $287 million, which increased by $102 million year-over-year, primarily driven by strong operational performance. In Q3, we repurchased $67 million worth of shares and ended the quarter with approximately $1.9 billion in cash and similar assets on our balance sheet. Stock-based compensation in Q3 was $82 million, down $24 million quarter-over-quarter, largely due to just over $20 million in expected reversals tied to executive departures in the period. In Q4, we expect stock-based compensation to normalize and be more in line with Q2 2025 levels. Now for our Q4 outlook. We anticipate GTV to range between $9.45 billion to $9.6 billion. This represents year-over-year growth between 9% to 11%, with orders growth expected to outpace GTV growth. It also reflects strong customer demand in October, continued momentum from landing and expanding enterprise partnerships, and is partially offset by the impact of a variety of EBT SNAP funding scenarios. We expect advertising and other revenue to grow 6% to 9% year-over-year. This reflects ongoing strength from emerging and midsized brands, partially offset by some large partners adjusting spend as they manage macro uncertainty and changing consumer trends. While this creates near-term pressure, the fundamentals of our ads ecosystem remain stronger than ever. With our performance reach and diversification, we are confident in returning advertising and other revenue to double-digit growth in 2026 and meaningfully growing this part of our business over time. We are also guiding to Q4 adjusted EBITDA of $285 million to $295 million, reflecting our commitment to disciplined execution and steadily increasing profitability. In summary, we delivered a great Q3 and our momentum continues to build as we look to finish 2025 strong. As a clear category leader, operating at tremendous scale and driving efficiencies, we're taking a disciplined but aggressive approach to investing to further accelerate our growth and advance the broader industry. To underscore our confidence in long-term value creation, we authorized a $1.5 billion increase to our share repurchase program, bringing our total capacity to $1.65 billion as of this morning. We plan to enter into a $250 million accelerated share repurchase program while continuing to opportunistically repurchase shares. With that, we will open up the call for live questions. Operator, you may begin.

And the first question is going to come from Eric Sheridan with Goldman Sachs.

Maybe just to dovetail with the comments and all the details in the materials so far today. If you had to isolate what you see as some of the biggest strategic investments you want to make across your technology stack, growing supply or aggregating demand, how should we think about what those key investments are to build the types of growth narratives you're talking about today?

Yes. Thank you, Eric, for the question. As you can see from our Q3 results, the business is in good shape. We have momentum. We've been driving consistent growth, seven quarters of double-digit growth with consistent EBITDA expansion. So considering the strength of the core business, I'm not coming in and rewriting our entire playbook or making dramatic changes to our underlying vision and strategy. It's going to be fairly consistent. That said, I have started to outline various focus areas that I strongly believe can help us accelerate into the next chapter. There's three of them. One of them is affordability. We know that affordability is the #1 reason why people churn off the platform. We also think it's a barrier to customers placing their first order. So we've made some significant traction with some of our largest affordability issues like loyalty integrations with retailers, the weekly flyer integrations that we've been doing. But we do believe that there's more we can do with retailers, including working with retailers on their own pricing strategy, including having conversations about price parity on the platform. The second area you're going to see us continue to invest in is to accelerate enterprise even more. I continue to see significant opportunity to accelerate our enterprise platform based on everything I hear when I talk to retailers. And even though we're already over 350 e-commerce storefronts, there is more room here for us to sign and launch a lot more retailers across North America, and I also see this opportunity to expand outside of North America for the first time in a real way. And once we've landed with a retail partner, there's an opportunity for us to cross-sell with other partners like with Caper Carts and with FoodStorm. The final area that I want to highlight is ads and data. Our ads business is very strong and highly performing. I plan to continue to invest to build an ads ecosystem that really innovates on-platform with our high-performing and strong measurement, off-platform through partnerships with Google and Meta and the Trade Desk and now Pinterest and TikTok, and then, of course, with Carrot Ads, where we're now powering 240 ad partners. I feel strongly that these are going to accelerate our business. As a tech company operating in the grocery space, we believe that we can do incredible things with AI together both on our platform and together with our retail partners to accelerate even further.

