Instacart explores a sale, report says. A typical premium would cost 14 times cash flow
A bank has been hired and early talks were reported. The cash behind the price is thinner than the $480m quarter suggests.
Instacart is reportedly working with an investment bank to explore a sale. It grew order value 14% and made $480m of free cash flow in one quarter. Those results show a seller with a strong operating business.
A sale would be a bet on Instacart's advertising and data business. A buyer would have to assess a cash figure boosted by the June quarter.
June's $480m of free cash flow includes a $113m inflow from receivables, the money customers owe. Without it, free cash flow was about $367m, a quarter below the headline.
The Information reported the sale exploration on Friday 23 October, according to a market report. It says Instacart has held preliminary talks with Uber and DoorDash, and that they may not lead to a deal.
Instacart shares closed at $56.44 on Friday, up 9.2%, according to Yahoo Finance at the 4pm New York close. Thursday's close was $51.68.
The stock had already risen before the report. From $42.96 on 23 September to Thursday's close is a gain of 20%. Friday's jump takes the one month gain to 31%, so a bidder starts from a higher base than Thursday's close.
The operating results
Instacart's second quarter was strong. Instacart reported gross transaction value, the total value of orders, of $10.35bn, up 14%. Revenue was just over $1bn.
Net income was $111m, down 4%, a decline a buyer would weigh. Adjusted EBITDA, a measure of operating profit before some costs, was $313m, up 19%.
Free cash flow was $480m, against $253m in the March quarter. It rose 156% from a year earlier, against 19% for adjusted EBITDA and a 4% fall in net income.
Growth has accelerated, by the chief executive's account. The company has "meaningfully accelerated our growth over the past three quarters", the prepared remarks say. Orders rose 9% to 90.3m.
Guidance points the same way. The September quarter outlook puts order value up about 14% again, at $10.3bn to $10.55bn. The company widened its ranges. It also expects order value to keep growing faster than order count.
Instacart is not selling out of weakness. Orders are up 9%, and the September quarter outlook has order value up about 14%.
What a typical premium would imply
No price has been reported. The valuation below uses a typical premium. Instacart was valued at about $12bn before the report, and a 30% to 40% premium gives $16bn to $17bn.
A buyer would start from Friday's market value of $13.4bn, about 237m shares. At $16bn to $17bn the price is $67 to $72 a share.
That is 31% to 39% over Thursday's $51.68 close. Friday's $4.76 rise already covers between a quarter and 30% of that premium.
Free cash flow over four quarters was $1.18bn. A $16bn price is 13.6 times that and $17bn is 14.5 times.
Net of the $1bn Instacart holds in cash and similar assets, the multiple is 12.8 to 13.6 times. That multiple measures what a buyer would pay for each dollar of annual cash. Its reliability depends on the cash flow behind it.
Why June’s cash needs a closer look
The four quarter total hides how uneven the cash was. June operating cash flow included the $113m inflow from receivables. A year earlier receivables were an outflow of $67m.
The swing is $180m, or 61% of the $293m year on year rise in free cash flow. Even without the inflow, June cash stayed above March, so the quarter was strong on its own terms.
Free cash flow also ignores stock pay, which was $221m in the first half. That is 30% of first half free cash flow of $733m.
Buybacks took $683m of that cash, 93% of the total. They still cut the basic share count 10.5% in a year.
The advertising business
Advertising is the main attraction for a buyer. Advertising and other revenue was $297m in the quarter, 28% of revenue, and it grew 16%, outpacing order value.
The remarks call the strength broad across large, midsize and emerging brands. It was strongest late in the quarter, alongside the World Cup.
Carrot Ads lets other ecommerce platforms run retail media on Instacart. The remarks say brands want fewer retail media networks to manage, which favours a larger network. A Pinterest tie up lets brands buy Instacart audiences through Pinterest.
Advertising revenue is growing, though its profit contribution remains unclear. Gross profit rose 11%, slower than revenue growth of 14%, and slipped to 7.3% of order value from 7.5%.
The remarks say payments to publishers grew as Instacart expanded certain Carrot Ads and off platform partnerships. The company expects that growth to moderate in 2026, so margin could recover. Until then, a buyer can assess the ad growth but cannot yet confirm its profit contribution.
Costs elsewhere improved. Total operating expenses were $608m, 5.9% of order value against 6.1% a year earlier. That offsets the thinner gross margin, which is why adjusted EBITDA still rose 19%.
What a buyer would get is a $480m cash quarter that receivables lifted by $180m on the year. The price rests on advertising, which has grown but not yet shown its profit.
Grocers using Instacart's Storefront software have a stake too. Storefront powers more than 380 grocery sites, and the chief executive says retailers keep their "brand, customer relationships, and data their own".
What the next results could show
Instacart reports third quarter results on 5 November. It guides adjusted EBITDA to $320m to $340m, up 19% at the midpoint, and advertising and other revenue growth of 15% to 18%.
Management says it now expects to land within its ranges rather than beat them. A result inside that range, with gross profit still near 7.3% of order value, keeps a premium defensible.
If the receivables inflow reverses and free cash flow falls back toward March's $253m, four quarters give $1.01bn. A $16bn price then becomes about 16 times. A bidder would then pay more for less, and advertising would carry the case alone.