Instacart Aktie

Well, thank you very much, everybody, for joining us this morning. We're really honored to have with us from Instacart, Emily Reuter, Chief Financial Officer; Rebecca Yoshiyama from Investor Relations; and Alfonso from Investor Relations joining us as well. So we do have the dream team. And I'm Colin Sebastian. I cover Internet and Internet services at Baird. Our conference has had a lot around AI, AI enablement. We'll talk about that in a minute. But first, just to go through the disclosure. Some of the statements made today by Instacart may be considered forward-looking. These statements involve a number of risks and uncertainties that could cause actual results to differ materially.

Any forward-looking statements made today by the company are based on assumptions as of today, and Instacart undertakes no obligation to update them. Please refer to Instacart's most recent Form 10-Q for a discussion of the risk factors that may impact actual results. Emily may also reference certain non-GAAP financial metrics and reconciliations are available on CART's Investor Relations website, and we'll start going through those reconciliations now.

But before we do that, let's talk about -- I think the last quarter, that would mark 9 consecutive quarters of double-digit volume growth. Q2 implies another quarter, 11% to 13% GTV growth, which is above order growth. And looking out the next couple of years, I think it might be useful to talk about what you believe are the most important drivers to sustain that growth across the business.

Yes, sure. I mean, first and foremost, obviously, we're quite pleased with the 9 quarters of double-digit growth. That's a combination of things. I think, strong execution across the team, which is, of course, an important piece of the puzzle. But the other piece of it is just the model that we've built, which is a number of reinforcing factors that allow us to keep compounding over time. It starts with the marketplace. That is an area where we continue to add new users. We continue to deepen engagement with those users. We continue to grow our Instacart Plus membership, and we're sort of accelerating the overall product capabilities and features with AI that allow us to continue to grow.

We then continue to take that technology and provide it for our retailer partners in the form of our enterprise business. And that has been something that is a really unique asset that we have that others don't really have access to that allows us to tap into an entirely different body of consumers that we might not otherwise be able to touch and retailers are really motivated to grow that part of the business. And so those 2 pieces really reinforce each other in terms of the technology and the capabilities that we bring to the table, but also in terms of the pools of consumers that we're able to access.

And that's really the foundation on which we then build other capabilities and services. So you see us talking about expanding enterprise not just in North America, but internationally. You talk about AI solutions as a new vector for growth in-store as sort of rounding out our omnichannel experience. So we're just seeing a lot of really good momentum across the business and are expecting to sort of continue to see that growth into the future.

Yes. We'll unpack a number of those areas more specifically. For those of you in the room, feel free to send a question to the e-mail address there. And if there's time at the end, we can get to those as well. You've said growth shifts back to users as the company laps the benefit from the $10 basket, minimum basket size and the restaurant partnerships. I guess what gives you the confidence that user growth can be the primary -- can be a primary growth driver? And how is customer acquisition costs trending as you ramp towards the full funnel marketing program?

Yes. Look, I think it's interesting. We get a lot of questions around this. When I go back in time, user growth was a primary driver of growth. When I think about it, I think about it more as 2025 being somewhat of an anomaly where we layered in a combination of restaurants in '24, but also the $10 minimum basket feature for our Instacart Plus users, which as we talked about at the time, was really a lower AOV, but higher frequency way to drive engagement with users.

And so that -- in '25 drove order frequency being a more significant component of driving orders growth for that period of time. But it was always our expectation and has been a part of our execution and our strategy to drive orders growth. So that's not new. It's just if you think about the impact of '25, some of that additional order frequency. Now order frequency as a driver, we expect to remain.

But again, order of magnitude, that subsides as we lap that feature. Now from a customer acquisition standpoint, we're very pleased with our ability to continue to drive efficiencies across our marketing portfolio. The way I think about marketing isn't just purely about CAC, though. It's really about I have a marketing budget. We have a full funnel approach to marketing that starts at the top with brand awareness, and you see some of that and then very quickly move down the funnel from new user acquisition, which is, of course, a big component of what we do.

But we also spend a lot of time reengaging users that have lapsed or driving engagement with existing users. So it's part of our portfolio. And really, what we do is very frequently, monthly, bimonthly -- sorry, weekly even, we're looking at that portfolio, assessing ROI and shifting dollars between different areas of the portfolio, depending on what we're seeing in terms of those returns. And again, as I said, we've been quite happy with our ability to keep driving that efficiency over time. So from our standpoint, again, not really a major shift in terms of what we've been doing for multiple years. We expect user growth to be a core contributor to our growth on the order side in particular.

Does ROI change that quickly on a weekly basis? Or is it more just shifting from the lower part of the funnel to the upper part of the funnel? Or how does that work?

Yes. It's not so much that it shifts on a weekly basis. It's more that we are constantly looking to find the lowest ROI spend and redeploy it towards something ROI. So you'll find yourself potentially experimenting with different things and saying, "Hey, let's try something. If that's working, we'll lean more into it. If I want to do that where am I funding it from? I'm going to look for whatever is at the bottom of that stack or you try something that doesn't work, we cut that quickly and we'll kind of go back to things that we know work.

But again, we like to look across that full funnel to say, where do we find the most efficiencies, but also making sure that we're having a balanced approach because some of these things are very easy to measure and they're very direct feedback of you're driving an order today. Some other things are going to be longer term, a little bit harder to drive to measure the exact impact, but you know that across the full funnel, you need all components to work to make -- you need the brand marketing to work to make the last click attribution successful, right? So we know we need the full portfolio, and it's really about sort of balancing as we move through the quarters.

Yes, makes sense. Another -- in that multivariable growth equation, AOV is another one of the variables, and that's started to rise a bit. I think 3% increase, $113, a function of engagement as well as contribution from the club partners, the club stores as well. But how much of that improvement is structural versus temporary? And maybe how to think -- how should we think about the mix between larger weekly baskets and the smaller convenience-oriented orders?

Yes. This is an interesting one because similar to the question you asked earlier in terms of order frequency, I think, again, if you go back in time, AOV has been a strength for us in many ways, right, in terms of our large basket composition, in terms of our ability to address the weekly shop in a way that's quite unique to us. And you saw us increase basket size over that previous period.

Now as we went into 2025, and we talked about this quite a bit at the time when we had a little bit of pressure on AOV, that was really coming from that mix of restaurants, which had lower AOV as well as the $10 minimum basket driving those smaller basket incremental orders. Now as I said, during that period of time, we specifically called out 2 things. One, that, that was happening. That was really the key driver. And so you'd expect that as you lap the adoption of those features, some of that headwind would go away. But at the same time, throughout the whole period, we also said that the underlying fundamental basket size was actually doing quite well. So what you're seeing now is we're lapping some of these specific features or services is really the underlying sort of fundamental -- back to your question, fundamental strength of our business.

I think there's a couple of other things that I would point out. One is driven by engagement of existing users. So what happens is if you have users, they engage over time, they tend to shop more frequently and they tend to shop to have higher baskets over time. So you have these engaged users, that's going to drive up AOV over time. You also mentioned club, right? Club has been a strength for us. We've talked about that growing, particularly as consumers are value-oriented, but also because of proactive strategies we have on club, right?

You've heard us talk about our Costco membership as a benefit, and that has driven strength in the club category. So I think there's more to come from that as well. And then we have a category of users that are business like, right? So restaurants that are ordering from retailers like Restaurant Depot. These are going to be larger basket orders as well. So it's a host of things, that are going to -- that have been driving this. And I think, again, I think about the 2025 headwinds more as an anomaly versus what you've seen as sort of overall strength in our large basket orders over time.

The last thing I'll say, again, is just that we view this generally as a huge strength of ours. We are one of very few players that is operating in what is the largest segment of digital grocery, right? So 75% of online grocery is in large baskets, and that's where we play. It's where we're strong. So we obviously do operate and compete effectively in smaller basket orders, but we can take those small basket orders and unlike others, actually transition those to large baskets over time, but the bulk of our business is in these large orders.

Am I remembering correctly, though, that in various macro periods, the AOV for the weekly trip is fairly stable. It's what people are buying within that AOV that varies.

Yes, that's largely right. So there's -- yes, so the way I would think about it is to the extent that people are -- there's macro dynamics, inflation, et cetera, people tend to shop on a budget. And so if you have price inflation, you may have someone take an item out of the cart. Now that's a little different than if I'm shopping at a club retailer, my mental model is a little different, right?

I think even you might think about that in your own daily life, you have your weekly shop and then you have your bigger stock-up shop. Those are going to be a little bit of a different price tag. And so you see that again with that club mix. And then again, as I said, when you have the business customer shopping from a restaurant depot, that's also going to be a very different -- that's less shopping on a budget. It's much more around what do I need to operate my business. So there's a couple of different dynamics at play. But broadly speaking, yes, we do see people adapt to changing prices in those environments.

I want to talk about the enterprise business. I think we characterized Instacart Enterprise as the Shopify of grocery. And back at the IPO, I think you had enterprise tech at about 20% of GTV with Storefront Pro powering a lot of partners. I mean, today, Costco, Publix, ALDI, Sprouts, right, forgetting anybody in there probably. But how do you -- or how should we measure your success there, the value you're providing from enterprise and how the strategy is unfolding?

Yes. So you did forget a few because we have 380-plus retail partners on Storefront Pro, but you've had a lot of the big ones. And actually, I think it actually highlights a really important point that I'll get to, but it's not just small retailers, right? Even think about the Shopify correlation that you mentioned, right, starts with the sort of long tail.

But actually, what you see is that even the Costcos of the world are looking to us to be their technology partner because very few players can invest at the scale and speed that we can because we're able to invest on the marketplace side. We invest on the enterprise side. We can do it in a way that's just really differentiated. But back to your question in terms of overall strategy. Look, I think in terms of the proof points that you're looking for, hey, is this working? How do I understand the dynamic between marketplace and enterprise? I think the answer is it's reflected in our total company results.

When we think about how we operate internally, you might think about it as sort of a suite of services that you're going and offering to a retail partner, right? So we go talk to them. We're talking about marketplace. We're talking about Storefront Pro and Carrot Ads and in-store products and a whole range of different things. Even within those that I mentioned, we're talking about do you want to bring your loyalty program online? Do you want to launch EBT SNAP or alcohol or it's quite a broad conversation. And so we truly think about our suite of services and that retailer relationship holistically across these products and services.

So when we even price them, we're thinking about that from a retailer lens and a retailer-by-retailer basis and making sure that it makes sense for our business and obviously, for their business as well. When you kind of peel back the covers on what's happening and how these 2 things interplay, just some things to think about in terms of where they both reinforce but also drive efficiencies across the business would be, as an example, shopper efficiency, right? Like because we operate enterprise, we have a scale that drives shopper efficiencies that benefit the marketplace and vice versa.

Carrot Ads or our ads ecosystem, not just Carrot Ads, but because of Carrot Ads, which is built on the back of SFP for the most part, we have a scale and a product and service that is really attractive to CPGs because they can come to us and advertise across our marketplace and over 310 Carrot Ads partners as well as additional partners that aren't even on our enterprise ecosystem. So there's just a number of things that make it such that an IC+, I didn't mention is something that works across both. So these parts of our business really truly work together. We think about them holistically. We manage the P&L holistically. And we think the proof is in the results in terms of the 9 quarters of double-digit growth, our ability to continue to execute on our profitability trajectory as well.

Maybe as a follow-up to that, are you seeing more urgency from traditional retailers for this type of investment, this transition, specifically because of increasing competition in the space from companies like Amazon and Walmart?

Yes, absolutely. I mean, look, I think it's a continuation of a trend, but we definitely have a lot of conversations. We often say, Chris, our CEO, is many times sort of the first call for many retailers after an announcement from one of those players. And that's because we are end of one in terms of the ability to bring this grocery-specific technology layer to the table for customers.

I mean, you mentioned some of them that are -- you think, of course, Costco or all these players can do this themselves. And maybe they can, but they choose to partner with us because we have the ability to invest at a scale and pace that's going to only accelerate in terms of that technology innovation. And so we've been really well positioned to capitalize on what is a period of time where if you're a retailer, you're looking to modernize your e-com experience for your customers, but also you want to do so in a way that allows you to keep access to your customers to manage your brand, right, or to be able to present however it is you want, we can do both, right?

We can provide that deep technology layer, integrations and you continue to have that storefront layer for your customers. So we think we're really well positioned. We think we're one of very few players that do that really effectively. And again, it's because of the interplay between marketplace and enterprise that we're able to do that.

Yes. I mean e-commerce is really complex. It's really difficult. And we see repeatedly the traditional retailers, particularly who try to go out on their own, end up choosing partners to really utilize those same technologies on a common platform. But does that urgency show up specifically? Is it Storefront Pro, Carrot Ads? Is it the in-store technology, the fulfillment and logistics? How does that show up specifically?

Yes. Look, it's everything. And I think one of the things that we view as a real strength of ours is we're able to provide effectively a menu of options for our partners. So you mentioned folks that try to go out and do it on their own and then kind of come back to an Instacart type partner. I mean, ALDI is a great example of that, right? ALDI came to Storefront Pro in Q1, and that's been really going well for them. And so we're seeing the benefits of everything we just talked about and a very concrete example of a player that is a massive industry player could do it on their own, did do it on their own and chose to come back to us.

In terms of the product suite, the answer is it depends. But I would say the traditional sort of life cycle that we see is maybe we work with you on marketplace, then you come in through Storefront Pro or even Storefront, upgrade to Storefront Pro, expand the Carrot Ads, although I'd say increasingly, that was more the historical. Increasingly, if you turn on Storefront Pro, pretty much every one of those deals today comes with Carrot Ads out of the gate because I think we've pretty well proven the model with Carrot Ads and then in-store technology on top of that.

AI solutions is a more nascent part of our portfolio, but we're seeing traction there as well. We had talked about some of our large partners like Kroger and Sprouts. We've seen many more come to the table since then, Woodman, Save Mart and others. And so it depends. It's retailer by retailer, but that's kind of generally storefront Pro is usually at the sort of heart of the conversation.

And is there a pattern that's emerged where you bring through Carrot Ads or Storefront Pro and then there's the ability to cross-sell, upsell over time?

Yes. Absolutely. And we've given some of these sort of stories, I think, in some of our communications, but I think Sprouts is a great example of what we call land and expand, but really starting with one product or service and then really, they are a great example of a retailer that has adopted practically every service that we offer.

But at the same time, you have other retailers who don't need all of them. And that's great because you take a retailer that wants to have their own Storefront, but needs a fulfillment partner. Kroger is a great example of that, right? So one of the largest players in the U.S. market, but we're their exclusive fulfillment partner. So we get to participate because of our differentiated ability to execute on what is really complex, right?

It's not picking up a bag and delivering it to a door. It is going into their store with picking tech and moving through that store efficiently, getting the customers what they want, which obviously is a high bar and then getting it to them. So we think that kind of menu of options approach is -- allows us to get in the door with retailers however they want to interact with us.

Yes. And moving to yet another growth variable or lever, international. Insta Leap is now a part of Instacart. And so maybe that's a good place to maybe talk about the international model. Is this primarily a capital-light opportunity for you? Where are you going to see the expansion of that business over time? Does it even extend out to fulfillment and logistics as well?

Yes. So the way I think about international is -- part of the reason that we think it is really attractive for us is as we've been talking to retailers in international markets, what we're seeing is a lot of the same challenges that our retailers had in the U.S. market facing the same challenges in largely European markets. And so that's, of course, interesting to us because we've built the technology already. And so we can take a lot of what we've built and bring that.

And so to address the question directly, that's technology based, right? It's based on tech that we've already built and bringing that like a storefront type of experience to retailers that are facing similar challenges abroad. So I would say, look, we are being very disciplined about our approach. The intention is to be capital-light, existing technology, leading with options like Storefront Pro or options like paper or food storm. So there are other options, again, depending on what individual retailer is most interested in.

But we think there's a way for us to do it in a way that is not going to be big heavy upfront investment, not immediately or in any sort of near-term plan thinking about a marketplace model. And Instaleap is a really interesting way that we think allows us to accelerate those ambitions. So Instaleap is pretty small. But what is interesting about it is, I would say, 2 to 3 things. One is their technology. So on the one hand, we have a lot of this technology ourselves, but they've been building specifically for international markets.

And oftentimes, there's nuances about tech needs that international retailers are looking for that they have. So we think their technology, particularly on the fulfillment side, is quite complementary to what we have in-house. The second is relationships. So we have really deep long-standing relationships with U.S. and North American retailers. Those are different, and they've been at this for some time and have existing relationships that we think that we can leverage.