And our next question will come from Colin Sebastian with Baird.

I guess two questions, one and a follow-up. On the AI solutions, Chris, I guess, how should we think about the monetization model here? And how are you using those deeper relationships to expand the marketplace side where there are an increasing number of options for consumers? And in terms of the acceleration you're expecting next year within advertising, Emily, I was maybe just hoping for a little more context around how much of that depends on the macro environment versus platform-specific initiatives and maybe opportunities with partners like TikTok and Uber Eats.

Thank you, Colin. Regarding AI, it’s still early on. We announced our launch last week, and I’ve personally spoken with all the retailers, and they are excited about this. We believe we are onto something significant. Our plan is to develop a range of enterprise offerings that will provide AI-powered capabilities to our retail partners of all sizes, connecting various aspects of the shopping journey from online product discovery to in-store stocking. For retailers, this presents a monetization opportunity as it will enable smarter operations, improve product visibility with our in-store view, and enhance customer shopping experiences. Despite being in the early stages, we are off to a promising start and are confident we can monetize this over time. As for advertising, given the current challenging macroeconomic conditions, we are pleased with our Q3 results of plus 10%, which met our expectations. Looking ahead to Q4, we project growth of 6% to 9% and over 10% for the full year, but we are considering various factors affecting our brand partners. On one hand, mid-market and emerging brands are showing strong ongoing growth, but some of our larger partners are reducing spending due to the tough environment. Additionally, in Q4, we are comparing against brands that significantly increased their spending at the end of last year. Despite this, I am not satisfied with our Q4 guidance and am focused on accelerating growth. I am confident we can return to double-digit growth next year and achieve our long-term target of 4% to 5% of gross transaction volume. This confidence stems from the groundwork we’ve laid over the past year with various initiatives. We are continuously innovating on our platform to attract larger budgets and drive performance for brands through new formats and enhanced optimizations. We are also making substantial progress within our ad ecosystem, now having 240 Carrot Ads partners that include retailers and third-party marketplaces. Recently, we added new partners like Vroom Delivery and Bottlecapps, building a strong pipeline for future growth. We have also launched ads on our Caper Carts with Wakefern, set to deploy in 20% of their stores. Our off-platform partnerships, including those with Pinterest and TikTok, are foundational for us this year. Together, these elements of high performance on our platform and the expansion of new supply present real long-term growth opportunities.

And the next question will come from Shweta Khajuria with Wolfe Research.

Let me try two, please. One for Chris and one for Emily. The new partnerships as well as international growth plans, can you please talk to both of those? One is how impactful do you think that the new partnerships can be in the near to midterm as well as where are you focused on for international growth? What is your go-to-market strategy versus how should we be thinking about your plans for the near to midterm? Emily, the guidance for the fourth quarter, could you please provide a little bit more color in terms of framing the impact of potential EBT SNAP headwinds versus the incrementality of enterprise and the ongoing strength in order growth?

Thank you for the question. On new partnerships, look, we see potential in so many of our partnerships across the broader business. If you're asking about enterprise specifically, we have, again, 350 storefronts, but we continue to launch more storefronts. We launched 40 new storefronts in the first half alone. We just launched Restaurant Depot, which is our first wholesaler that supplies for foodservice. We just launched Cub last week, another retailer. We do believe that this is a very important part of our strategy, and you're going to see us continue to lean into this. Our partnerships on the ad front with off-platform are also going to be critical. Again, this was a foundational year where we struck many partnerships, and we're working through integrations and what our go-to-market motion is going to look like as we talk to brand advertisers about those capabilities. When it comes to international, first of all, I want to say I'm very excited about our plan to take our technology to new markets. We have already spent some time in other countries. We've spoken to retailers. Again, they're trying to solve the same problems as the retailers that I talked to in North America, how to build scalable e-commerce solutions, ads, and in-store digital solutions for customers. That said, while I believe that this is going to be a very promising growth lever for us, I'm also focused on ensuring that we're disciplined on expenses in the way that we do this aligned with our profitability objectives and our ability to deliver annual EBITDA progression. It is probably worth sharing a little bit more about our approach here. We're exploring the major markets like Europe, but we're doing that with our existing products like Storefront Pro and Caper and FoodStorm. We're not building a new suite of technology specific to these markets. We will be investing some. There will be resources applied to this effort obviously to do the selling and to localize our products. But again, I intend to be super disciplined and extremely focused on how we do that. This is another great example where our internal adoption of AI with our tech teams can help us accelerate and accomplish our goals in North America at the same time as abroad.

