Double whammy for Swiggy, Zomato: Quick commerce losses to be higher in Q4; food delivery growth to slow, says BofA

To be sure, the prediction on quick commerce holds true for other players, like Zepto, Flipkart Minutes, BigBasket and more, in the ecosystem.

The current quarter is likely to be another tough one for food delivery majors such as Swiggy and Zomato. During the January-March period (Q4), losses resulting from the quick commerce business will be even higher than what they were during the October-December period (Q3), which will likely weigh on the performance of these companies, as per BofA Securities’ recent client note.

At the same time, growth of the gross order value (GOV) of the food delivery arm, which is the core business for both Swiggy and Zomato, is likely to slow to around 16-18 percent in Q4 from around 20 percent that was estimated earlier, the note released on March 26 said.

Food delivery, while being the core business, is also the cash cow for both the companies and funds the losses arising from quick commerce partially, the analysts at BofA said.

So, a bleeding quick commerce arm along with a slowing food delivery business can prove to be a double whammy for both, Swiggy and Zomato.

“The quick-commerce story narrative has quickly moved from ‘higher growth, improving unit economics’ to (a) ‘rising losses, high competition market’, BofA said in its note.

To be sure, the prediction on quick commerce holds true for other players, like Zepto, Flipkart Minutes, BigBasket and more, in the ecosystem.

However, Swiggy and Zomato will be more in focus as these are the only two companies that have a thriving food delivery business, a rapidly growing quick commerce vertical and are both publicly listed companies that need to deliver results each quarter.

The other players are privately held companies so they will not have to deliver promising results each quarter and are not subject to the scrutiny of public market investors on a periodic basis.

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The findings come after both Swiggy and Zomato had a tough Q3. While the Bengaluru-based company saw its losses widen 39 percent to Rs 799 crore on a year-on-year (YoY) basis, its Gurugram-headquartered rival saw net profits fall 57 percent on a YoY basis to Rs 59 crore.

Even Zomato’s food delivery chief was in agreement that food delivery had slowed in Q3. “Currently we are going through a broad-based slowdown in demand which started during the second half of November," Rakesh Ranjan, CEO, food ordering and delivery business, Zomato said in the company's shareholder letter on January 20 while announcing the company's results.

His counterpart at Swiggy had similar views, too. “It (October-December) is a quarter which is slightly softer than other quarters, but we are growing at 19.2 percent, which is within the range of what we've guided to the markets about 18 to 22% growth for the category," Rohit Kapoor, CEO, Food Marketplace, Swiggy, told analysts while discussing quarterly results on February 5.

To be sure, the companies spoke about the Q3 performance and did not provide an outlook on Q4.

However, after Q4, the analysts at BofA see better times for the companies. “...going into FY26, losses should narrow materially as competition is expected to ease. While we expect Q4 losses to be higher, we don’t expect a fast recovery,” the note concluded.