And then last but not least is team. The team is really excellent. We've been really happy to integrate the team there and think that they can help us accelerate from an international perspective. So overall, excited about early days, but excited about the opportunity and what we're seeing.

Turning then to Agentic Commerce, another big topic here at this conference. But I think you've talked about building the gold standard of Agentic Grocery, specifically and also integrating with LLMs, ChatGPT, Cloud and now Gemini. So that being said, if agents become the new front door for commerce, what guardrails are you putting around data, around the economics, the user experience to ensure that these channels are incremental?

Yes. Maybe I'll just start by talking about our AI strategy broadly because I think it's important to understand that AI from a grocery lens is going to be different than many other industries, right? It's not just about sort of the front door. You have to actually connect that to what's on the shelf and then you have to get what's on the shelf to the customer, right? So there's a really important connectivity that happens between whatever interface the customer is engaging with.

And we think that our 1.6 billion lifetime orders worth of data and understanding both what you're looking for as a consumer, but also real-time understanding of what's on the shelf brings together sort of the magic of the ability to actually get you what you're looking for to your door as a consumer. So we think the ultimate experience ultimately then happens within the Instacart ecosystem on the Instacart marketplace.

And so that's really the focus for us. So we are building AI into experiences really from end to end, whether that's personalization that takes into consideration the context of what you've already put into your basket or your history so that we're able to offer things up that are more attuned to what you're likely looking for or down to CART Assistant, which we've launched to 25% of our users in the U.S. So it's still early days there, but we're starting to see some really interesting behavior from early adopters around more complex tasks.

So tax. So recipe -- searching for recipe, meal planning, building the larger baskets, which can take time. So we actually view AI as something that can really be an accelerant to the overall industry because it takes something that's complex, right? Building your first basket can be time consuming. If we can make that quicker, easier for you, more efficient, that's really compelling. So then we can take all of that, including CART Assistant and bring that to our owned and retail owned and operated sites -- so CART Assistant, we will -- you'll see us roll that out with some of our partners as well. And then I think of the 3P partnerships with the OpenAI, Anthropics and Googles of the world as ways to tap into incremental consumer demand.

Now why incremental? That is what we're seeing today. It's very early on a small number. But again, if the experience is much better within our ecosystem, we think ultimately, people will go to what is the best experience. But if I'm able to be in front of the customer wherever they are and tap into potentially new pools of customers, that's definitely the right strategy for us and how we're thinking about it.

Now in what construct am I willing to do that, only one where data is really -- is sort of front and center in terms of our data rights, in terms of protection of data, not having those players able to use our data to train their models in any way. So I'd say we're quite focused on data when it comes to the nature of those contracts, but we feel very good about the way that we've been able to craft it such that we're very protected, and we maintain what we view as the primary asset here, which is that very deep understanding of consumer behavior when it comes to grocery specifically.

And as those AI surfaces or applications scale, how are you managing or how are you thinking about margins related to those, managing the token and the infrastructure costs associated with usage of those?

Yes. So there's a couple of different flavors, I would say, around token usage or the way that I think about it anyway. There's token usage that's specific to, we'll call it, like internal efficiency, right? So you could think my team using tokens or the engineering team using tokens to do their job better, faster, more efficiently. And that, I think, is, to some extent, simply how you manage any cost in the P&L. It's just another version of that, how you manage headcount costs, how you manage subscription costs and other things. And so to the extent that you're seeing an increase in cost there, we're thinking about, well, am I seeing efficiencies from it?

Am I seeing return? Can I hire less quickly than I was expecting because I'm able to do the work of what would have been an additional hire. If not, then I've got to really question those costs. And so I think about it really as a flexible approach. Now it requires because things are moving very quickly and costs can move fast, it requires a very flexible approach to say, okay, this is something we're monitoring very real time. My team works very, very closely hand-in-hand with R&D to make sure we understand exactly what usage looks like on a regular basis.

And do we need to make adjustments either to the spend side of the equation? Or do I need to make adjustments elsewhere in the P&L to offset those costs because we actually like what we see. The other component is obviously the usage of tokens for some of these products and services. And that's really around are we seeing the output? Do we see increases in customer engagement in those kind of metrics that drive return. So those things sometimes take time, but that's sort of the mental model of how I think about those things. But I don't expect any sort of margin impact in the short term. We're definitely actively managing the impact.

Got it. Well, unfortunately, we're going to have to end there. Emily, thank you so much for your time, and I could ask many more questions, but I appreciate you coming.

Thank you so much. Appreciate the time.

Good day, and thank you for standing by. Welcome to the Instacart First Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Rebecca Yoshiyama, Vice President, Head of Investor Relations. Please go ahead.

Thank you, operator, and welcome, everyone, to Instacart's First Quarter 2026 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-K. 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 press release, which can be found on our Investor Relations website.

Now I'll turn the call over to Chris for his opening remarks.

Thanks, Rebecca. Good morning, everybody, and thanks for joining us. Q1 was a strong start to the year. We grew GTV 13% and total revenue 14% year-over-year, surpassing $10 billion in GTV and over $1 billion in total revenue for the first time. We also expanded profitability and repurchased $349 million in shares, reflecting our continued confidence in the business. Stepping back, the headline is simple. Our strategy is working. We're the leading grocery technology platform, delivering a best-in-class consumer experience, powering retailers through our marketplace and enterprise capabilities and operating a scaled advertising ecosystem for brands. Each part of our strategy is getting stronger on its own.

And more importantly, they're compounding together. When we improve the consumer experience and scale our marketplace, we drive growth for our retail partners. We extend those capabilities into retailers owned and operated channels, which deepens our integrations and allows us to create better, more differentiated experiences for consumers. And as our platform grows, it creates more opportunities for us to expand our ads and data capabilities while also unlocking efficiencies that we can reinvest back into the business. That combination is what's driving our results and gives us confidence in our runway ahead.

Now let me walk you through what we're seeing across each of our key growth engines. Starting with marketplace. Our fundamentals are strong, and we remain laser-focused on delivering the best end-to-end grocery experience. We center on what matters most to customers: selection, quality, affordability and convenience, and we're increasingly using AI to make our experience more personalized and intuitive. You can see this in all the product improvements we've made, which may sound simple individually, but at our scale, they compound quickly.

For example, we continue to enhance our search functionality, making it faster and more relevant while also guiding more new users toward search earlier in the journey. That matters because customers who use search are about 5x more likely to place their first order. We're also improving how consumers discover and access savings, making promotions more visible and easier to understand, including offers like free pasta sauce when you buy $10 more of meat. That's helping customers save while also driving larger baskets.

And as we continue to raise the bar on quality, we've upgraded our AI-powered replacement flow to better reflect consumer preferences in real time, a strong example of how data and technology have come together to improve outcomes for both shoppers and customers. On top of this strong foundation, we're introducing new AI-powered capabilities. With over 1.6 billion lifetime orders, we have a unique and deep understanding of the grocery journey, and we're using that to build the gold standard of agentic grocery AI. We recently began testing Cart Assistant, our AI-powered conversational shopping experience, now available to about 25% of U.S. customers. Early feedback is encouraging with customers using it to discover recipes, build meal plans, quickly assemble baskets and research products. These are some of the most time-consuming parts of grocery shopping, which highlights the meaningful role generative AI can play in enhancing the online grocery experience.

These advancements are also why we've decided to integrate Instacart with AI platforms like ChatGPT and most recently with Claude. We want customers to experience conversational grocery shopping combined with the power of Instacart selection, data and fulfillment wherever and however they choose to shop. In addition to all of these product improvements, affordability remains a key growth lever. Consumers are very focused on value, and we're continuing to give retailers better tools to deliver that. For example, over the past several quarters, we partnered closely with Sprouts to launch Sprouts Rewards across their online properties, in addition to enabling native sign-up, account linking and digital coupons directly on our marketplace at the same time they rolled out the program in stores. We're also seeing club retailers continue to outperform on the platform, driven in part by programs we helped launch like Costco's executive member benefit.

We're also making progress on price parity. Retailers who offer price parity, meaning no markup on item prices, continue to grow faster on our platform. We saw that with both Hy-Vee and Raley's after they moved to price parity in Q1, and we're building on that momentum with more recent launches of Fareway as well as several other local independent grocers. Our next growth engine is our enterprise platform. Retailers choose Instacart because of our purpose-built grocery technology across e-commerce, retail media, in-store and AI solutions. The breadth and depth of our platform is difficult to replicate and it delivers clear results. At the center of our enterprise platform is our storefront technology, which powers over 380 grocery e-comm sites.

Our flagship offering, Storefront Pro, supports partners like Costco, Publix and Sprouts, and continues to gain traction because it drives meaningful outcomes. On average, grocers who upgrade to Storefront Pro see an over 10 percentage point lift in online sales and a more than 5 percentage point lift in 90-day new user retention. A strong example of this is ALDI. In Q1, they launched a redesigned U.S. website and mobile app nationwide powered by Storefront Pro, another clear signal of how valuable our technology can be to large established retailers. We partnered with ALDI for a long time, starting with our marketplace and expanding into services like alcohol, EBT SNAP, flyers and the custom integration to bring their weekly finds online. Since 2019, we've also powered their online grocery delivery and their pickup experience through our fulfillment technology.

So their decision to double down on Storefront Pro and launch Carrot Ads is a clear example of our enterprise strategy in action. We're now extending that approach with our newest enterprise offering, AI solutions. As we build leading AI capabilities on our marketplace, we're bringing those same tools to retailers' owned and operated channels. We're already seeing strong engagement here, particularly with Cart Assistant, where we're working with partners like Kroger and Sprouts to bring these capabilities to life. And we've also recently signed additional partners, including Food Bazaar, Heritage Grocers, Restaurant Depot, Save Mart and Woodman's. All of this growth across marketplace and enterprise strengthens our advertising and data capabilities.

In Q1, we grew advertising and other revenue 16% year-over-year, our fastest growth rate since Q3 2023, driven by continued expansion and diversification across both sides of our ecosystem, where we're accelerating both supply and demand. On the supply side, we're expanding inventory and providing our best-in-class ads capabilities across more surfaces. This is driven by our healthy growing marketplace and our expanded network of over 310 Carrot Ads partners, where we recently launched new partners like ALDI, Dierbergs, Fareway and Jerry's Foods. On the demand side, we're seeing broad-based strength across over 9,000 brands advertising on our platform. This is supported by our focus on making it easier for brands to get started and scale.

New brands to our ecosystem can now launch high-performance campaigns in minutes with fully automated tools and our AI-powered recommendation engine in our self-service platform, Ads Manager, continues to gain traction. We're also using AI to enhance performance across our platform. For example, we recently launched a new generative recommendation system that can use real-time context to better understand the consumer's intent. Previously, adding milk to your cart might result in a recommendation to add cookies or cereal or sliced cheese. Now based on additional items in your cart like flour and eggs, we can better predict that you're actually shopping for baking essentials. This leads to more valuable suggestions like vanilla extract and cinnamon and early data shows that this is driving higher engagement and better results for advertisers.

Beyond advertising, we're also making progress on data monetization. Our off-platform partnerships where we allow brands to leverage our first-party data to make their campaigns more effective on platforms like Meta, The Trade Desk, TikTok and more, we're continuing to scale as we attract incremental budgets from ad partners. And our consumer insights portal, which aggregates real-time high-quality insights into consumer behavior, continues to attract new subscribers like Kraft Heinz, and drive deeper engagement with existing partners like Advantage Solutions. So when you step back, our growth engines are working the way we want them to, and we're carrying that momentum into Q2. We're also continuing to invest in longer-term growth opportunities. International is off to a strong start.

As you'll recall, we're taking an enterprise-led approach, partnering with retailers and scaling technologies that have already proven to solve retailers' needs. In Q1, we launched Storefront Pro with Costco in Spain and France. And while it's still early, consumer demand is encouraging and tracking ahead of our initial expectations. A few weeks ago, we acquired Instaleap, a strategic acquisition that aligns perfectly with our goal of bringing our grocery technology to a global audience. Instaleap has built a versatile fulfillment platform that can adapt to different market dynamics across regions. And just as importantly, they've built strong relationships with grocery retailers around the world, particularly in Europe and Latin America.

This is exactly how we want to expand internationally, focused, partner-led and grounded in existing capabilities that we know work. We're also seeing strong progress with our in-store technologies. Caper, our AI-powered smart cart, is now live in more than 100 cities, including recent expansions with Wakefern and Allegiance retailers. Customers are continuing to enjoy their Caper experience, which is driving higher baskets, new loyalty and omnichannel activations and early traction with our real-time inventory and aisle-aware advertising experiences.

Alongside Caper, solutions like FoodStorm and Carrot Tags are helping retailers modernize in-store operations and improve both efficiency and customer experience. When you put this all together with signals from our shopper network and deep retail integrations, we're developing a truly complete view of the omnichannel grocery experience. That's already starting to unlock new capabilities. For example, we've begun piloting Store View with partners like McKeevers, Sprouts and more, who are leveraging real-time computer vision to improve shelf availability and accuracy. Over time, we expect this to translate into additional benefits across our ecosystem, including better availability, better recommendations, more efficient fulfillment and more valuable advertising for retailers and brands.

Okay. Before I hand it to Emily, let me close where I started. Our strategy is working. Our marketplace, enterprise platform and advertising ecosystem are each getting stronger, and we're gaining momentum on longer-term growth initiatives that are built on our critical advantages. Together, this creates an increasingly powerful platform that positions us very well for durable, profitable growth. We're operating from a position of strength in a large underpenetrated category, and we're focused on extending our lead by continuing to drive value for our partners while growing the pie across the ecosystem.

With that, I'll turn it over to Emily to walk through the financials.

Thank you, Chris, and hello, everyone. We entered 2026 with strong momentum, and our Q1 results clearly demonstrate that our focus and investments across our key growth engines and new initiatives are working. Our performance continues to be supported by strong operating fundamentals with multiple levers in our P&L that allow us to balance growth and profitability in a disciplined way.

Now let me provide more color on our Q1 results. In Q1, GTV was $10.29 billion, up 13% year-over-year, primarily driven by orders of $91.2 million, up 10% year-over-year. As we expected, GTV growth outpaced order growth as we lapped the launch of our $10 minimum basket feature for Instacart+ members in Q1 2025. Average order value of $113 was up 3% year-over-year, reflecting the ongoing deepening of customer engagement across our platform and strong performance from club retailers, which tend to have larger AOVs. Transaction revenue was $733 million, up 13% year-over-year, representing 7.1% of GTV. Transaction revenue as a percent of GTV was flat on a year-over-year basis, driven by increased fulfillment efficiencies, largely offset by lower payment revenue.

As a reminder, because we manage multiple levers across our P&L, we expect transaction revenue as a percent of GTV may fluctuate from quarter-to-quarter. Advertising and other revenue was $286 million, up 16% year-over-year. As Chris noted, this was our strongest growth rate since Q3 2023, and helped drive our advertising and other investment rate to 2.8%, up from 2.7% in Q1 2025. This outperformance in Q1 was driven by broad-based strength. Large brands performed well, while mid-market and emerging brands leaned in particularly strongly to start the year. Total revenue was $1.02 billion, up 14% year-over-year, primarily driven by GTV growth. GAAP gross profit was $738 million, up 10% year-over-year, representing 7.2% of GTV compared to 7.4% in Q1 2025. The year-over-year decrease in GAAP gross profit as a percent of GTV was primarily driven by an increase in cost of revenue as payments to publishers scale with the expansion of Carrot Ads and off-platform partnerships.

As a reminder, we expect year-over-year growth in payments to publishers to moderate in 2026 compared to 2025. GAAP total operating expenses were $556 million, representing 5.4% of GTV, compared to 6.1% of GTV in Q1 2025. Adjusted total operating expenses, which exclude the impact of stock-based compensation expense and certain other expenses were $463 million and represented 4.5% of GTV compared to 4.9% of GTV in Q1 2025. The year-over-year improvement in both GAAP and adjusted total operating expenses were primarily driven by increased operating leverage across all line items. In particular, G&A benefited in Q1 from the repeal of Canada DST late in the quarter, which is not a benefit we expect moving forward now that this matter is resolved.