Great. I can jump in on your question around framing the impact of EBT SNAP. Shweta, that I think about it is that, first of all, EBT is a relatively small part of our overall business. Obviously, as a company, we're very focused on making sure that we can help families get food on the table. What we've looked at in terms of our modeling is a variety of funding scenarios because there has been continued uncertainty about how the rest of the year will play out. We believe that we can achieve our guidance in any of those scenarios. Now what does that mean? It means that we have strong fundamentals in terms of how the business is performing. We did have strong performance in October. That's reflected in our guidance. As Chris mentioned earlier, we also are seeing continued momentum from our land and expand strategy with our enterprise partnerships. For example, we are deepening relationships with retailers like Wakefern and Cub. As Chris mentioned, we launched 40 net new retailer sites in H1 alone, and so we're starting to see the benefit of that. We launched Restaurant Depot, and that is off to a great start. Our embedded marketplace on Grubhub. So a lot of little things that are all coming together to drive overall strength in the business.

And the next question will come from Nikhil Devnani with Bernstein.

Chris, you've spoken a lot about affordability. Can you maybe level set for us where we are today? What is the direction of travel been on markups over the past year or two? And where are we today versus your desired end goal on this objective? When you think about pushing towards price parity or reduced markups, it all makes a lot of sense, but there obviously is some tension with merchant partners that worry about their margins on third-party platforms. So how do you get the partner base to buy into the strategy longer term? And does anything have to evolve or change about the Instacart model or structure as more retailers adopt this?

Thank you, Nikhil, for the question. So I think we all know, including our retail partners, how important it is to work on affordability, especially with the competitive environment and the fact that people are increasingly comparing prices online. Oftentimes, actually, it's the retailer that brings us up with me. As a result, we're working with almost all of our retail partners on our strategy, and this can take many forms, including surfacing deals more aggressively or reducing the markup or offering sale pricing or going all the way to same as in-store pricing, which I think is what you're getting at with the question. On same as in-store pricing specifically, we know it's going to have a positive impact. We can see it in the data. Price parity retailers are growing 10 percentage points faster versus marked-up retailers. We know they retain better. That's why many retailers have moved. In the first half, we announced that Heritage Grocers has moved to price parity. Schnucks went full price parity. Now we have several banners testing their way into it in major markets like Nashville, Chicago, Dallas, and Tucson. I don't know exactly where it's going to net out, but I do think that, that trend is going to continue. We don't break it out, Nikhil, because it's simply not binary. How would we capture a retailer that reduces their markup from 6% to 4%, which just happened? It's good news for the customer, but it wouldn't get recorded if we were tracking price parity full stop or retailers that offer price parity, but only for loyalty-linked members as an example. All that said, I will likely report out on a quarterly basis any retailers that have moved to price parity so that you can see any movement. As for the approach, for the most part, we're taking a consultative approach. We're sharing the data with what they might expect to see on Instacart from a sales lift perspective and a retention perspective. We're also sharing longer-term share and sales trends of digital overall, including where a retailer might be losing share to some of the largest players that are going after digital baskets. To the extent that we would invest, there are many financial puts and takes with retailers given the breadth of products and services we have with most of them. Depending on the broader context, we might put some small dollars towards this. But for the most part, it's the retailers that need to lean in, make the decision, and decide how to price their products.

