In the world of business, sometimes things aren’t as straightforward as they seem. Take Eternal, the parent company of Zomato and Blinkit, which recently posted a huge drop in its profit for the first quarter of FY26. Yet, despite this setback, its share price surged by more than 7%. How do we explain such a paradox? Let’s break it down.
Eternal’s Dramatic Drop in Profits
First, let’s address the big number: Eternal’s net profit for Q1 FY26 tumbled by a staggering 90%, from ₹253 crore last year to just ₹25 crore. That’s a huge drop. But why did this happen?
The company’s performance was heavily impacted by its ongoing investments in its quick commerce business, Blinkit. Blinkit, which competes in the fast-growing market of instant grocery delivery, is still in an aggressive expansion phase. These hefty investments, especially in things like new stores and warehouses, dragged down profits despite impressive revenue growth.
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Revenue Surge Amidst a Profit Decline
While profits took a hit, revenue told a different story. Eternal’s revenue from operations rose by 70.4% year-on-year, hitting ₹7,167 crore in Q1 FY26, up from ₹4,206 crore the previous year. This surge came primarily from Blinkit’s expansion. The quick commerce segment alone saw a sharp 155% growth in revenue, contributing to the total rise. It was this growth in revenue that helped the company offset some of the financial losses from its other segments.
Let’s take a closer look at the numbers for better clarity:
| Metric | Q1 FY26 | Q1 FY25 | % Change |
| Net Profit | ₹25 crore | ₹253 crore | -90% |
| Revenue | ₹7,167 crore | ₹4,206 crore | +70.4% |
| Blinkit Revenue | ₹2,400 crore | ₹942 crore | +155% |
| B2C Net Order Value (NOV) | ₹20,183 crore | ₹13,036 crore | +55% |
Despite the steep profit decline, Eternal’s positive revenue growth and Blinkit’s market share gain provided enough hope for investors. And it was this optimism that spurred a 7.5% rise in its share price on the day the results were released.
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Blinkit: The Growth Driver
Blinkit, which crossed a major milestone in Q1 by surpassing Zomato’s net order value (NOV) for the first time, played a crucial role in this growth. The company reported a 127% year-on-year jump in NOV for Blinkit, which contributed significantly to the rise in overall revenue. Blinkit’s expansion plans are aggressive, with 243 new stores opened in Q1 alone, bringing its total store count to 1,544. The company aims to reach 2,000 stores by the end of FY26, which is a clear indication of how important this business is to Eternal’s future.
What’s Ahead for Eternal?
While Blinkit’s rapid expansion is one part of the story, it’s important to note that there are challenges ahead. Blinkit is still not profitable, as it reported an EBITDA loss of ₹162 crore in Q1. This loss is attributed to investments in new stores and warehouse space, which are expected to continue in the near future.
The company’s food delivery business, which includes Zomato, saw a 13% year-on-year growth in NOV. However, margins in this segment have matured, meaning future growth may slow down.
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The surprising stock surge
So, what explains the stock price jump? Eternal’s shares gained momentum because investors are optimistic about the long-term prospects of Blinkit. Despite the near-term losses, the company’s aggressive expansion in the quick commerce space is seen as a positive. The management’s outlook, with remarks about Blinkit’s rapid customer growth and increasing market share, provided enough confidence to investors.
Furthermore, Eternal’s focus on innovation and adaptation to changing consumer habits, as seen in Blinkit’s expansion and improvement in margins, helped drive the stock rally. Investors are looking past the short-term challenges and focusing on the company’s growth potential, particularly in the booming quick commerce sector.
Conclusion
In conclusion, while Eternal’s profits for Q1 FY26 may have plummeted by 90%, the company’s revenue growth and strong performance in the quick commerce segment have led to optimism among investors. Blinkit’s impressive growth, coupled with the overall revenue surge, suggests that Eternal is on the right track despite its losses. As the company continues to expand Blinkit and improve its profitability, it could potentially turn this profit slump around in the long run.
Eternal’s story is a reminder that the market often looks beyond short-term setbacks, focusing instead on the long-term vision and potential for growth. The key takeaway: sometimes, a drop in profits isn’t as worrying as it seems, especially when it’s part of a broader strategic move.