As a reminder, we continue to expect Q1 to be our lowest quarter of stock-based comp in a calendar year, followed by a sizable step-up in stock-based comp in Q2 due to the timing of our annual refresh grants. GAAP net income was $144 million, up 36% year-over-year. Adjusted EBITDA was $300 million, up 23% year-over-year. We also generated operating cash flow of $268 million and free cash flow of $253 million, both down 10% year-over-year, primarily due to the collection of a large accounts receivable balance from a retailer that benefited cash flow in Q1 2025 and the payment of $60 million in regulatory settlements made in Q1 2026.

In Q1, we repurchased $349 million of shares and ended the quarter with $323 million of remaining buyback capacity. We closed Q1 with approximately $880 million in cash and similar assets. While our balance sheet remains strong, and we expect to generate meaningful cash flow in 2026, we recently established a $500 million unsecured revolving credit facility to provide additional operating liquidity. Separately, today, we announced a $1 billion increase to our buyback authorization. We are well on track to return the majority of free cash flow via repurchases this year, and this increase will enable us to remain opportunistic in our buyback approach in 2026 and beyond.

Now on to our Q2 outlook. We anticipate GTV to range between $10.1 billion to $10.25 billion. This represents year-over-year growth between 11% to 13% with GTV expected to continue to outpace orders growth. We expect advertising and other revenues to grow 11% to 14% year-over-year, reflecting the ongoing benefits of diversification across both supply and demand on our platform, even as brands continue to navigate a dynamic macro environment.

We are also guiding to Q2 adjusted EBITDA of $290 million to $300 million, representing year-over-year growth of 11% to 15%. For the full year, we continue to expect adjusted EBITDA to grow faster than GTV while moderating in the rate of expansion as we reinvest to accelerate across our multiple growth engines and lap some of the more significant operating expense efficiencies realized in 2024 and 2025. Overall, we delivered strong Q1 results and are building on the momentum as we enter Q2. Our operating fundamentals are strong, and we're well positioned to continue driving long-term profitable growth and shareholder value.

With that, we'll open up the call for live questions. Operator, you may begin.

[Operator Instructions] Our first question comes from the line of Colin Sebastian of Baird.

Maybe just following up on the Q1 performance and the acceleration in overall revenue growth. If you look across the platform at the core products and the newer initiatives where you're making investments, maybe it would be helpful to break out -- break down that growth a bit in terms of what's driving the most incremental improvement in marketplace, enterprise and advertising, and how you see those factors playing out as we look ahead to Q2 and the balance of the year, particularly given some of the shifts in the macro and competitive environments?

Yes. Thanks, Colin, for the question. So look, we are happy with our growth results. As you heard, Q1 was another strong quarter of 13%. It was our ninth consecutive quarter of double-digit growth, and we surpassed $10 billion in quarterly GTV, which that was a milestone for us. And we do think that the consistency of our growth is an important indicator, and that's why I said our overall strategy is working. We're continuing to attract and engage more monthly customers because we're relentlessly focused on making our service better every quarter with constant improvements across the entire customer journey from when a customer opens the app to when they're building their basket to when they check out right through to when they get the delivery, the exact thing that they ordered. So that might sound simple, but again, at our scale, these improvements compound quickly.

And then at the same time, we're extending that experience and all of our technology across more surfaces with our strong enterprise momentum. We're now at over 380 storefront clients and our recent launches like Restaurant Depot as an example, and Cub from Q4, they're performing well. And in Q1, we're very proud that ALDI returned to Storefront Pro. And then across all of it, AI continues to meaningfully accelerate our progress.

It's allowing us to onboard retailers faster. It's allowing us to customize for retailers faster. It's allowing us to improve personalization for customers while also unlocking entirely new experiences, for example, with Cart Assistant, which, as I mentioned upfront, we're now testing with 25% of customers. Early feedback is encouraging, and that's only going to get better over time. So when you put it together, there's multiple engines driving our growth across the company. Our strategy is working. We're strengthening our core experiences. We're expanding our technology across more surfaces. And then AI is further accelerating our growth. So we feel really good about the fundamentals and how we're executing and our trajectory overall.

Our next question comes from the line of Eric Sheridan of Goldman Sachs.

Maybe 2, if I can. One, on the advertising side, what do you see as some of the most interesting growth opportunities that present in new mediums or new formats for advertising as you think over the next 12 to 18 months? And building on the answer on the enterprise side, would love to go a little bit deeper in the Instaleap acquisition and what you think that means for an international opportunity around enterprise in the years ahead?

Thanks for the question, Eric. I mean there's no question in our mind that the innovation around ads is going to come from AI and everything related to how AI can advance advertising mediums and platforms. For us, AI is completely core to our advertising efforts at this point, and we're using it in a few major ways. One is we're using it behind the scenes with ranking and relevance and personalization. We're making all of our sponsored ads more relevant with AI. We're driving stronger engagement and more items added to the cart. With advertising tools and efficiencies, we're making it easier for advertisers to manage and drive performance of campaigns, especially when it comes to emerging brands.

There have been multiple examples over the last few months, including our AI-powered recommendations for advertisers alongside a suite of bid and budget and category imagery recommendations. This is all fueled by AI. We also launched AI-powered landing pages for display campaigns. And then the third pillar here, and I think this is going to become increasingly relevant is AI with conversational commerce and agentic experiences. We're innovating here alongside the team that's building our agentic consumer experiences, and our ads are going to be informed by how consumers engage in agentic shopping. So our strategy is going to be to build trust and utility with consumers and leverage all of the learning across everything we know from online, but also in-store and our learnings from Caper Cart to incorporate that into the overall shopping experience there.

On Instaleap specifically, so look, we view Instaleap as an extremely strategic acquisition for us despite the relatively small size. It's fantastic tech. It's a really special team. This is a great example of our M&A philosophy in action. We look for technologies and capabilities that complement our existing platform and accelerate our growth in a disciplined way. And Instaleap is just a great combination of that. Their grocery technology is resonating with retailers around the world, and they have deep retailer relationships in markets that we want to pursue. And so that put them squarely in a sweet spot for us as a grocery tech company with global ambitions and a land-and-expand strategy on the enterprise side, where we can offer all of their current customers many more products with our existing services from our enterprise suite of products. So we're thrilled to have them as part of our team.

Our next question comes from the line of John Colantuoni of Jefferies.

Chris, last quarter, you mentioned aspiring to faster growth. As you look back at what you've accomplished in the first 4 months of the year, what needs to happen for you to realize that goal? And second, could you just talk a little bit about what drove the broad-based strength in the advertising business? I'm curious if this was more of an industry dynamic or more of a unique dynamic to Instacart?

Yes. Thanks for the question. You're right. We did say our ambition was to accelerate and we have been accelerating our growth. We're very happy to provide another double-digit guide of 11% to 13% for Q2. And although we don't guide beyond our current quarter, I can talk a little bit about why I'm confident in our ability to drive long-term durable growth. Our strategy is unique and differentiated. No one else is doing what we're doing. And we've built a model with multiple paths for growth that all reinforce each other. So our core experience, so that's across marketplace and enterprise, that continues to improve. And there's more runway to go because we're the category leader in a very large underpenetrated category.

And then our enterprise platform, in particular, which leverages all of our marketplace innovations, that continues to be a real strategic advantage with retailers. And the model is simple. We help enable retailers to grow and we grow with them. And we're now operating at considerable scale. As mentioned, 380 storefronts, and we believe that there's even more upside to land more retailers in North America and abroad, big and small and to expand with more products and services with our existing partners. And as we look forward to get to your question about the -- some of the newer initiatives, our foundation is allowing us to invest in many of these new initiatives.

We're taking our enterprise products to new international markets. That unlocks a much larger market opportunity for us. We're extending beyond e-commerce into omnichannel with in-store technologies like Caper Carts, like FoodStorm, Carrot Tags. And because we're already deeply embedded with retailers because of our enterprise platform, we're in a unique position to help power that shift. And then once again, AI is a real accelerant for us, helping us move faster across everything and power entirely new customer experiences, including AI solutions for retailers, which is just starting to get off the ground. So look, when I step back and I look at the total picture here, we have strong execution in the core business, and we're layering in new growth drivers that are going to expand our platform over time. And that's what gives me a very high degree of confidence in our ability to drive sustained long-term durable growth.

On your second part on ads, look, we're also really happy with the momentum on the ad side. As mentioned, Q1 was our strongest ads and other revenue growth since Q3 of 2023, and we feel great about the underlying fundamentals that are driving the business. So first of all, the fact that we're driving overall platform growth year-on-year does drive more advertising participation. But we're also seeing strength in our core on-platform offering, where we're continuing to innovate, that includes the sponsored products, which continues to be the main growth driver from a format perspective. And again, this quarter, strength came from all brand cohorts, so large accounts, mid-market accounts and emerging brands.

But maybe backing up, what you're seeing here is also a reflection of our plan in action. So our ambition is to build one of the largest and most effective ads ecosystem where brands come to us to drive performance across Instacart and multiple other surfaces. And our strategy to get there is working. We're laser-focused on building diversification across supply, meaning more surfaces where we place ads and demand, meaning more brands investing and current brands investing more. And to break that down, on the supply side, we're continuing to grow our Carrot Ads network where this is where we extend our reach and our tech and our demand on to retailer websites. We're now at 310 partners. We have a healthy pipeline. And remember that as we expand with Storefront Pro, those clients almost always enabled Carrot Ads. So our enterprise expansion also helps build our ads ecosystem. We recently signed partners, as I mentioned upfront, like ALDI and Dierbergs and Fareway and Jerry's.

On the demand side, we're seeing broad-based strength from over 9,000 brands that are advertising with us. Large brands performed well in Q1, but also, in particular, we saw strong engagement from mid-market and emerging brands. We've also been expanding our platform through partnerships with Meta and Google and TikTok and Pinterest and The Trade Desk. So this is where CPGs use their first-party data to target our high-intent audiences and then we provide them with measurements and performance on Instacart. And importantly, with this initiative, we believe we're gathering incremental budgets for these campaigns because we're tapping into existing digital ad spend. So at the highest level, on the ad side, our stated strategy of building one of the most powerful ads ecosystems is working, and you're seeing that show up in our results.

Our next question comes from the line of Ron Josey of Citi.

Chris, I wanted to ask just a little bit more on price parity here, just given it drives greater adoption and sales. And specifically, in your conversations with retailers and how they think about price parity, just talk to us about how they are approaching this as Instacart becomes more of a weekly and habit as opposed to just convenience overall. And then as you think about enterprise and Storefront Pro and the 10-point lift in online sales after launching Storefront, just talk to us about what's driving specifically adoption here? Is it just greater penetration of these retailers on the platform or greater sales? Any insights there would be helpful. So price parity and adoption of Storefront Pro.

Yes. Thanks for the question. So on price parity, just to be very clear, so retailers set item level prices on our marketplace and on our owned and operated sites, obviously. So some choose to mark up prices to help offset the fees that we charge the retailer, but many do offer price parity. That said, if I come at this from a bit of a consumer lens, customers are seeking value and the retailers on our platform who are delivering it are -- they're growing faster and they're retaining customers better over time on our platform. And so that -- the data is clear. Price parity retailers grow faster. They grow 10 percentage points faster. And so this gives the retailers an ability to drive incremental sales on Instacart, especially as they're competing with each other for share.

So that can be very critical to them in the long run. We're a very large platform now, and retailers are motivated to win share on Instacart. But it's also important because they don't want to lose share to other large digital players who are increasingly trying to win share of the grocery market. So that's where the conversation with retailers centers with us. It's -- if it's an incremental sales and share opportunity for them, the results in the -- that we're seeing over time are very clear. And so we work with them. We work with them on this, and we work with them, obviously, on a bulk of other affordability strategies to allow them to perform well with consumers who are looking for value on the platform.

Your second question was around enterprise and the adoption of enterprise. And what I'd say here is like, look, why do retailers use us? It's because we're able to extend all of the scale from our marketplace where we're doing hundreds of millions of orders, and we're able to offer that to them in a way that allows them to compete with some of the largest digital players with a very high-quality experience. And so if you look at what -- the fact that we're offering end-to-end technology right through from e-commerce, including search and all the relevancy and the personalization that we're continuing to offer, combined with our efficient cart and checkout and order orchestration right through to when it gets delivered to the customer's home, that's a very complex experience. It's difficult to get right.

And that's why when retailers are evaluating their options on how they want to perform and compete in the e-commerce sphere, they look to Instacart because we're able to give them that scale and leverage those learnings. We are seeing a 10% lift in performance, and that's because, again, because of the experience that we're driving on marketplace that we're able to extend onto their sites. And so what I'll say is we think that there's quite a bit of runway here. There's -- again, we're at 380 retailers overall. We're seeing performance on this side of the business for them and for us, and we're going to continue to lean into this as a strategic growth driver.

Our next question comes from the line of Shweta Khajuria of Wolfe Research.

Can you hear me?

Yes.

Okay. Can you please talk to the opportunity and/or risk with agentic? I mean you addressed that a little bit. I guess one of the questions we get is around the development of AI platforms where a consumer can order for delivery, a basket of items and then the AI platform chooses whether it is Instacart or DoorDash or Uber Eats, which platform is the best use case, potentially risking organic traffic. So could you please talk to how you view this and what your pushback is?

And the second question is, could you please talk to the order growth versus AOV? Anything in particular beyond the $10 minimum that we should think about?

Yes. Thank you for the question. As it relates to third-party platforms and AI platforms and how we think about that, our strategy here is pretty simple. We want to be wherever customers are while also maintaining control of the experience and maintaining control of our data. So -- and at the same time, I should mention that we're building the gold standard of agentic experiences using all of our proprietary data directly on Instacart and on our retailer partner side. So we want our direct agentic experiences to be the gold standard.

In terms of traction with some of these other platforms that we've chosen to integrate on like OpenAI and now Anthropic, it's still very early in engagement, but we are viewing this as an incremental demand channel in a very large, again, underpenetrated category. If we co-create the experience with these partners, these integrations will allow us to engage -- allow customers to engage with Instacart in new ways, and we believe it's going to help accelerate online grocery adoption over time. And if that happens as the leader in the online grocery category, we think we're going to win. And then again, we're very disciplined when it comes to things like data. We're staying disciplined when it comes to how we're surfacing that. And so we're doing that in a very controlled way to minimize any disintermediation risk and continue to have our proprietary data to be a strength of ours as we build the experience on our first party.

For the second part, I will turn it to Emily to talk about the orders growth.

Sure. Let me first speak to orders growth, and then I'll jump into AOV. So orders growth of 10%, as you noted, was a little bit of a step down from prior quarters. And this was largely in line with what we expected and communicated. And so in specifics, in Q1, the main dynamic, as you pointed out, was that we were lapping the full rollout on a year-over-year basis of the $10 minimum basket benefit that we had applied for Instacart+ members. So through the year in 2025, the $10 minimum really drove smaller incremental orders, and that was a meaningful driver of order frequency throughout 2025, in addition, obviously, to ongoing order growth. And so as a result of that, you're seeing GTV at this point grow faster than orders.

As we look ahead, we expect that to continue. We expect user growth to be the primary driver of order growth. And while frequency will continue to play a role, we do expect, as I said, user growth to be the primary driver. On AOV, similarly, this was, again, largely in line with what we had expected and communicated in prior quarters. If you look back at 2025, we consistently said that AOV, if you excluded the impact of restaurants, which launched in '24 and the $10 minimum basket benefit was actually continuing to increase year-over-year. And so what you're now seeing is that underlying strength coming through a bit more clearly as we lap the impact of $10 minimum and now 2 years into restaurants.

And so what I'd say on AOV is that there's a couple of things driving that underlying strength. One is the ongoing deepening of customer engagement across the platform. And that's because, of course, retained customers typically go on to shop more and spend more over time. We have continued strength in the weekly grocery shops. We have strong performance from club retailers who tend to have a bit higher AOVs. And we're also seeing high-value business customers shopping at some of our recent launches like Restaurant Depot. So really seeing some great trends in AOV across the board.

Our next question comes from the line of Josh Beck of Raymond James.

I wanted to go back to the Cart Assistant. It sounds like 25% of your customers are starting to see the functionality. What have been some of the early learnings? Has anything stood out with respect to conversion or basket size, ad monetization? We've heard some comments from others in the industry. So just kind of curious what you are seeing there. And then also on the search functionality, it sounds like there's an enhancement underway. Is it kind of moving from a more of a keyword index framework to maybe something a little more nuanced with LLM? Just kind of curious what's going on under the covers there.