The next question will come from Ron Josey with Citi.

Maybe Chris, as a follow-up to that one, and I wanted to ask about the chart in the letter around cart's top enterprise partners and the cadence here. It looks for those retailers, the six retailers that were highlighted on the multiple platforms, maybe with the exception of two, most had a dip and then flattish growth before returning to that 10% average. So talk to us about the evolution here as competition ramps up or as exclusivity sort of dissipates here.

Yes, sure. Ron, this is Emily. I can start. I think it's important to explain why we included the chart and what we found interesting about it. We've had a lot of questions regarding loss of exclusivity and how our enterprise relationships strengthen our future. We examined the performance of retailers with whom we have an enterprise relationship and how their business is affected once we go nonexclusive. We're pleased to see that in these cases, we can maintain strong growth across all retailers. As you may know, over 80% of our business is currently nonexclusive. Among the remaining exclusive accounts, most have an enterprise relationship with us. Again, we wanted to emphasize our confidence in our ability to continue growing our business. The fluctuations in the chart can be attributed to factors like seasonality or specific launches with individual retailers. Those are the elements that will create the variations you see in the chart.

And the next question will come from Ross Sandler with Barclays.

Yes. Great. Just following up on the price parity topic from a couple of questions back. Has Amazon's big push changed the nature of the conversation between you guys and your merchants around price parity? That would be question one. Second question is, the new AI offerings look super interesting. Could you just elaborate on how some of this might speed up adoption of merchants migrating to a solution like Instacart? Or is this just more like kind of offering another service that just adds to the plethora of services that you already provide? Is this the materiality of the AI offerings, I guess, is the question.

Yes. Thanks for the question, Ross. On the first one, as it relates to the competitive environment with Amazon and how retailers are thinking about that and how we're thinking about it. We have assessed the top markets that overlap with where Amazon's rolled out, including the top 30, and we continue to grow in those markets and grow overall, as you can see from our results and guide. Our mix looks good. We're not seeing a shift in basket composition between small and large baskets. We're not seeing anything meaningful in our AOV. That said, third-party data is showing that the largest source of amazon.com grocery customers has been the in-store customers. We are using this as a routing cry with retailers where we're already deeply embedded and who need omnichannel strategies to compete. This can show up in a bunch of different ways. It could show up in us actively and aggressively engaging in our existing roadmap depending on what we're working on with that retailer. It might mean that we're moving faster with in-store technologies like Caper Carts. As part of this, we are discussing pricing strategies. As mentioned, some of our large retailers are testing price parity pilots right now in some of the major cities that I outlined. Retailers are keenly aware of what's happening in the competitive dynamic, and we’re helping bring them solutions to compete and win. On the second one, as it relates to AI solutions specifically and how it might speed up adoption of merchants. Look, I do believe this is going to speed up the entire industry. The way that we're going about this is very similar to how we approach all of our enterprise technology. We will innovate directly on Instacart and then take that technology to retailers. When we do these types of things, what we see is technology accelerates across the grocery ecosystem. So on Instacart, we're going to be building out agentic experiences directly. We have incredible data from our 1.5 billion orders to date. We have a rich catalog from 17 million unique items. We understand people's preferences, and we have the best UX. As a result, we do think we can deliver the most relevant agentic experience for grocery with a great user interface directly on Instacart. With what we called Cart Assistant last week, we will bring these conversational capabilities to our retail partners so they'll have similar capabilities at the same pace and scale that we're building out directly on our marketplace. This is going to enhance the grocery experience in several ways. You could interact with an assistant upfront or you could engage with a digital assistant throughout the journey. For example, you could give a Cart Assistant a prompt around a party for 10 people, and it would help you build a cart based on your past preferences and any other context that you provide about the other guests or you can shop normally and engage as needed. At the end of the shop, you could say, check my entire basket for any gluten as an example. We will take that technology and make it available to our retail partners in the form of this AI solution. This means we'll be building agentic experiences on retailers' owned and operated websites like the ones we've already highlighted, Sprouts and Kroger.

