Eternal shares declined nearly 9% over two trading sessions following the release of December quarter results, despite the online delivery company turning profitable across its major business lines. The stock's performance reflects growing investor concerns about the company's ability to sustain its operating performance amid intensifying competition in the quick commerce sector.

Strong Financial Performance Amid Market Concerns

The company delivered robust financial results for the December quarter, with consolidated metrics showing significant improvement both sequentially and year-over-year.

Blinkit Drives Revenue Growth Despite Store Expansion Challenges

The growth was primarily driven by Blinkit's exceptional performance, with the quick commerce platform's revenue surging to ₹12,256 crore from ₹1,399 crore in the same quarter last year. However, store expansion faced operational constraints during the quarter.

The slower store rollout, attributed to operational constraints from the festive season and pollution-related curbs in Delhi NCR, may have contributed to reduced cash burn and supported the sharp profit growth.

Competitive Pressures and Future Profitability Concerns

Investors remain concerned that escalating competition could force Eternal to increase discounts and promotional activities, potentially affecting future profitability. The company faces pressure to accelerate store expansion to achieve its target of 100% year-on-year growth in net order value, which may increase cash burn in upcoming quarters.

The food delivery business under the Zomato brand showed steady recovery, with adjusted Ebitda margin improving to 5.4%. Meanwhile, the going-out segment's losses widened due to continued investments, though the company expects sequential reduction and break-even within 4-6 quarters.

Business Segment Performance and Targets

Hyperpure, the company's business-to-business grocery supply arm, recorded revenue of ₹1,070 crore, representing 4.6% sequential growth. Eternal has set ambitious targets for this segment, aiming to achieve $1 billion in revenue and 4-5% adjusted Ebitda margin over the next three years.

Analyst Outlook and Stock Performance

Despite maintaining buy ratings, analysts have adjusted their expectations due to competitive dynamics in the quick commerce sector.

Emkay noted that while Eternal delivered a strong profitability surprise at Blinkit, the sector remains in a land-grab phase that may compel the company to trade margins for market share. Motilal Oswal expects heightened competitive intensity to delay Blinkit's profitability trajectory and has trimmed adjusted Ebitda estimates by 15% for FY28, citing aggressive discounting and promotional spending by competitors.

Eternal faces potential stock volatility following an unexpected leadership transition, despite reporting sequential improvement in operating margins, according to Dharmesh Kant, Head of Equity Research at Cholamandalam Securities. The analyst warned that Deepinder Goyal's sudden departure from his executive role could trigger negative market sentiment in the near term.

Leadership Change Creates Market Uncertainty

Kant emphasized that the unexpected nature of the leadership transition may unsettle investors, particularly given its timing alongside earnings results and the company's ongoing path to sustained profitability. "Had this been a planned, well-laid transition, the reaction could have been different. Coming mid-journey on profitability, the market is likely to take this with a negative tinge," he stated, predicting the stock could open lower in the next trading session.

Financial Performance Shows Mixed Results

The company's latest quarterly performance presented a mixed picture, with revenue meeting expectations while profit after tax disappointed due to higher other expenses and reduced other income contribution.

Kant noted that operating profit remains the more relevant metric at this recovery stage, highlighting the significant gap between topline growth and profitability improvement over the nine-month period.

Quick Commerce Challenges Persist

The quick commerce segment, now representing over 70% of Eternal's business mix, continues to be the primary drag on profitability. "Cash burn in quick commerce is happening at a faster pace, which is restricting operating profit growth, even though food delivery continues to perform well," Kant explained, adding that valuations remain expensive despite sequential improvements.

Blinkit Performance Offers Cautious Optimism

Blinkit's adjusted EBITDA reaching zero as a percentage of net order value provided a positive surprise, exceeding market expectations of continued losses. The platform's net average order value rose to ₹547, marking a one-year high.

However, Kant cautioned against reading too much into a single quarter's performance, citing aggressive expansion by Amazon and Flipkart, along with Swiggy's defensive capital deployment. "It is too early to call this an inflection point," he warned, expressing skepticism about sustained profitability materializing over the next three to four years.

Trading Outlook and Investment Stance

Kant expects initial negative reaction but sees potential for short-term trading opportunities. "If the stock opens 3–5% lower, it could offer a trading opportunity for a 5–10% bounce," he suggested, while emphasizing this represents strictly a short-term trading perspective.

From a long-term investment standpoint, the analyst remains cautious and negative on the broader quick commerce and food delivery space, citing persistent competitive intensity and high cash burn as ongoing concerns for sustainable profitability.