Yes. Thanks for the question, Josh. So first of all, on Cart Assistant, again, we've been investing in this. It's still early. We're at 25% of our U.S. consumers who are being exposed. And the learnings were really what I described upfront, which was consumers are using it to save time and get additional value and get inspiration and drive discovery with things like recipes and meal planning. We're seeing consumers do product research through our Cart Assistant. And remember, when we're building these types of experiences, we're really trying to understand how consumers are going to engage with this longer term.

So of course, you can come to Instacart and you can engage with Cart Assistant as a digital agent to help you build a basket faster from the onset. But we're also looking at experiences throughout the customer journey where customers can interact with Cart Assistant a little bit more behind the scenes to help them with things like understanding if there's any gluten in their cart as an example. And so we're still studying a lot of the engagement data, and we're still learning. But from an impact perspective, what I will say is that, I mean, we do think AI overall is going to be a meaningful growth driver for the category over time. And at a high level, it's because what it does is it makes grocery shopping simpler and more intuitive.

And that should accelerate online adoption by driving better conversion and higher retention and larger baskets and more frequent ordering. And we think we are in a very unique position to bring all of that to life because of our proprietary data from our 1.6 billion lifetime orders and because we're operating an at-scale fulfillment network with shoppers in physical stores and because of our deep retailer integrations, for example, with inventory systems. No one else has this combination, and that's what's allowing us to move from more of a front-end AI experience to actually -- experience that will actually help you complete your order, and that's going to be very difficult to replicate.

On your second word around -- your second question around search. So search, in particular, helps customers find what they want faster and customers that search are 5x more likely to place their first order. Key to search is having rich data as well, right? We need to be able to access the catalog. It's not easy to do in grocery, and that's another reason why we see so much traction on the enterprise side of the business because search is a very nuanced example of something that takes years of data and millions of orders to get right? And that's really what we're seeing there. So we're going to continue to innovate. We want search to be as relevant as possible for consumers. We do think search helps consumers complete their basket faster, and we know that it drives that likelihood to place a first order. So we're going to continue to invest there.

Our next question comes from the line of Justin Patterson of KeyBanc.

Great. Could you talk about some of the guardrails you have around AI costs? We've seen a lot of companies taking different approaches to managing increased token consumption. So I'd love to hear about how you're thinking about that. And then separately, I'd also love to hear about how you're thinking about just advances in recommendation and ranking models benefiting both conversion rates over time and having applications to the ad side.

Sure. In terms of guardrails around AI costs, look, I think this is something that's evolving real time. So I think about 2025 as a point in time where we were more experimenting and seeing where we were seeing adoption and allowing people to try to adopt AI across their workflows and then, of course, across the consumer experience as well. So I think we're definitely monitoring this real time. And to the extent we're seeing either efficiencies in workflows, finding ways to offset those costs in other ways. As it relates to consumer experience, I'd say it's still early, but we are looking for metrics around ways to, again, offset those costs through things like better customer engagement, better conversion, et cetera. So I think it's still early, something we're monitoring and adapting to really quarter-by-quarter.

And to your second question about recommendations, as I mentioned upfront, we're using data and demand signals to invest to make recommendations as relevant as possible. And the major innovation here has again been around AI. And this is why I've talked about this both as a consumer experience element, but also a brand and advertising element because now you're able to do it across your content with semantic intelligence. So our view is that as we make recommendations more relevant, we're just going to help consumers to find what they're looking for and complete perfect orders. And we think that, that's going to help us on both the advertising side and just with overall consumer experience.

Our next question comes from the line of Nikhil Devnani of Bernstein.

I wanted to ask about enterprise. So you have several products now available to retailers. I guess when you step back at the aggregate level, how should we be thinking about the size of this business now in terms of contribution to revenue or GTV? And then also the economics of these orders as this product continues to grow and become a bigger portion of the mix of the business for Instacart, how do the economics stack up relative to your marketplace business?

Yes. Thanks, Nikhil, for the question. Why don't I take a step back and talk about how we think about the enterprise business and then Emily can dive a little bit deeper into the margin side of the question. So look, we do believe that enterprise is playing an overall highly strategic role with us with retailers and our ability to deliver for them, but also deliver the best customer experience across both enterprise and marketplace. To really emphasize why that is. First of all, enterprise enables these much deeper retailer relationships, and it gets us on the same side of the table where we're innovating with them. We're now doing -- we do short- and long-term planning. And these relationships often lead to these technical integrations that really only exist to make the experience better, which they do across their owned and operated sites and our marketplace.

And enterprise, of course, drives overall efficiency for us. We make very good use of our marketplace innovation by extending it to enterprise clients. And as a result, it lowers our cost to serve through shared infrastructure. It also allows us to reinvest even more in shared technology and capabilities that benefit everyone. And it also increases order volume and density, which also helps us on the cost side. As we've stated in the past, both enterprise and marketplace are growing, but the way that we think about enterprise is less as a stand-alone line item and more of a core part of how the overall platform compounds over time.

So Emily, do you want to expand on that?

Yes, sure. From an economic standpoint, I mean, first of all, we don't break out the specifics of economics in part because, as Chris spoke to, really all parts of our ecosystem work together. So for example, the fact that we have marketplace and enterprise benefits our fulfillment cost as just one example of how we think about scaling the 2 sides of our ecosystem. We -- what I would say is that both marketplace and enterprise generate profit positive dollars.

I'd say both are contributing to overall growth. And when we think about the specific economics, I'd also say that each retailer is really different. Our contracts retailer by retailer are bespoke. And that is because when we go to a retailer, we're working with them to figure out the right construct or constellation of different products and services and how they work together. And we're really looking holistically at that partnership to say, does this make sense from an economic standpoint for us, for them. And so it makes it difficult to disentangle any one part of our ecosystem.

And if I could just add a quick follow-up. So to what extent do you want to scale white label logistics for these partners internationally as you offer enterprise? And if that is a big part of the road map, I guess, how do you think about the investment required to do that in a new country with less of an existing infrastructure already?

Yes, I can take that. Thanks, Nikhil. Like look, we're very excited about our plan to take our tech and our enterprise tech to new markets for the first time. And we believe that, that is a very promising future growth lever for us. We, of course, have ambitious plans. But as that said, we're being very disciplined on how we approach it. That's why our strategy is an enterprise-led strategy. We're taking proven products like Storefront Pro and Caper Carts and FoodStorm to retailers who are facing the same challenges that we've already solved in North America. And that's what also gives us confidence in product market fit.

In other markets, retailers are telling us that there's a fit. And we're seeing encouraging signs. As I mentioned upfront, Costco Storefront Pro expansion in France and Spain is performing ahead of our initial expectations. So we're very excited about this. We're excited about our Instaleap acquisition as an accelerant for what we're trying to do internationally. But again, we're going to be very disciplined. We're taking our current products to new markets, which again gives us cost leverage. And yes, anything to add, Emily?

Yes. I think the only thing I'd add is that our focus really is on the technology layer. So if you think about Instaleap, it's about fulfillment tech, the orchestration layer, the great retailer relationships they bring to bear. As Chris mentioned, enterprise-led really focused on existing tech like SFP, FoodStorm and Caper. So the question was asked really, I think, with a focus on logistics. I think that is something that we can do internationally. I wouldn't say it's our priority. So we will obviously consider that on a case-by-case basis.

Our next question comes from the line of Jason Helfstein of Oppenheimer.

Maybe 2 quick ones. Can you give us your thoughts on the advertising outlook for the rest of the year? Obviously, this quarter was quite strong. And then just -- I don't think we've heard anything on Instacart+. Just any thoughts you want to share, increased -- is this an increased focus this year? And then any just concerns with lapping any of the credit card promotions around Instacart+?

Yes. Thanks for the question, Jason. I'll start on the ads side. So look, looking ahead on ads, we just provided another strong guide for Q2, 11% to 14% growth for ads and other. And although we don't provide specific quarterly guidance beyond that, we are confident in our ability to deliver our long-term targets on ads of 4% to 5% of GTV. And that's because at the highest level, we believe that we have the right strategy, we're executing against it, and we're successfully expanding our scale and reach towards our goal of being a leading ad ecosystem. And when we break that down into some of our core building blocks and components, we do see headroom across the ecosystem.

So starting in our core, we're continuing to innovate on platform. As mentioned in an earlier question, we're using AI innovation more than ever to provide tooling like our new AI-powered recommendations. We're using AI to drive more personalization and relevancy, which all translates to better performance for brands. And then we're taking that innovation and we're extending it on to our Carrot Ads networks, where we're at 310 partners and growing, and we have a healthy pipeline. And we're extending our ads innovation in-store with Caper Carts, which is still very early, but I firmly believe is going to be one of the most interesting advertising opportunities for brands in-store. And then we're monetizing our data in a couple of ways.

Off-platform, which we touched on, but again, we've built a strong foundation with all of the right partners. We're excited to scale that further and tap into incremental budgets and with our new data solutions like our consumer insights portal, where brands can access unique real-time data insights. So again, we're confident in our ability to scale ads and other over time. Of course, there's lots of puts and takes in the advertising business on a quarterly basis, but we firmly believe in our ability to hit our long-term targets.

On IC+, I wouldn't say it's an increased focus specifically. I think it's a continued focus for us. It has always been a key part of our overall strategy. And we are seeing paid IC+ members continue to grow. They are continuing to represent the majority of GTV and orders on the platform, and they also continue to be more engaged and retain better than nonmembers. And effectively, how we think about this is that it is -- that strength is really reflected in our overall fundamentals. So you remember last year, we talked about the fact that our MAU, we're seeing the best retention in a few years, right?

So you're seeing that in MAU growth and just in overall user engagement. So we're focused on continuing to drive overall value for the program, right? It's anchored in the $0 delivery minimum, which we lowered to $10 for grocery and $25 for restaurants. Obviously, things like Access New York Times Cooking and Peacock, and we're always evaluating new ways to drive value for members. In terms of lapping the benefits, I wouldn't say there's anything I would call out as it relates to lapping the IC+, but we, of course, continue to look for ways to drive increased value for our members.

Our next question comes from the line of Ken Gawrelski of Wells Fargo.

Could you talk about the factors impacting incremental margins in the 2Q guide? Obviously, some strong GTV growth guided to at the high end, but maybe a bit softer incremental margins. If you could talk about the factors. That's question one. Question two, please, maybe could you talk about the success you're having with partners working towards price parity? What are the continued challenges? What are the successes maybe you've had there? And how would you evaluate your progress?

Perfect. Okay. Thank you for the question. On the first one, look, I'll let Emily speak to some of the shorter-term kind of puts and takes between quarters. But at the highest level, as it relates to profitability, nothing's changed about our strategy. We're confident in our ability to hit our long-term targets of 4% to 5% of GTV. But let me share how we're thinking about investing in our business overall. So as a reminder, we are the category leader in a very early market with tons of upside. So yes, we're investing and we should be investing.

We're investing in our core where our fundamentals are strong. Our product keeps getting better, which means that we can acquire and retain customers more efficiently. And in many ways, we're still early in our journey when you think about some of our mid- to long-term growth areas like in-store technology, where the bulk of grocery transactions still happen, international markets where we're just getting started, although again, being very disciplined there and building leading-edge AI solutions.

And on all of these, we have high conviction that these investments are going to pay off over time because they're proven models like land and expand with enterprise, which is our international play. We have a right to win in these areas. We are investing in a very intentional way and in a very disciplined way so that we can continue to deliver profitable growth. And again, we feel good about our ability to hit our long-term targets of 4% to 5%. But in the meantime, we're going to continue to invest because we see so much opportunity in front of us, and we see attractive investment opportunities to drive growth.

Yes. Just to add a little bit of color specifically on Q1 and Q2. I don't think there's anything fundamental that's changed in the business from Q1 to Q2. And I think we've also been consistent with saying that we do expect the pace of margin expansion in 2026 to moderate versus 2025. So again, nothing new or different that we're seeing in terms of what's happening away or deeper inside the business. A couple of things I might call out as it relates to Q1 and Q2. So I did mention on the call earlier that Q1 benefited from the repeal of Canada's digital services tax. What happened there was it happened very late in the quarter.

So typically, we manage through surprises that come whether they're positive or negative, meaning we reinvest things that come to the upside or we manage around things to the downside. But what happened here is it was something we expected in Q2 and it ended up happening in the last couple of days of the quarter. And so we just didn't have time to reinvest at levels that we found attractive. And so that is something that doesn't recur in Q2. In fact, as I mentioned earlier, something we expected to happen in Q2 and got pulled forward into Q1.

The other thing I might call out is that Q2 of '25, we did see a step-up in transaction revenue as a percentage of GTV from 7.1% to 7.3%. And so again, when you're thinking about the year-over-year comparison, there's just going to be some differences in terms of how you look at Q1 versus Q2. And so generally speaking, that's why we really focus on overall annual improvement in EBITDA and EBITDA margin because in terms of operating the business, you may have just quarterly fluctuations. So I wouldn't think about anything truly different in Q2 that we're seeing relative to the last couple of quarters.

And to your question on price parity, look, the success that we've seen is a steady drumbeat of retailers moving towards price parity since we've really outlined this as a priority and an opportunity for retailers last year. So we saw Schnucks move to price parity last year, Heritage Grocers so far this year, Hy-Vee, Raley's, Fareway, several independent retailers. We're seeing that play out in their performance. Again, the data is very clear that retailers that market price parity see a 10 percentage point acceleration. They retain better.

The challenge, of course, being here that ultimately, retailers set pricing on the platform, it's up to them to make that investment and to kind of evaluate the short- and long-term return and the strategic nature of wanting to capture digital sales and share versus some of the retailers on our platform, but also some of the largest digital players that they're ultimately competing with. And so the challenge is really it's a retailer's decision whether or not to go to eliminate the markup and price parity to stores.

Our last question comes from the line of Andrew Boone of Citizens.

I just wanted to ask about Caper Carts. Chris, you mentioned the opportunity with in-store. Can you just flesh that out, talk about where you guys are in terms of scaling that and then expectations we should have going forward?

Sure. Thanks for the question. So first of all, at the highest level, we very much believe in the in-store opportunity for technology. E-commerce is at low double digits. So the vast majority of transactions will still happen in-store for the foreseeable future. And there is a massive opportunity to modernize and digitize that experience with seamless operations, advanced personalization, way finding, advertising to help customers in-store discover products, save money while they shop. On Caper, specifically, we're seeing great momentum with Caper. We're now live in more than 100 cities with over a dozen retail banners.

From a scale perspective, we're continuing to expand with Wakefern, where we're now live at about 20% of stores. We launched new pilots recently with Sprouts and Wegmans and Coles in Australia, where we've announced an upcoming pilot with Morrisons in the U.K. So I'm confident that Caper has runway ahead, strong product market fit with consumers and retailers. This is one of my main learnings. Customers love the experience of using the cart and retailers love it for the operational benefits and the potential to turn their in-store customers into omnichannel customers. And it's also driving higher basket sizes for retailers. So we're making traction on Caper. We're making traction with ads on Caper, and we think that it's a great mid- to long-term growth lever for us.

Thank you. This concludes the question-and-answer session. We'd like to thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Before we get started, I have to read the research disclosures, all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures appear on the Morgan Stanley public website. They are also available at www.morganstanley.com/researchdisclosures and at the registration desk.

Some of the statements made today by Instacart may be considered forward-looking. These statements involve a number of risks and uncertainties that could cause actual results to differ materially. Any forward-looking statements made today by the company are based on assumptions as of today. Instacart undertakes no obligation to update them. Please refer to Instacart's Form 10-K for a discussion of the risk factors that may impact actual results.

Chris may also reference certain non-GAAP financial metrics, and reconciliations are available on Instacart's Investor Relations website. The last part was unique. That was custom.

So well, nice to meet you in 3D. So you've been at the role now for about 9 months.

Yes, that's right.

You've been handling a lot of investor discussions, internal meetings, getting to know the company. As you sort of sit and sort of compare and contrast those, 2 questions. One, what has surprised you most or what you've learned about the company sort of going division by division? And then sort of like match that up with what do you think is the most misunderstood aspect of the company externally?

Yes. I think -- okay, so a couple of things. First of all, it hasn't been quite 9 months. It's been 6 months, I think, but I was appointed 9 months ago, and I've been effectively running the company, I would say that since then.