And the next question will come from Justin Post, Bank of America.

A couple of questions. I wonder if you could help us understand the Enterprise Solutions contribution maybe to revenues or just overall to your business besides just retention of retailers, just financially, how you think about it? And then second, you did mention that October is off to a strong start. I know there's some competitive concerns out there, but are you seeing any changes from new competition in October?

Okay. Justin, I'm glad you're asking about the enterprise business because, again, we think it's one of our biggest critical advantages. From an economic perspective, there are some nondirect benefits. It increases our order density. It gives us cost to serve advantages. It allows us to reinvest back into the business. But we don't break out growth or unit economics on enterprise or marketplace because it differs retailer by retailer. We're constantly working with retailers to launch new services. Both marketplace and enterprise are growing parts of our business, both add to our bottom line, and both reinforce each other in a virtuous cycle. An investment in one strengthens the other. And on your second question about competition, look, it's an attractive market. Fortunately, competition isn't new to us, and we're not at all surprised by the evolving competitive landscape given the massive TAM and the market penetration relative to other e-commerce categories. When I take a step back here, it’s clear that we're playing a different game. We’re leading in areas of the market that our competitors don't really touch, such as big baskets. So over $75, which still represents 75% of the online grocery market and on retailers' owned and operated sites, which I've said, as an enterprise platform. Because of these key differences, we continue to be the clear leader in online grocery among digital-first players. We’re leading in share of sales by far. We’re three times higher than the next largest digital player. We’re leading in new activation GTV. We’re multiples higher in large basket activation. We are multiples more effective at converting small basket activations to large baskets. We’ve proven that we can compete and win in a highly competitive space, and we haven’t seen anything in the short term that would change that.

And the next question is going to come from Deepak Mathivanan with Cantor Fitzgerald.

So Chris, the new AI tools are very interesting. Can you talk about the strategy to kind of merchandise the tools more extensively in front of consumers and perhaps aim to make Instacart a bigger part of the meal planning service for consumers just beyond the weekly grocery delivery service? How much of this experience needs to be dependent on retailer integrations versus some of the data and tools that you have? And then maybe one for Emily. I think Chris noted that the unit economics is positive for all types of orders. Can you talk about the factors that help small basket orders reach profitability? Do you think there's runway to improve the incremental margins for these over time?

Thank you, Deepak. I'll take the first one around AI tools. We are actively using AI directly on Instacart in order to enhance the experience, and we're looking for ways constantly to merchandise those. We're focused on better personalization, the most relevant digital shelf for better recommendations, better replacements. We want to use our rich data set to capitalize on the rise of GenAI. Our product catalog spans 2 billion product instances refined in the 17 million unique items. We've completed over 1.5 billion lifetime orders. This gives us a real advantage to put a personalized experience at the forefront going forward, including things like meals, which you've called out. We will have the ability to create customized meal plans based on inputs from consumers in the future. You can start to see some of the things that we're doing on our site already from a merchandising perspective with things like Smart Shop, which is our AI-powered personalized shopping experience, analyzing customer behavior from dietary preferences to surface the most relevant products faster. we've created virtual aisles today tailored to specific household needs. If you have a baby or a pet or a dietary need, we’re doing personalized replacements, which is showing up today to consumers. That includes incorporating dietary needs as well as pricing and past preferences. We’ve really started to surface AI-driven experiences, and you're just going to see that continue to accelerate into the future.