So starting on kind of the thing that surprised me the most, like the underlying strength of our business has really and the -- strength of our strategy has really been a pleasant surprise. Obviously, I've gone -- I went very deep on the strategy when I got the role. And I do think that people don't necessarily think about the strength of our business the way that we think about it internally. Most people just think about the fact that we are -- they think of us as a consumer marketplace when really we are so much more than just a consumer marketplace. We are the leading grocery technology company in North America, and we're continuing to extend our lead. And that's something that's very different and differentiated from what anybody else does. No one else is doing what we're doing. No one is building the type of integrations that we're building. And the market that we're going after is just enormous.

Obviously, the grocery TAM is there, but also as evidenced by the number of partners that we're working with. And the genius of our strategy is everything that we do, we're building a system that is reinforcing itself and is all connected to one another, which allows us to kind of invest in one area and then get the benefits platform-wide.

So let me tell you kind of what I mean by that. So obviously, we do have a large and growing marketplace. The marketplace is a very big part of our overall business. But we take all of the learning and the scale from that marketplace and we offer it to retailers in the form of an enterprise business. So that strengthens our enterprise business. And then our enterprise business, in turn, helps us on our marketplace because we have integrations with retailers and we have quality work streams and we have SLAs with the retailers. The enterprise business also gives us access to the ad surface area, powering retail media for retailers. It gives us access and a right to win on in-store with our Caper Cart. We have an in-store physical AI-powered cart.

If I take the Caper Cart as an example, the Caper Cart is operationally excellent. Retailers love it. It's also an ad surface. It's also going to help us strengthen the marketplace because it's collecting in-store signals. So those are just a couple of things that -- a couple of examples. But really, the point is that we are a grocery technology company that is leveraging our advantage across enterprise and marketplace to stay ahead of the pack. So that's a key strength area that I want to highlight.

From an unexpected surprise, unexpected challenge, I think you said. Like, look, I think the grocery category on its own is extremely complicated, and it presents a huge opportunity for us. Outside of the fact that the TAM is enormous and it's only 13% penetrated, it's actually a very attractive category because it's a recurring category. It's an essential category. It's habitual. That said, it's also an extremely complex category to get right because it's local, it's perishable, it's low margin. And I think a lot of other players think that they can come in and just win this category, but they can't because of the complexity. And all of that complexity is actually where our strength is.

We're very strong because we've already built the retailer integrations. We've built the density. We have all of the data. And so we can essentially power the intelligence layer in an AI world. And so all of the complexity of this category is the reason why our growth is sustainable, it's durable, and it's the reason why we think we can continue to extend our lead.

And that point on the complexity. So there's -- there are a lot of factors you're bringing together with the algorithms, the delivery people, matching everything so the orders on time are accurate. Maybe sort of walk us through what have been the biggest drivers of the recent acceleration in growth? And how do you think about what will sort of keep that faster growth durable throughout '26?

Yes. So the -- if I had to summarize what we're trying to achieve, our goal for 2026, it's accelerate, and we are accelerating to your point. So we just posted our best growth as a public company at 14% GTV growth last quarter. We just provided our best guidance as a public company, 11% to 13% for this quarter. And that's despite there's been tons of competitive headlines. There's been -- competitors have actually been building out. And that's because we're playing a fundamentally different game. And because we're in the lead, we're able to press our advantage across multiple priority areas and multiple dimensions on -- across our business.

So there's our marketplace, as an example, our core marketplace, we have -- we're investing to make sure that we grow that marketplace. In fact, we have been accelerating here, too. We accelerated every quarter through 2025. We view it as our job to provide the absolute best customer experience across all consumer -- all elements that the consumer cares about, including affordability. I've talked a lot about affordability and the importance of affordability since I've gotten this role. And one of the areas that we're tackling now is moving price parity to stores with retailers. At our last earnings call, we announced that Hy-Vee already this year has gone price parity. Raley's has gone price parity. We're about to go price parity with Fairway on both Storefront Pro and on the marketplace. We know this is important because retailers that are priced at price parity, they grow faster, they retain better.

But that's just the marketplace. Then we have the enterprise platform where we work with retailers to grow their business. And as they grow, we grow. And we just continue to scale this side of our business. We are up to 380 storefronts. So that's where we actually power the e-commerce storefront for the retailers. And we're also -- we also continue to expand our enterprise offerings with all of our existing client base. So as that client base grows, we sell them more products and services. So that's an important element.

And then the 2 other big priorities that we're leaning into is obviously advertising and continue to compound our ads and data advantage. We just continue to scale here, right, 9,000 brands. We are at 310 retailer sites that we power. We know that brands are looking for a partner that they trust to scale across multiple surfaces, a player that they trust on performance and measurement, and we are that partner. And then the final area that we're leaning into in a big way is obviously AI. We are -- our ambition is to build the absolute best agentic experiences and the best AI grocery assistant directly on Instacart. Of course, we're going to work with others like Gemini and OpenAI and others, but we want to build the best one there.

And then again, consistent with what I articulated upfront, we're going to take that to our retailers in the form of an enterprise product. So we're taking it to Sprouts and Kroger are the first retailers that have signed up to work with us on AI.

There's a lot of projects. You have a lot of different balls in the air items in the basket, I guess. Remind us just sort of what is the company's philosophy about sort of how much it chooses to invest, where it chooses to invest? What are sort of the analytics or the ROIC they're doing on the investments? And how do you sort of balance we want to invest versus flow through the profitability?

Yes. We have -- we operate under -- we have internal financial guardrails. And we -- obviously, because we're so early in this category, we look for every opportunity where we can get a return. The good thing is that the opportunity for us to invest in new areas is large for us. So for example, we're in the process of taking our tech internationally for the first time. And so we -- this is an investment that we're making, but we think it's a long-term growth lever for us because of the TAM that we can unlock. Europe has a larger grocery TAM than North America.

So this is -- I think this is a great example. We recently launched with Costco in Spain and France. We announced that we were going to start going internationally just when I took the role, and we've already entered countries. And so we evaluate opportunity by opportunity. Obviously, we have guardrails where we believe that the investment is a responsible investment. But because we have such a giant opportunity because we're in the lead and because this market is so big, we look for lots of opportunities to drive growth.

Maybe I'll double-click on the international part because I think there's a -- walk us through what you're investing in international. How are you building it out, asset-light, asset heavy? And sort of we're sitting here 1 year from now, what will be viewed as success with the international expansion?

Yes. So our approach to international is very much an enterprise-led strategy. So that means that we're going with our existing products. We're going with Storefront Pro. We're going with Caper. We're going with FoodStorm. I do think that our enterprise products are going to travel very well because grocery complexity is universal. We've been in the market. We've talked to partners in various other countries across Europe as an example, and they're trying to solve the exact same problems that we're trying to solve that retailers here in North America are trying to solve.

So we think our technology is going to really meet their needs. And what's amazing is many of the retailers in other markets in Europe, in particular, they don't -- they haven't built e-commerce capabilities or they have a site and the site is not transactable. And so as a result, many of these markets have really low grocery penetration, much lower than the U.S. And so when we look abroad and we look at the size of this opportunity, we think we have product market fit and the markets are ripe for us to go in and help drive online grocery penetration.

From a cost perspective, we think we can go internationally in a very cost-disciplined way because we're going with our existing tech stack. We're not building new products to go international because we're using Storefront Pro and Caper and FoodStorm. We're also, as part of our approach is we're going to -- geographically is we're going to target major markets where we can have an anchor partner similar to what we've just done with Costco, and we'll localize around that anchor partner for that market. So as you would expect, we have target markets across other large attractive markets. But if we start working with a major retailer in that market, we will localize there first. And so that's how we're going about international in a highly cost-disciplined way.

I will say that we were very happy to be partnering with Costco internationally because we've got such a deep interesting relationship with them. We've already been working with them. We've launched Storefront Pro in the U.S., and then we launched it in Canada as well. So this was a natural extension of that strategy. But that said, we are also pursuing net new retail partnerships in these markets. We're going to be looking for retailers that are trying to solve technology needs around grocery e-commerce, and we'll be pursuing them as part of this go-to-market. Success in a year would look like us continuing to build this out in a meaningful way with net new partners.

Got it. Okay. Let me ask one about competition. Your core business right now is really, really cranking at a high rate, your retention, your cohorts, your frequency, everything is going in the right direction. And yet there is this almost bogeyman out there where Amazon, Walmart, DoorDash, Uber, this litany of companies are all sort of getting bigger and bigger into grocery. And eventually, there's this view, well, one or all of those are going to be able to compete more aggressively against Instacart for the big weekly shop. That's going to be a problem for Instacart. What's your reaction to that? And sort of what gives you confidence in the durability of your growth even as these other players come in to go after your shoppers?

Yes, it's a great question. We don't obsess about competition internally because for a variety of reasons, but we do obviously watch it very closely. What I'll say is, you're right, large baskets are 75% of the market. That's where loyalty is built and that's where lifetime value is built, and that's where we are particularly strong. We're also strong in small baskets. It doesn't mean we're not strong in small baskets. We are -- in fact, we also convert small baskets to large baskets at faster rates than others.

But when I take a step back and I look at the overall landscape, obviously, the market is big enough for multiple players to win. But when I look at the specific offerings that are out there, most of them are geared towards small fill-in orders, I think probably incremental use cases versus the weekly shop. And if you look at Amazon as an example, which you raised, Amazon has a few thousand SKUs in their switching stations or their warehouses. It looks like they have 4- to 5-hour delivery windows. When you look at the data, it would suggest that their baskets are under $50. If you look at the restaurant delivery players and the traction that they're trying to make within grocery as well, when they launch a new retailer, they gain an initial amount of share because their share was 0, but then they start to plateau and their baskets stay small. And that's despite these partners being after this business for multiple years in the case of Amazon, multiple iterations.

And so none of this surprises me because smaller fill-in orders are much easier. The large weekly shop is what's extremely complex, and this is what we've cracked, and we've been at this for almost 14 years now. Our AOVs are over $100. And the reason is, is because we know what it takes to win in these baskets. And it requires deep selection. So we're at 2,200 retailers, but also 100,000 stores. And we also have 22 million unique items. You can get pretty much anything you want on Instacart in the grocery category. We've got -- we invest heavily in quality. Our perfect order fill rate was up another 5 points last quarter. We're very fast. So we deliver our on-demand orders, which are 75% of our orders. That's anyone who's clicked priority or the first available ETA. We're delivering those on average in 90 minutes. Now a lot of them are delivered in under 30 minutes. And we have these retailer integrations.

And I don't -- I really want to emphasize how important these integrations that we have with retailers are to the overall experience. And this is something, again, that none of our competitors have or are building out, right? We work with retailers to improve their owned and operated sites. Retailers like Kroger, where we power their deliveries on all of the Kroger properties, when we work with them to improve that experience, it's also improving marketplace. When we work with retailers on the depth of understanding the inventory and what's on shelf, we're also getting that benefit on our marketplace. So that -- these are things that really differentiate us in the experience. It's the reason why we have success in large baskets and others are struggling to break through, and it's durable and sustainable because others don't have those integrations and are not even pursuing them.

All right. Well, let's talk about agentic. I'm sure you have heard me. I know Emily has heard me explain my Utopian grocery dream of the Saturday morning grocery shopper that says, good morning, Brian. Here are the 30 things you and your family order. I found some new dip that goes well with your favorite chips. Here is a coupon for a new 2% milk. Do you need a more Topo Chico for the Super Bowl party you're throwing? And is the Monday morning delivery time what you want? And I will say, heck yes, this is amazing.

How far away are we from that? Is that something that is 12 months away, 24 months away? And sort of what are the most challenging parts of getting that right on Instacart?

Yes. I think our imagination is being validated in real time with what's going to be possible from a consumer perspective. I think let me tell you how we're approaching this agentic space and how we're navigating our own strategy versus the strategy of partnering with others. Our goal is to build the absolute best agentic experiences and AI experiences directly on Instacart. And we do think because everything -- all of the examples that you just used requires data and it requires intelligence and it needs to understand you. We think we're going to be in the right position to be able to build the absolute best experience because of the data.

Grocery complexity exists even in an agentic world. And so it requires you to understand millions of items, local preferences. There's dietary preferences, budgetary preferences perhaps, in-store intelligence. And so our objective is to use all of the data that we've amassed from the 1.6 million orders that we've done to date and build the absolute best intelligent assistance so we can do exactly what you described. That's our objective. So that when you come on, we will know what you typically buy, but we'll also know what you intended to buy. We will combine that with all of the data signals that we get from in-store, like what is in stock, what's on promotion. It will build in your preferences, for example, again, your specific diets and your specific dietary preferences.

So with all of that, we do think that we're going to be successful building the gold standard of agentic experiences directly on Instacart. The way we're going about that is from an experience standpoint is we're going to build the AI assistant. So when you go to Instacart, you're going to be able to prompt an agent directly on all of the things that you're hoping to kind of achieve in your shop as you build and refine and optimize your basket. But we're also just going to build agentic experiences throughout the consumer experience.

So to give you an example, if you don't want to come to Instacart and engage in an agent directly, what you could do is you could just fill your cart normally and then ask it questions throughout and have it optimize your grocery basket throughout. So at the end of the shop, you could say, is there any gluten in my basket or how much sodium is in my basket? Or are there other alternatives from a sale or price perspective? And so we're going to build those experiences. And then we want to, again, extend all of the innovation and technology out to our retail partners in the form of an enterprise product, which we're doing now. And we believe by getting this right, Instacart will still be the primary destination for these types of experiences that you described. People will come to Instacart for their weekly shop because the agentic experiences will be the best.

Now when you take a step back, a giant step back and you say, okay, well, the landscape is broader than just Instacart and obviously, there's these AI platforms. The way we think about this is we want to be wherever consumers shop. And we want to be the grocery intelligence layer and the grocery technology layer on those surfaces. But we want to work with those platforms to help shape the experience versus just react to it. So we're operating under a series of principles. One of those principles is we want to co-create the grocery experience. And in our partnerships with these AI platforms, we're able to do that because we are the experts in grocery. We understand the grocery journey. but we also have the intelligence layer and all of the data. So we're able to do that.

The other thing that we want to do is protect that data because for obvious reasons to be able to control the experience in the future. So we're surfacing our data to these platforms in an extremely controlled way. But the goal here is to make Instacart discoverable on these surfaces and when they discover us, have that experience be amazing. So regardless of how you come into Instacart, you're having a quality agentic experience. And right now, the referral volume that we're getting from these platforms is still really small, and we're not seeing any material changes from a consumer perspective on how they engage with Instacart.

But what I'm actually hopeful for is that this is going to help us drive incremental users and incremental use cases because, again, coming back to your example, there are so many use cases where if you're conversing with one of these platforms, you might just want to order a couple of ingredients for dinner or fill in order. And if that grows the online grocery category, that is a huge win for Instacart because, again, remember, $1.2 trillion market, 13% penetrated behind almost every other retail category, there's so much upside. So if we're discoverable on these surfaces and we have a good experience and they're driving incremental use cases, that's more e-commerce sales. That's good for us, both on our marketplace and for all of the partners that we power.

Let me go back to the on-platform agent, though. Just that -- so we understand the biggest challenge, like the hurdle to build that agent. Is it compute capacity? Is it just sort of engineers need to build it out, you have the capacity? Is it getting the couriers? Is it supply? Like what's sort of the hardest part that needs to be completed?

I think the most challenging part of all of it is having all of the data signals, and we do have that. So at this point, it's just a matter of making sure that we launch with the absolute best experience. We're not in a hurry to be the first one out of the gate. We want to be the best one out of the gate. And really, the challenge -- the reason why others will struggle where we will succeed is because of the intelligence layer that's reinforced with the physical signals.

You have to remember that we're a logistics company. We're a software company, we're a service company. We're also in-store, we're a logistics company. We gather all of these signals from in stores. We know when something can be delivered. We know when something is going to be in stock. So it's stitching all of those data layers together in order to build an agent that could do anything through refining and building the grocery cart.

I think you're quite important to some of these early horizontal agents. When we think about sort of these horizontal agents that are trying to be built out ad dollars or commissions are going to follow wallets, consumer spend. Grocery and CPG is the largest bucket of offline spend remaining. I actually think sometimes if they don't capture food, there could be a problem with their long-term monetization algorithm. You don't search for carrots the same way you do running shoes as one example.

So as you structure these deals and sort of let them have you on the platform to enable grocery behavior, how are you sort of ensuring that you have safeguards in place so that you can still win those customers, bring them back as direct Instacart customers. You don't sort of get disintermediated by an agent that wedges itself between you and them?

Yes. Again, I think we're viewing these other agents as lead gen in incremental sales. And by basically controlling the data that we're surfacing, they're sending us the query and then we're basically supplying the answers to that query. It's always going to be a good use case and a great base use case, but the best use case is going to be on our platform where we have all of that additional data where you can in real time interact with the agent.

I think when you talk about from a brand perspective, I think there's going to be lots of opportunities for us to work with brands in this world for a couple of reasons. One is because we're maintaining ball control of the agentic experience directly on Instacart, we're going to be able to work the consumer angle with the kind of media and ad angle in parallel. So we're going to -- we actually are working those road maps in tandem so that we're able to appeal to CPGs. And we have a lot of experience and I think a right to win with CPGs in the way that we go about this because, again, they're bought into our performance. We have a history of delivering ad formats that really move the needle for our brand partners.

And the other thing is we're very strong from a relevancy standpoint. Our underlying data models help us with the relevancy of what we're putting in front of consumers. And with that, the digital shelf will change. What we're showing to consumers will change over time because it will be tailored to each individual person. Once we have that relevant shelf in front of consumers, we're going to be completely indispensable to consumers, but brands are also going to want to be part of that digital shelf.

So we have ongoing ideas on how to engage with CPGs on how to drive their products and drive discovery for their products and throughput for their products on our platform. I'll tell you, every conversation I have with the CPG over the last 6 months has been how do we think about the future here, and this is how we think about it.

Yes. The ad business is doing very well. It grew 10% last quarter. You added thousands of brands and different advertisers to the platform. As you sort of think about 2026, what are the key areas you're investing in, in the advertising business this year other than agentic to sort of continue to get not only new advertisers, but also scale that spend per advertiser this year?

Yes. So you're right. We're very pleased with our ad results. So we had 10% in Q4 adds and other growth, and we just guided to 11% to 14% in Q1. That's on top of 14% comp from the prior year for Q1. And look, I think this is a reflection of a strategy that we've been building out that's working. We want to be -- we want to build the best and most complete ads ecosystem for CPGs. And that's working. That's driving really healthy diversification from -- on an advertising basis across supply and demand. And what I mean by that is on supply. So obviously, we have our growing marketplace. We have 2,200 retailers. So when an advertiser comes to us, they get access to a large growing marketplace with lots of retailers.

But we're also now rolling up and powering all of these retailer sites, 310, what we call Carrot Ad sites, where we're extending our tech and our demand on other services. Brands love that we're doing that because it saves them from having to work with individual retail media networks. They can come to us, they trust our performance, and we scale there. We've also started to scale on the actual physical Caper cards, the cards that we have in store. So all of this incremental supply, all of these surfaces allows us to attract an influx of demand, that and all of the AI tools, which I won't touch on, but are an important part of that equation as well.

So with that, we just continue to attract more brands. So we're up to 9,000 brands versus 7,000 brands the year before. And we're attracting more and larger budgets because we're using those budgets across a larger surface area that's performance. And so that is -- that strategy, that underlying strategy is one of the reasons that we're successful in driving growth. And that's all on platform, what we would consider on platform. That's growing -- that's driving the bulk of our growth, but we're also now expanding off-platform. So what I mean by that is brands can come to us and they can use our first-party data to plan their campaigns on search and social. We've struck partnerships with Pinterest and TikTok and Google and Meta and others. And that allows them to use our high-intent audiences. They can refer that traffic back to Instacart. They can get closed-loop measurement. So it's highly strategic.

And one of the things I want to address here because we've gotten it a couple of times over the last couple of days is, yes, some of our off-platform ad spend comes with a higher cost of revenue. We know that, but that's very intentional because what we're realizing is that the ad spend for off-platform is incremental because it's coming from search budgets and social budgets, it's coming from a broader digital budget. So we're actually driving incremental profit dollars through this strategy, which is working. So what you're seeing, the results that we're driving from an ads perspective is the strategy, the ecosystem strategy working for us. And it's why we believe that we're going to be able to hit our long-term targets of 4% to 5% of GTV.

Got it. Great. Let's talk about how you're using Gen AI sort of internally to drive more productivity. You've talked about 40% increases in output per engineer, 4x faster on some projects or the software being developed faster. As you think about this year, how do you think about further Gen AI savings down the P&L to either reinvest or let flow through to shareholders?

Yes. Well, I mean, this is not a unique to Instacart observation, but it's remarkable what's happening here. And that stat that you referenced, the 40% higher output per engineer, that was a stat from 2025. What's even more remarkable is that 10% of our engineers, our output has increased double that at 80%, and that just continues momentum into 2026. The 4x faster software projects, that's where we have an entire team using AI. So if we start a project where every kind of pillar within the project is using AI, we can complete that project 4x faster versus individual engineers using it.

So the velocity of what we can achieve here, it's not incremental. It's quite transformative, and we're leaning into this in many ways. So just to give you a few examples of how we're using it internally to kind of to layer on all of the productivity gains with some of our critical advantages as a business to move faster is we're using it on our core marketplace to improve order quality and fulfillment efficiency. We're constantly running experiments on Instacart, as you would expect. We can run these experiments faster. We can measure the experiments faster. We're onboarding retailers faster than we have before. But this -- the velocity of our retail launches on the enterprise side has accelerated. Last year, we did 70 versus just 30 the year before. We can launch them faster and we can launch them with more features.

It's not -- in the past where we might have done an MVP, we stood up the site. Now we can give retailers more of what they're looking for out of the gate, more white glove service. It's helping us go international. the difference between going in international now that we're starting this build-out this year versus even 12 months ago, it's going to be remarkable about how fast we can actually move on the tech side. So basically, the way that we're viewing this is we're leaning into agentic AI across the entire company, across all functions, and we're accelerating our momentum in all of these areas.

4x faster. sounds very encouraging, but when I can see my grocery shopping agent because if it's 4x faster, it should be years. So I'm optimistic I'll be able to order my Topo Chico automatically over the next 12 months. Talk to us about the capital allocation and sort of the share repurchase program. You've been pretty my word, aggressive in buying back the stock over the course of the last year or so. So just philosophically, how do you think about capital returns in the right amount?

Yes. So our strategy from a capital allocation perspective is, one, the first thing that we always look to do is reinvest in the business to drive momentum. This comes back to the fact that we are the leader in a growing market that's still early. The most responsible thing for us to do is look for every opportunity to invest in the business, and that's what we do.

Our second priority is then to save some firepower for M&A. We've had some successful M&A. Last year, we bought a company called Wynshop, which is a grocery technology company. In the past, we purchased Caper, FoodStorm, which is a catering company. We bought a company called Rosie, which provides retail tools for small independent retailers. This has been something that we've done well in the past, and we want to save firepower to be able to do that going forward.

And then the third strategy is we want to opportunistically buy back our own shares, which you saw happen last year. We bought $1.4 billion worth of our own stock back in 2025, and much of that was concentrated in Q4. So in Q4, as our business accelerated, we bought back $1.1 billion worth of our own shares. And so we expect to continue to do that on an opportunistic basis going forward. We always approach that as an opportunistic approach.

Great. All right. Just one more. If we sort of -- there's always this discussion about large baskets, small baskets, where are you better positioned, more challenged over the long term? How do you think about 3 to 4 years from now, does large basket, small basket matter? Or are you just sort of we're going to go after all of it?

Yes. We look at this data quite frequently. We're not -- I don't see a shift between large baskets and small. What I see is incremental use cases coming in for small baskets. And because the category is so early, I think lots of small basket use cases are going to pop up as consumers get more comfortable with ordering online for their grocery needs, which is, again, lagged over time.

The large basket, the idea that a consumer is going to place their grocery order for the week, I think that's a durable habit. I think it's been like that for 50-plus years, and I think that it's going to continue to be like that. We see the spikes when consumers should -- like Sunday, as an example, is a big day for us. We can see that families are placing their grocery order for the week, and we expect that to continue.

All right. Well, anxious to see what happens over the next 12 months. Hopefully, I'll have my agent ready to go.

Awesome. Thank you so much.

Thank you.

Good day, and thank you for standing by. Welcome to the Instacart Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, the Vice President of Investor Relations, Rebecca Yoshiyama. Please go ahead.

Thank you, Carmen, and welcome, everyone, to Instacart's Fourth Quarter and Full Year 2025 Earnings Call. On the call with me today are Chris Rogers, our Chief Executive Officer; and Emily Reuter, our Chief Financial Officer. Before we dive in, I want to provide an update on our approach to earnings communications. Beginning with Q1 2026, we will not publish a quarterly shareholder letter and instead, we will move to an annual shareholder letter.

We believe this approach allows us to better reflect the long-term nature of our strategy, step back to assess our progress more holistically and focus on the sustained value we're building. We plan to continue to provide regular updates through our quarterly earnings call. A detailed earnings press release and supplemental materials. Now on to today's call. We will make forward-looking statements related to our business plan and strategy, developments in the grocery industry and our future performance and prospects including our expectations regarding our financial results.

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.

Thanks, Rebecca. Hello, everyone. I hope you've all had a chance to read my annual shareholder letter. I am incredibly proud of what we delivered in Q4. We closed out the year with our strongest GTV growth in 3 years ads and other revenue grew 10% year-over-year. And based on our strong conviction in how the business is performing, we repurchased $1.1 billion worth of shares in Q4 alone. Looking ahead in Q1, we're guiding to the strongest year-over-year GTV growth we've ever provided as a public company, and we're doing it while continuing to expand profitability.

The performance gives us confidence not just in the quarter ahead, but in our ability to drive durable, profitable growth over the long term. It's clear that we have real momentum. And today, I want to focus on what's driving that. It starts with the category that we operate in. Grocery is massive, still early in its online journey highly fragmented in 1 of the most operationally complex categories in all of retail. Those dynamics have historically slowed online adoption, but they're also exactly why our differentiation matters and why we're continuing to extend our lead.

Because we stayed relentlessly focused on grocery, we have purpose-built technology, deep retailer integrations and ongoing systems designed specifically to handle that complexity at scale. Just as important, these systems work together. So our advantage is compound with every order we fulfill, which is now up to more than 1.6 billion lifetime orders. That's why, as I said in the letter, we're now in a position to press our advantage. Our strategy is clear, be the platform consumers trust for all of their grocery needs, provide the technology grocers rely on to power their omnichannel business and be the advertising ecosystem brands prefer on Instacart and across many other services. And with generative AI accelerating execution across our platform, we are increasing our velocity, compounding our advantages and driving greater efficiency, all while strengthening the value of our first-party data.

Our momentum is showing up across multiple engines for growth, starting with marketplace. Today, more than 2,200 retail banners spanning nearly 100,000 locations are accessible on the Instacart app or instacart.com. As we've expanded selection, we continue to raise the bar on convenience, quality and affordability. And because our marketplace fundamentals are strong, we're able to reinvest in marketing and incentives efficiently, driving even more growth in operating leverage.

Enterprise is our next growth engine. Enterprise is not just another channel for us. It's how we build deeper, more durable partnerships with retailers. This includes custom integrations, shared planning and road maps, joint OKRs so that we're aligned on what success looks like with real mutual upside. And today, we now power more than 380 grocery e-commerce sites, and we see a lot of runway ahead, both to launch with new partners and to expand with existing partners as they adopt more of our solutions.

Costco is a great example of how this progression works. We started with our marketplace and storefront experience, building trust and driving growth and from there, we upgraded Costco to Storefront Pro Costco business centers and launch additional fulfillment options like priority delivery. More recently, we worked together to launch a benefit for Costco executive members who are their most valuable customer segment, and we expanded internationally with the launch of Costco's first-ever same-day site in France and Spain.

Spreads is another strong example. We began by launching e-commerce on our marketplace and by building a storefront on sprouts.com. From there, we expanded fulfillment with curbside pickup, where we put our picking technology directly in the hands of Spreads associates. As the partnership deepens spreads upgraded the storefront Pro with Karada unlocking new incremental revenue streams. Today, we're leaning in even further together with in-store experiences like Caper Cart and Food Storm, and we're now getting ready to launch AI solutions starting with Cartesian. And these examples are not isolated cases. We see this again and again. partnerships start with e-commerce capabilities, they expand through fulfillment and ad monetization and they deepen with in-store and AI capabilities over time.

Each step helps retailers accelerate growth and allows us to participate in that growth as well. In addition, Enterprise unlocks system-wide value for us in the same way that marketplace learning drives enterprise innovation, enterprise also makes our entire platform better. We can start with whatever our retailer needs and we can build from there. And as our partnership deepens, consumers get a better experience. They engage more, they place more orders. And that scale lowers our cost to serve and improve efficiency across marketplace and enterprise allowing us to invest even more in the shared technology that powers the entire platform.

This is why our enterprise platform is a growth engine and why I'm so confident that we have multiple years of profitable growth ahead of us. Our growth and momentum across Marketplace and Enterprise also strengthens another part of our business, our ad ecosystem and our data solutions. Brands and agencies want strong performance and they want measurements that they can trust at scale and that's exactly what we deliver. In addition to ads on Marketplace, we've expanded our advertising technology and demand to more than 310 retailer-owned sites through caradads, up from 220 a year ago.

As our reach has grown, we've pulled in more demand. In Q4, more than 9,000 brands advertised on Instacart, up from 7,000 last year. And this diversification makes our ads ecosystem stronger and more resilience. We're also starting to unlock advertising inside physical stores through shoppable display ads on Caper Carts. Early engagement has been encouraging. For example, a simple got everything you need prompt is driving a nearly 1 percentage point lift in basket size on average. And this is just one data point that reinforces our belief that Caper will be one of the most powerful in-store advertising platforms over time. We're also investing in incremental advertising and other revenue opportunities built on our first-party data.

For example, with our off-platform partnerships, where we can help brands reach consumers beyond Instacart, whether that's through search, social, recipe or video and in many cases, connect that activity back to real purchases on our platform. We're also creating additional ways to monetize our data, including with the consumer insights portal, which now has a dozen paid subscribers in just a few months.

Finally, I want to spend a few minutes on AI because it's no longer about just about making teams faster or more productive. We're seeing fundamental shifts in how work gets done and how platforms create advantage. AI shifts may pose a risk to certain businesses, but we believe these shifts favor platforms like Instacart, that combine technology with real-world operations and unique data at scale. This is where we win and why we think we will excel and be a net gainer in an AI-driven world. Grocery isn't a digital-only problem. It's physical. It's operational. It's relationship-driven, and we operate at that intersection with deep retailer integrations and experienced shopper network and a constant presence inside stores.

That operating model gives us one of the richest grocery data sets in the world. For example, our orders on average, include at least one replacement. That means we don't just understand what people buy we know what they intended to buy and what's acceptable when that item isn't available. And those insights can only be earned by having a network of shoppers inside stores, solving real-world inventory problems at scale. Put simply, our physical operations make our data better, and that data makes our technology smarter, more unique and more effective, exactly what's required to succeed in a category as complex as grocery, and it underscores why we win as the leading grocery technology partner for the industry.

Internally, we're also leveraging AI to accelerate our execution. Over the last year, we invested heavily in connecting our tools, data and infrastructure. So AI can operate across our systems, not in silos. As a result, our teams are using AI not just to move faster on a single workflow, but to solve broader problems and execute across multiple initiatives in parallel.

You can see the impact in how we're executing. Over the past year, average output for engineer is up nearly 40%, which includes 10% of our team increasing output by 80%. This momentum is already accelerating into 2026. And for new projects, we believe AI is now enabling us to build production grade software more than 4x faster than before. And we're doing all of this while improving quality. System reliability is up even as engineering throughput has increased significantly. That's not incremental improvement. It's a fundamentally different pace of execution, and it's fueling momentum across our business.

For example, on our enterprise platform, we're onboarding more retailers faster while delivering more customized white glove solutions at scale, which was not possible before. You can also see it in the breadth of what we're delivering from improvements in quality and fulfillment efficiency to new customer experiences like our SmartShop technology to our white label AI assistant, known as cart assistant, to building physical AI capabilities in-store with Caper Carts and store view and to expanding retailers' e-commerce capabilities internationally.

And then on ads, AI is powering more relevant consumer interactions and simpler, more efficient tools for advertisers. It's fair to say that we are using AI across the board to accelerate and improve all aspects of our business. Overall, 2025 was a defining year for Instacart. More than 26 million customers trusted Instacart and engagement continues to deepen with approximately 10 million customers placing at least 1 order in December alone, a new high for the company. That's a clear signal that our strategy is working, our operating fundamentals are strong. Our teams are executing at a high level across our growth engines, and we're well positioned to be the clear winner with AI. And as we look ahead to 2026, my mindset is clear. This is the moment for us to accelerate. It's time to press our advantage, extend our lead, further scale our platform and unlock new opportunities to drive long-term profitable growth.