On unit economics for various basket sizes, one of the most important things that drives our ability to create unit economics that we like is really about the density of orders at the same place at the same time because that allows us ultimately to batch orders. The number of orders that we have per batch has increased by double digits over the last four years. That’s been a key focus. Additionally, we started to talk about how we were able to batch priority orders, which was something that was new for us over the last several quarters. We're now batching about one-fourth of priority orders. Again, this allows us to take advantage of that overall density. We focus on time to fulfill an order. The time it takes for a shopper to fulfill an order has gone down by 25% over the last four years. It’s about shaving off seconds or minutes of an order. When we launched the minimum basket size sort of end of last year into early this year, we said we could do it at economics we like. If I look at the sort of economics of basket sizes since that launch, I'm really pleased with our ability to improve the overall profile seeing effectively convergence of our ability to be profitable across any basket size. This allows us to be the provider that can service any of the consumer needs. We've talked about our strength in big baskets. We think that's critical to being able to serve the primary use case for groceries. The fact that we're able to do that across small baskets as well means that we can be there for you regardless of the use case.

And the next question comes from Ken Gawrelski with Wells Fargo.

Two, if I may, please. First, as digital grocery delivery becomes more ubiquitous, are you seeing any changes to shopper behavior? Are basket sizes becoming smaller, and maybe shopping occasions becoming more frequent? Do you see any of this in any of your customer cohorts? And if so, what does it mean for Instacart? That's question one. Second question, please. Just any updates you might have on the New York City delivery minimum wage changes expected in early '26 and any ways you anticipate to mitigate those impacts?

Sure. Yes, I can start with the shopping behavior. No, we're really not seeing what I would describe as change in shopper behavior because I think when I think of shoppers, I think of the person executing the basket in the store. On the consumer side, what we’re seeing actually is that large basket growth remains consistent. It continues to be the majority of the market at 75%. We are capturing the full set of consumer needs. In terms of general behavior, we continue to see large baskets playing a critical role.

For the second one on New York, I'll speak at a high level and then Emily can speak to how we're thinking about it financially. We know that New York City Council passed a bill that establishes a minimum earnings standard for grocery delivery workers. Mayor Adams did redo the bill, but the council ultimately overwrote it. The bill extends existing earning standards that restaurant delivery platforms have been operating under since 2014 to grocery delivery workers. Now we're working with the city during the rule-making process. It's a little early to determine the impact. Our mission is to help families put food on the table. The reason we don't support these types of extreme regulations is that they do the opposite. We know this will come at the detriment of customers, shoppers, and retailers in New York City. Customers could see increased fees, shoppers could see fewer earning opportunities, and they may lose the flexibility to choose when and where they shop. Retailers will likely see fewer orders given the cost increase to consumers. We have dealt with many regulatory changes over the course of Instacart's history, and we're confident we're going to navigate this one while still delivering on our profitability objectives at the company level. This is not an outcome that we want or believe is good for stakeholders in New York City.

Yes. I think the only thing I would add there is just that for us, New York represents a pretty small percentage of overall GTV. I agree with everything Chris said in terms of navigating the potential to see increased fees on the consumer side, but not something we haven't seen before and certainly able to navigate at a total company level.

And the next question will come from Steven Fox with Fox Advisors.

I just had one question. I was curious if you could talk a little bit more of the reasons behind even pursuing any international expansion at this point as opposed to doubling down on your advantages that you've talked about in the U.S. from two aspects: one, just the here and now that I just mentioned; and secondly, the fact that as you have moderate success there, it's going to lead to bigger and bigger investments, which maybe your investors are less inclined to accept.

Yes. Thank you, Steven. We think this is the right moment in time for us to start exploring markets outside of North America. For the last few years, we've been working with retailers throughout North America, establishing a very strong base. We know and understand retailers and the types of challenges they’re trying to solve locally in the U.S. and Canada. Based on all of our conversations, we believe it’s the same challenges that they're trying to solve in these other markets. The opportunity feels right. We’re going with our existing set of products, Storefront Pro and Caper and FoodStorm. These are built. We will need to invest in the go-to-market motion. For the most part, we’re taking our existing technology and extending that to retailers beyond just North America to continue growing our business in new markets.

Yes. The difference that Chris mentioned is we're building on products that already exist today. We didn't mention trying to build a marketplace solution, which has a different investment profile than going with what are effectively enterprise-led solutions.

And our next question will come from Andrew Boone with Citizens.