We're still early in the omnichannel transformation of grocery. Instacart's earned the right to lead it, and I'm determined to make that happen. With that, I'll turn it over to Emily to walk through the financials.

Thank you, Chris, and hello, everyone. Our business is operating with tremendous momentum across multiple growth engines powered by a strong operating foundation and Instacart's distinct advantages. That foundation and the large underpenetrated market ahead of us is exactly why we're continuing to invest across a balanced portfolio of short-, medium- and long-term growth initiatives to extend our category leadership.

We're doing this with discipline, guided by clear guardrails, return expectations and deliberate trade-offs across investments. And we continue to drive efficiency and leverage across the P&L. We've been consistent with this approach and it's working. Over the past few years, we've accelerated GTV growth while expanding adjusted EBITDA. That track record gives us confidence in our strategy and our ability to deliver even more profitable growth over the long term. Now let's dive into our Q4 results.

We ended the year with momentum. GTV was $9.85 billion, up 14% year-over-year, marking our strongest growth in 3 years. This performance was driven by orders reaching $89.5 million, up 16% year-over-year. And as we expected, average order value decreasing by 1% year-over-year, reflecting growth in restaurant orders. Transaction revenue grew 13% year-over-year and represented 7.1% of GTV, which was flat year-over-year. This was driven by investments into affordability to drive customer engagement, largely offset by increased fulfillment efficiencies.

As a reminder, we manage multiple levers across our P&L, so transaction revenue may fluctuate quarter-to-quarter as we intentionally reinvest in growth. Advertising and other revenue grew 10% year-over-year, reflecting our strong GTV performance or onboarding of more carrot ads partners throughout the year, diversification across more than 9,000 active brand partners and the extension of our data advantage through off-platform partnerships and new data solutions. This momentum helped Q4 advertising and other revenue outperformed our expectations even as certain large brand partners continue to navigate macro uncertainty in their businesses.

Some of our advertising and other revenue growth is also driving higher payments to publishers, which includes what we pay certain Carrot Ads partners for the benefit of advertising on their sites and incremental ad budgets that we optimize and deploy on behalf of brands on certain off-platform partnerships. While this shows up as higher cost of revenue, it's intentional and incremental growth by design. That's because these initiatives deepen our relationships with brands, unlock additional ad budgets and strengthen the broader platform by delivering value to retailers and consumers.

While payments to publishers scale throughout 2025, we expect its year-over-year growth to moderate in 2026. In Q4, we also continued to demonstrate financial discipline and operating leverage. GAAP net income was $81 million, down 46% year-over-year. This decline was primarily due to higher G&A expenses related to nonrecurring legal and regulatory matters, including a $60 million settlement with the FTC.

Absent these nonrecurring expenses, Q4 GAAP net income would have increased year-over-year. Adjusted EBITDA grew 20% year-over-year to $303 million. We also generated operating cash flow of $184 million, up 20% year-over-year. Because of our confidence in the strength of our business today and in our ability to keep investing, scaling and pressing our advantage, we opportunistically repurchased $1.4 billion of shares in 2025. This included $1.1 billion of repurchases in Q4 alone, which included our $250 million accelerated share repurchase program.

We ended 2025 with approximately $1 billion in cash and similar assets and $671 million of remaining buyback capacity. Now on to our Q1 outlook. We're encouraged by the momentum we're seeing across the business and are starting the year from a position of strength. We anticipate GTV to range between $10.25 billion to $10.275 billion. This represents year-over-year growth between 11% to 13%, with GTV growth expected to outpace orders growth as we lap the full launch of our $10 minimum basket feature for Instacart Plus members in the prior year quarter.

We expect advertising and other revenue to grow 11% to 14% year-over-year reflecting the ongoing benefits of diversification across supply and demand across our platform, in addition to a positive start to the year across large, mid-market and emerging brands. We are also guiding to Q1 adjusted EBITDA of $280 million to $290 million, up year-over-year by 15% to 19% and down quarter-over-quarter, primarily due to advertising seasonality.

As we look ahead to fiscal 2026, we remain committed to steady annual adjusted EBITDA year-over-year growth at a rate that outpaces GTV growth. Similar to prior years, we expect this rate of expansion to moderate year-over-year as we reinvest to accelerate across our multiple growth engines and lap some of the more significant operating expense efficiencies realized in 2024 and 2025. Overall, we finished 2025 strong and are off to a great start in 2026. Our momentum is building, and we have multiple engines for growth and levers in our P&L to drive durable, long-term profitable growth and accelerate omnichannel grocery adoption for the industry.

With that, we'll open up the call for live questions. Operator, you may begin.

[Operator Instructions] Our first question comes from Douglas Anmuth with JPMorgan.

You discussed in the letter how grocers come to you for technology and not just as a demand channel. How should we think about the scope of the opportunity here in terms of both marketplace as well as enterprise adoption? And how do you think about kind of the addition of new retailers versus deeper penetration with existing

Yes, that's a great question. Thank you, Doug. I'll explain how we think about these -- the marketplace and enterprise side of our business. And I'll start by saying both of those have been growing and both are healthy. We do see enterprise as a real strategic advantage and also, in my view, a very underappreciated side of our business. And I know I made many of these points upfront, but I want to reiterate why enterprise is such an important part of our growth story here. It's, first and foremost, Enterprise enables much deeper strategic conversations and much deeper technical integrations with retailers. It's ultimately what's getting us on the same side of the table, and it's becoming the foundation for the relationship that we've built with retailers.

So we're truly innovating there. We plan together based on everything that a retailer is trying to achieve. So it helps us drive growth through their owned and operated but also helps with the overall relationship back on our marketplace. So that -- the enterprise relationship that we have leads to improvements in the consumer experience that are felt on both sides. And I would say the other benefit of enterprise, which I want to call out is that is driving overall efficiency for us. It's increasing our order volume and density it's lowering the cost to serve through shared infrastructure.

It's allowing us to reinvest even more in share technology and capabilities that benefit everyone. And as far as future opportunity goes, I believe that there is significant future opportunity on the enterprise side in 2 ways, even though we've launched so many new partners on Store from Pro in 2025, we launched 70 versus just 30 the previous year, $80 million I do believe that there's quite a bit of room headway here, including internationally. We just launched our first partners internationally with Costco in Spain and France.

So there's expansion opportunities with new retailers, signing and launching them but also by expanding with more products and services with existing retailers. That's the Costco example that I provided in the Sprouts example, where we call it land and expand internally where we have the opportunity to continue to serve solutions to retailers to drive growth for both of us over a longer time period. So our focus is really to grow both marketplace and enterprise, and we believe that there's substantial runway ahead.

Our next question, Nikhil Devnani from Bernstein.

Nice to see the GTV numbers and order growth. What do you think has driven the acceleration in the business as you look across core metrics from users to frequency and retention. And then related to that, maybe you could just step back a little bit. There's obviously a lot of focus on competition right now from Amazon, DoorDash and others. But your business is improving. What are you seeing on the ground in markets where there is more competition? And are we just at an inflection point in grocery e-commerce adoption right now? Is that what you think is helping here?

Yes. Thanks for the question, Nikhil. I'll start with some of the drivers of our Q4 results because we're certainly very proud of our results. As mentioned, GTV was up 14% year-on-year, which is the strongest we've delivered in 3 years. From a consumer perspective, we are seeing growth in demand for our service. And look, the core drivers of our Q4 results were strong user growth and strong engagement with our customers. Last year, in 2025, 26 million customers use Instacart with approximately 10 million unique customers placing at least 1 order in December, which was a record.

In addition, GTV from our 2025 new customer cohort was the largest that we've added since 2022. And what we're seeing is that we're retaining those customers at higher rates year-over-year. So we saw very strong new user metrics and at the same time, we deepened engagement with existing customers, converting annual customers to quarterly and quarterly to monthly at faster rates year-over-year, and we steadily increased spend per customer through 2025.

But when I back up and look at the kind of the total picture of what's driving growth, it's not just 1 thing. The performance is reflecting multiple growth initiatives working together, including continuous enhancement across products and selection, quality, affordability, convenience. We also have real momentum with the enterprise platform, as I just stated, and we also have momentum in the club channel, including deeper integrations with Costco with our executive member benefit and with new and existing partnerships, which drove growth for us, including with restaurants, our restaurant integration with Uber Eats as well as our embedded experience in Grubhub.

So it's really not 1 thing that's driving our performance, a compounding effect of a strategy that is working across multiple vectors, and we're executing very strongly against that strategy. From a competition perspective, I'll start by saying none of the competition activity that we're seeing surprises us at all given the size of the market opportunity for online grocery. And also, I have to say, I think that the sentiment around the competitive impact to Instacart is very overblown.

Obviously, we monitor competition extremely closely. But if you take a look at the facts on the field, as you mentioned in Nikhil, our GTV growth accelerated through 2025. Q4 was our strongest quarter in 3 years. And we guided to 11% to 13%, our strongest guide. That's despite all of the Amazon headlines and expansions and despite restaurant delivery marketplaces expanding with grocery retailers. We continue to have the leading share among digital first players. We are exceptionally strong in large baskets which is 75% of the market. We lead in large basket activations. We lead at converting small baskets to large baskets and look, we do pay attention.

We are watching what others are doing and others are going to have their strategy. But there is definitely a market for us here, and we feel good about our points of differentiation, including our leading experience across selection quality, affordability and convenience and with the entire enterprise platform, which, really, it's a part of the market that others just aren't participating in and is actually helped by intense competition as retailers that we partner with or force to react.

So overall, I'm confident in the size of the market opportunity for online grocery there's lots of room to grow. I'm confident in our ability to compete in this market in the long run.

Our next question comes from the line of Jason Halsen with Oppenheimer.

This is Chad on for Jason. Advertising came in a little bit stronger in the fourth quarter than maybe kind of initially feared. Could you maybe talk about the puts and takes of that was Were you able to drive better adoption? Or was like kind of macro impacts better than expected?

Sure. Thank you for the question, Chad. So yes, we did deliver strong adds and other revenue performance at 10% in Q4. And I'll pull apart the drivers here. So first of all, we are growing GTV, which does help fuel investment from brands. That strength was coming from all segments, emerging mid-market and large accounts even though we had highlighted some uncertainty around large brands on our last earnings call. But overall, if I take a giant step back, I think it's fair to say that our diversification strategy across supply, meaning new surfaces where we place ads and demands with more advertisers and larger budgets from existing advertisers. That is working.

Carrot Ads expanded to over 310 partners, which is getting us to really significant scale. We now have over 9,000 brands advertising on Instacart. As of Q4, that's up from 7,000 a year ago. And all of that diversification makes our on-platform add stronger and more resilient. And at the same time, we're continuing to scale our off-platform ads and data offerings. So we're now partnered with Meta. We're now -- we're partnered with -- the Trade Desk, Google, most recently, we partnered with Pinterest and TikTok, and we are successfully gathering incremental budgets for campaigns on these surfaces where CPGs can use our first-party data to target our high-intent audiences, measure the performance and drive conversion back on Instacart.

So overall, I would say our stated strategy of building one of the most powerful and relevant ad ecosystem is working, and we're executing well against that strategy.

Next question that comes from the line of Shweta Khajuria with Wolfe Research.

Let me try 2, please. The first 1 is on international growth. As you think about medium to long term, how are you thinking about unlocking that opportunity? And are those markets structurally different when you think about grocery delivery? That's my first. And then second is on local commerce. So is there an opportunity and an unlock in addition to smaller baskets where perhaps you add on local merchants in addition to grocery, that could be the next leg of growth?

Thank you for the question. I'll start with international. Yes, what we're finding is the markets are -- they do operate differently, but we continue to be very excited about our plans to take our technology to do to new markets. And we believe that it's a promising future growth vector for us, which we've been busy validating. So the more time that we spend in new markets, speaking to retailers, the more convinced we are that this product market fit for our tech because retailers in these markets are broader all trying to solve the same problems as retailers in North America.

Meanwhile, in many of the markets that we visited, grocery e-commerce is still quite underdeveloped. Many retailers don't have an online presence at all or their current website isn't shoppable and retail media is just getting started in many of these markets. We're also seeing interest in our -- for our in-store solutions in markets abroad like paper and food storm as retailers look to digitize their in-store experience. So as we've learned more, we're feeling really great about our stated approach. Our approach to going international as we're exploring major markets, the top countries in Europe and in Australia. We're entering with our existing enterprise technology like Storefront Pro, Caper Carts, Food Storm. We're not building a new suite of technology for these markets. We're leveraging the best-in-class tech that we already have and localizing it in a way that we believe will be scalable.

Our Costco launch in Spain and France is a great example of that approach, Spain, in France are attractive markets. It's Storefront Pro. It's a trusted partner with Costco. All of that said, I will also say that while we have ambitious expansion plans, we're also extremely focused on being disciplined on expenses. So that we expand in a way that aligns with our profitability objectives and our ability to deliver annual EBITDA progression.

On your second question around local commerce, we, as of today, we already serve all use cases. We excel in big baskets, but we're also quite strong in small baskets as well. One of the things that we did a prior year was we reduced the minimum basket for HistacarPlus users to $10, which is a lead offering and that is to attract smaller baskets. In terms of merchants and the types of merchants, our primary focus is grocery. It has always been grocery. We do offer other types of retailers on the platform for the convenience of our customers, but we are primarily focused on the grocery industry.

Our next question comes from the line of Bernie McTernan with Needham & Company.

This is Stefanos Crist calling from Vernie. I just wanted to follow up on the international expansion. How many of your other partners like Costco have international business? And is that the main strategy? Or are you also approaching new customers as well?

Yes. Great question, Stefanos. So it's a mix. Many partners that exist in North America also exist in Europe, Costco is not alone in that. Many of our partners have a presence there. And it would be easy to kind of like look at which ones those were. For us, we're doing both. We're talking to existing partners about expansion like what we did with Costco because that's -- we've already got established trusting partnerships and we think that, that's strategically wise and oftentimes, North American retailers are looking for expansion plans because other markets are less developed from an e-commerce perspective, but we are also in these markets, meeting new retailers, selling to new retailers, making new relationships in the major markets in Europe.

A great example of that was we spent time with Morrisons on in-store technology and now we're launching Caper Carts very soon in the Morrisons pilot market. So yes, we are -- we do have a sales presence in the market. We are talking to net new retailers and it's a big part of our strategy.

Our next question comes from the line of Josh Beck with Raymond James.

I wanted to ask a little bit about price parity initiative. Certainly, it seems like when grocers have adopted this pricing philosophy, you've seen a real nice elasticity benefit. So maybe how those discussions are progressing? And then you obviously shared a lot about Zogentic, which I felt very helpful. How do you think about the tailwinds to your business with respect to maybe on platform, so maybe easing the creation of large baskets?

And then how do you think about perhaps the economics and opportunity of platform? I would assume there's a potentially much larger pool of customers. I just would really like to kind of hear your thoughts on those topics.

Thank you for the questions, Josh. I'll start with price parity. So we work closely with retailers on all strategies, including on their pricing strategies. In the case of price parities or not applying a markup. We do work with retailers on that because we believe it's in their best interest, and there's a positive short- and long-term ROI for them. We consistently see price parity retailers outperform marked up retailers on Instacart. We see better retention price parity retailers. And this is important not just because we have a very large platform retailers obviously want to win share on Instacart, but also because they don't want to lose share to some of the largest digital players are increasingly volume for market share.

So we talk to our retail partners about -- but the full strategic approach when it comes to digital, pricing is 1 of those. We think it's strategically wise for retailers to consider this. We've seen some movements so far this year, IV just went to price parity, Rales just went to no markups as well on the platform. So we have seen traction. You're going to see us continue to focus on that going forward.

When it comes to AI and the influence of agentic consumers, so we're innovating here, when it comes to agentic experiences, we're focused on building agentic experiences directly on Instacart in a seamless way, that's very additive. We're designing agentic shopping experiences and deeper personalization that's driving better end-to-end outcomes for customers. In fact, we think that we can build the best and most relevant agentic experience because of our -- the unique data advantage that I talked about upfront. And it's not easy -- is extremely complex as a category. It is highly personal, especially for the big weekly basket. You can imagine how many preferences or dietary restrictions come into play when you're working on a family's weekly shop.