Chris, you mentioned in an earlier response, the path to 4% to 5% take rates for ads. Can you just walk us through the path there? Is that on-platform? Or do Carrot Ads need to grow larger for you guys to be able to reach that target? Any help there would be great. Then is there any update you guys can provide in terms of Instacart+? We haven't talked about that this quarter. What's new? What's changing? What's the plan to grow penetration?

Yes. Thank you for the question, Andrew. I want to reiterate that we believe we're very confident in our ability to achieve our long-term targets of 4% to 5%. It’s going to come from a combination of things. We are consistently innovating on the platform with new formats and optimizations. We’re building out new tooling like one-click recommendations, which is now out to 3,000 brands. We just launched AI landing pages, which are broadly available to brands. Everything that we're doing on our own platform is simply part of the ad ecosystem that we’re building and the foundation we’ve been laying throughout the last couple of years. Carrot Ads will be a big part of our growth engine longer term. We’re up to 240 Carrot Ads partners today. We’re extending our existing tech and demand onto all of these retailer sites, and we continue to launch more. Ads on Caper are also very promising. We just launched ads on Caper at Wakefern, and we believe that's going to be an exciting omnichannel advertising use case because we can target customers and work with retailers to deliver personalized ads in the store. When you take all these strategic pieces together, that’s what's going to drive our long-term growth. We’re extending our high-performance on-platform that brands trust. They trust our performance, they trust our measurement, and we’re taking all that performance to all of these new surface areas where we see growth potential.

In terms of Instacart+, this continues to be a critical part of our overall strategy. We are focused on doubling down on Instacart+ because these are our best customers. Paid Instacart+ members continue to grow. The engagement of those users as a percentage of our monthly users continues to deepen. That's something we like to see. It has been and continues to represent a majority of activity on the platform. They are more engaged and have higher retention than non-Instacart+ members, and that's why we continue to look for ways to make the Instacart+ membership even more valuable. You’ve seen us add subscriptions like New York Times Cooking. We’ve added restaurants and free delivery on restaurants over the course of the last year. You can expect us to continue finding ways to make membership even more valuable and drive continued penetration.

And the next question comes from Jason Helfstein with Oppenheimer.

Two questions kind of related. So, I mean, as you're thinking about adding new Instacart+ members, how much of the growth at this point is still like greenfield, meaning people who don't have, let's say, another subscription program? Again, you can kind of answer that question however you want. Then, second, it seemed like this earnings season, we heard more commentary from some competitors about deemphasizing large baskets and focusing more on small baskets, which seems like it will be positive for Instacart. But just if you want to elaborate maybe on some of the competitive dynamics you're seeing in the market around basket size.

Sure. Regarding Instacart+, the first question was about potential opportunities. The truth is we are concentrating on our own products and services and what we can offer. We understand that our membership provides users with the best grocery capabilities, which has proven to be a strong combination. We haven't noticed any competitive challenges that hinder our ability to grow our user base. Our main focus is on the range of services we offer, which includes top-notch grocery options in terms of selection, affordability, quality, and convenience, along with restaurant capabilities and other partnerships. We believe there is still room to expand our Instacart+ membership, which will drive our growth.

On your second question around small baskets versus large baskets and whether or not there's a trend, we aren't seeing an overall shift towards smaller baskets. 75% of the market is still in large baskets, $75 and above. We aren’t seeing a shift in basket composition between the two. We’re not seeing a meaningful change in our AOV. New entrants and new use cases could be driving incremental small baskets online. These baskets are likely coming from the physical store, which is what we're seeing with the Amazon baskets. Although we’re exceptionally strong in large baskets, we also participate in small baskets as well. We want to meet the needs of our customers regardless of where they shop. That’s why we introduced things like a $10 minimum basket. We’re successful in small baskets. We drive efficiencies and convert small basket users to large basket users at multiples times higher than others.

And due to the time, this does conclude our question-and-answer session for today. I do want to thank you for participating, and this will conclude today's conference call. You may now disconnect.