But we continue to believe that we're in the best position to solve for that complexity directly on Instacart and with our first-party data from 1.6 billion lifetime orders and our understanding of the grocery consumers. So you'll see us continue to do that. We're also partnering off platform with third-party platforms like open AI and Google and Microsoft to be wherever customers want to shop. So the example was with OpenAI, we were the first grocery partner to launch native checkout directly on ChatGPT and we see this as a channel to attract incremental demand and make it easy for customers to find Instacart, land on Instacart transact with Instacart. That's our approach there.

Our next question comes from the line of Eric Sheridan with Goldman Sachs.

Maybe a few just on Instacart Plus. Any update on the adoption rate you're seeing in terms of people coming into the program, how do you think about investing incrementally in growing Instacart Plus? And any differences you're starting to see or that are widening in terms of frequency, engagement or cross-platform usage from Instacart plus users?

Yes. Thank you for the question, Eric. Yes, we continue to be pleased with the results of Instacart Plus. Instacart Plus continues to represent the majority of GTV and orders on our platform. Paid-in Socar Plus members continue to grow, and Instacarts customers are more engaged and they retain better than nonmembers. And all of that strength we reflected in our overall operating fundamentals that we shared, where we're seeing user growth and strong new customer retention metrics and deeper engagement with existing customers.

From a strategy perspective, to the second part of your question, Instacart Plus is designed to unlock customer value and drive engagement anchored by the $0 delivery but as well as several additional benefits like the $0 delivery minimum, which people are allowed to $10 for grocery and $25 for restaurants. Also access to new use cases and services like restaurants with our Uber Eats integration, New York Times cooking, Peacock Premium. We expanded family accounts to 3 members. We also have in-app credits through select Chase partnerships.

I'll also mention, which is relatively unknown, that the value of Instacart Plus member extends beyond just our marketplace with the majority of our storefront retailers also using Instacart Plus and offering $0 delivery there as well. So overall, Eric, we're pleased with the performance of the program. And yes.

One moment for our next question, comes from the line of Colin Sebastian with Baird.

Great I guess first, maybe just a follow-up on competition. I know you said that you studied this in a lot of detail. So I guess, are you seeing that there are distinct use cases for consumers on Instacart compared to how they may be using the traditional retailers or e-commerce platforms for grocery? Or is it just that the market is so large and online penetration is so low that there's just room for multiple players. And then my second question is actually on Caper Carts and sort of in-store monetization and maybe ultimately that ties as well to enterprise. But given the lift in basket size from the prompts on Caper Carts and even beyond that, I mean, what is the appetite you're seeing for advertising within the cards for demand for the carts and ultimately, the pipeline for that?

Yes. Thank you, Colin. On the competition point, Yes, I do think that some of the competition is pulling in incremental use cases, small basket use cases. We continue to perform well in small baskets and large baskets, but we do continue to win where it matters most, which is big baskets. Baskets over $75 represent 75% of the digital market. And given the nature of some of the other offerings that we're seeing out there from Amazon and others, I mean, Amazon is an example, in their same-day experience, there's a few thousand SKUs and 4- to 5-hour delivery windows.

To me, their experience is inherently geared towards smaller fill-in orders and not the weekly shop with over a dozen items. And we see that play out in the data that we see some of the same-day grocery baskets appear to be well below $50. And also, we are seeing that as Amazon's ramped up their same-day perishable expansion. The biggest source of their grocery customers are coming from in-store and it's not a share shift from us.

And on that point, I do want -- I don't want to underestimate what that means for our business because as companies who -- as a company that works with hundreds of retailers that compete with some of these large players. It's the ultimate rallying cry for the rest of our partners. The rest of the market needs a technology partner to help them compete and win, and we are that trusted partner.

From an in-store perspective, at the highest level, we believe deeply in the opportunity for technology in the physical store with e-commerce at low double digits, the vast majority of transactions are still happening in store for the foreseeable future and there's a massive opportunity to modernize and digitize that experience with seamless operations and advanced personalization, wayfinding, advertising to help customers discover products and to help customers save money while they're shopping.

From a Caper perspective, we think Caper is an ideal solution to this, and it's an ideal way to engage the consumer. We're seeing great momentum. We have thousands of car commitments with retailers, big and small. We're now live in nearly 100 cities across 15 states. We launched new pilots in the second half of 2025 with Sprouts and Wegmans and globally with Kohl's in Australia. And as I mentioned, with Morrisons in the U.K.

From a scale perspective, we're also continuing to expand with wake firing, we're now live at about 20% of their stores. and where we've recently launched shoppable display ads, which is our first foray into the ads business. So overall, our learnings there that customers love the experience. Retailers love it for the operational benefits and the potential to digitize their customers and turn them into omnichannel customers. And then, of course, we're all encouraged by the early signals we're getting from an ad revenue perspective. So I remain optimistic about the future of Caper and incredibly focused on accelerating our momentum here.

Our next question comes from the line of Andrew Boone with Citizens.

I wanted to ask about your chat partnership. Now that Instant Checkout is live, can you talk about the advertising intensity that you're seeing with those orders is there anything that we should think about as we think about the evolution of retail media now as those channels start to mature?

Sure. So when it comes to CABP, maybe I'll just back up and say our approach with the AI platforms right now is to ensure that we are served up in a high-quality way in a way that respects our data, but we are anywhere where a consumer wants to shop. And so our -- in fact, our goal is to help define what grocery shopping looks like across the next generation of digital agents, including adcom. So we want to show up while we want to help kind of co-create the experience on OpenAI, our partnership with OpenAI allows for consumers to Shop Pay and now transact directly inside ChatGPT's app experience. So no switching or additional steps are required -- we were the first company to do that. But we're also partnering with others. We're partnering with Google and Microsoft.

In fact, we expect every generative AI company will connect into our grocery engine to drive demand for our retailers. From an adds perspective, I think like our immediate priority here is going to be to make sure that we're discoverable wherever customers choose to shop and that, that experience is incredible and that we're able to drive more users to our platform. And we think if we nail that there will be lots of opportunities to monetize that down the road.

But more broadly, we are very excited about the opportunity of AI and ads together. That intersection, we think, long term, is going to be a benefit to our business. And there's a few reasons for that. One is on Instacart. So as you know, we're building conversational commerce and agenetic experiences. At the exact same time, the ads team is innovating alongside our consumer team who are building those genic experiences, and our ads will be directly informed by how consumers engage in agentic shopping.

So our overall agentic ad strategy here is to build trust and utility with consumers that leverage everything that we've already learned from online in-store and in store. And the other thing that we're doing is we're using AI to improve all aspects of our ad technology, including behind the scenes with ranking and relevance and personalization. We're making all sponsored product ads more relevant, driving stronger engagement and more items added to the cart.

That we're improving advertising to tooling and efficiency, making it easy for advertisers to manage and drive performance of campaigns, especially when it comes to emerging brands. Most notably, we've expanded our set of AI-powered recommendations for advertisers. So for example, where in a campaign is there headroom to raise your rollout target while delivering your campaign goals or where can you increase new-to-brand coverage within the campaign? So we are highly engaged. We think we can be a leader here, and we look forward to the role that AI can play broadly in our advertising product down the road.

Our next question comes from the line of Deepak Mathivanan with Cantor Fitzgerald.

Chris, obviously, I think grocery is 1 area where the way consumers shop can have a meaningful change with all the AI tools. I know you launched cart assistant basically for card planning and things like that. And we also have integrations with ChatGPT and others, are you seeing meaningful change in how consumers are doing grocery shopping, maybe starting with what they need for the week or for a specific recipe, instead of kind of like staying with the typical routine for grocery shopping. And when do you expect some of the cart assistance and other AI experiences to be more broadly available?

And then perhaps one more question on competition. What are you seeing specifically on retailers where Uber and DoorDash rolled out in the last few months. Are you seeing any consumer behavior changes?

Yes. Thank you for the question. What I would say on all grocery engaged genic experiences is, first of all, I'm a believer that consumer behavior is going to shift over time, but it's still very, very early here. If we look at some of the referral traffic that we get from outside platforms, it's all very -- it's all kind of like not material at this point in time. We are investing because we do believe that consumer trends are going to change over time. So we want to make sure that we're there. However, it's still very early days and very -- relatively small relative to the size of our overall business.

We are extremely excited about card assistant, which is being built on top of our kind of very large and proprietary data sets, which is key here. We're making progress, significant progress. We're not racing to get this out the door. Our goal is to make our card assistance the absolute best. The most relevant experience for consumers, especially since we're going to be extending this on to partners like Sprouts and Kroger. In our view, many early genetic experiences are going to be limited in scope, operate as single step interactions which can potentially create friction.

Our goal is to have a comprehensive agent out in market. We're in beta testing now, Deepak. We're moving quickly. We're learning a lot. We have plans to roll out on Instacart marketplace by the end of of Q1.

To the second part of your question on DASH and Uber specifically. So look, when it comes to retailers sitting on other marketplaces, marketplace expansion, first of all, is not unexpected at all. And again, we grew despite to use the DoorDash example, DoorDash and Kroger launched at the beginning of Q4, we just had our best quarter quarterly growth in 3 years. And these launches to us really reinforce what I've been saying all along, which is when a retailer goes nonexclusive, that's steady state, we see other platforms growth plateaus and their basket size stays small, it's under $75.

We remain the share of sales leader versus digital first players on these retailers. And we're also now seeing that as other marketplaces add retailers, the incremental growth that they see from each additional retailer diminishes. Their growth is increasingly coming from other retailers on their own platform. So at the end of the day, I don't loose sleep over any of this because our marketplace is strong, our enterprise platform makes us even more resilient. And it gives us a seat at the table with retailers that a stand-alone marketplace does not have.

And if you look ahead, although I mentioned last earnings that 80% of our GTV already comes from non-exclusive retailers. I just want to be clear that our model has always assumed that retailers would sit on multiple marketplaces. That dynamic is fully embedded into our guidance and into our long-term strategy.

Our next question comes from the line of Ross Sandler with Barclays.

Great. Going back to advertising, you guys, I think, said that for 1Q as you're going to grow 11% to 14%, which is a nice acceleration off of a point tougher comps. So could you just talk about what you're seeing thus far in the quarter and then the pipeline? Are we finally through the rough patch with large CPG?

And then Emily to bring you in, you mentioned that COGS might leverage in 2016 on the publisher fees. So could you just talk about that leverage there? And then is that material enough to have an impact on overall incremental margins in 2016?

Yes. Thanks, Ross. I'll address advertising, and then we can pass it over to Emily. So yes, we are very happy. We're off to a very strong start in 2026. As you pointed out, we just guided to 11% to 14% for Q1. What I'll say is that we believe we have the right strategy here and we're executing well against it. We're already a top 5 retail media network and we're continuing to expand our scale and our reach across our growing marketplace across our expanding Karada footprint, off-platform and with our data solutions.

So our strategy is sound. Looking ahead, we're not providing guidance beyond Q1, and there's still some macro uncertainty that we're seeing in the market and some ongoing changes in consumer preferences as an example. But overall, our plan and our approach is to focus on driving strong year-on-year growth by continuing to diversify in terms of supply and demand and ensuring that we're building the largest and most effective ads ecosystem.

We have a very clear set of building blocks, which involves continuing to innovate on platform with advanced personalization and relevancy and all of the AI tooling I described, driving exceptional performance and measurement for brands as our goal and then extend all of that innovation to Karadads, which is again, we're at 310 Karadads partners now, which gives us real scale and then extend in-store on paper cards, which we just launched, and I continue to believe that this is going to be 1 of the most interesting in-store advertising opportunities out there.

And then we're going to use our first-party data to extend off platform. We're still early with off-platform, but we've built a strong foundation here. We have the right set of partners, and we're excited to scale that further. So with the strategy, like we're confident in this space and our ability to deliver our long-term targets here. But we do believe that we're -- I am optimistic about what we can achieve in once.

Ross, thanks for the question. So just to get a little more specific on what I was trying to call out is that if you look at adjusted cost of revenue through the course of last year, you did see a little bit of a modest step-up in Q4 related to cost of revenue. And so I wanted to call that out because while the majority of cost of revenue is going to be from credit card transaction payments that do sort of relatively with GTV. There is a component of cost of revenue that we do call out in our filings, which is payments to publishers.

And so I wanted to specifically give some context of what that includes. It's effectively 2 things. One is what we pay certain of our Carrot Ads partners for the benefit of advertising on their surfaces, as well as the budgets that we get where we're optimizing and deploying ad dollars on behalf of brands for certain of our as platform partnerships. So it's not all of our off-platform partnerships.

Now to your question around, is this going to cause sort of overall impact to margins at large. What I'd say is that first of all, what I wanted to highlight is that while payments to publishers specifically did scale throughout 2025, we do expect that year-over-year growth to moderate in 2026. Now when I think about the P&L as a whole, I would say 2 things. So first of all, that was a relatively modest impact. And we think that we have multiple levers across the P&L to drive profitability over time.

And you've seen us drive that pretty effectively over time. Now we did say that our expectation is that the expansion of EBITDA, while we look to continue to expand EBITDA grow EBITDA faster than GTV through the course of 2026, that rate of expansion we do expect to moderate, and that is because you've seen quite a lot of OpEx leverage as one example over the course of the last couple of years. We do have a number of great opportunities to reinvest in growth that we're seeing in terms of both short, medium and long-term bets.

So I wouldn't necessarily tie those 2 thoughts together. I think we have great opportunities to drive growth. and continue to have many levers at our disposal to turn that into profitable growth over time.

Our next question comes from the line of Michael Morton with MoffettNathanson.

Maybe if I could just follow up what we were just talking about, and I really appreciate the detail on the cost of revenue. Could you maybe speak a little bit about the contributors to advertising growth between on-site and off-site in the guide. Does that imply maybe some improvement in the on-site growth rate because we were trying to do some of that math that you talked about with the publisher payments as well?

And then also, I think, probably for Emily, could you quantify the contribution that you're seeing from Kroger's decision to change some of the fulfillment because business models, I would say, and what will then flow to cart and maybe how much of that is included in your guidance.

Sure. I can jump in and Chris, feel free to add any details. So in terms of contribution ads from on-site versus off-site. So we think of on-site, just to clarify, as a combination of the ads that we serve on our marketplace as well as through carats. If you come to Instacart to advertise and you deploy dollars, those are deployed across that full suite of services. So just to be clear, while we talk about off-platform because there is something that stands out specifically in the cost of revenue line, really, what we're talking about is an ad business that is primarily comprised of that on-site or we call it on platform internally as revenue, and we're continuing to see growth driven by on-platform.

So off-platform is a smaller contributor overall, but it is something that is starting to see some growth and some benefits, so definitely worth calling out. In terms of specifically quantifying contribution from Kroger, we don't call out sort of specific retailers, but we're definitely happy to see that what we're able to provide in terms of same-day logistics something that we thought was always a really critical benefit in terms of understanding the desire from consumers to get their groceries when they want it, when they need it, which in the majority of cases is on demand that we're able to step in and provide that service for our partner.

One moment for our next question comes from the line of Mark Zgutowicz with Benchmark.

I was just curious how you see the time line for the ads opportunity in Europe developing given a lack of 1P data in the region? And do you anticipate the incremental adds benefit here to come largely from net new brands or your existing global partners.

Thank you for the question, Mark. Our approach to Europe when we take a step back and we look at which technologies we're taking to Europe, we're primarily focused on sort from Pro, which oftentimes has ads embedded directly into it. So we'll have as capabilities over time. Caper Cart, which is also has an advertising surface area that we think is going to be monetizable oversight time and then food store, which is our catering software. So our approach is going to be take our technology, work with retailers start to solve complex problems and start to build new relationships with retailers abroad. And then advertising will be like a fast follow-on once we have the surface areas that are at scale to advertising in those markets.

Thank you. And ladies and gentlemen, this concludes our Q&A session and conference for today. Thank you all for participating. You may now disconnect.

Good afternoon, everyone. We hope everyone's had a productive day 1 of the Morgan Stanley NASDAQ TMT Conference. Welcome again to a 2025 version. We're thrilled to have Emily with us from Instacart, the CFO, previously at Uber and now at Instacart for a couple of years.

Yes. 2 years this January.

2 years this January, so happy, happy close to anniversary. Before we get to all of that, let's do the disclosures. Please note that all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures, appear on the Morgan Stanley public website at www.morganstanley.com/researchdisclosures. They are also available at the registration desk.

Some of the statements made today by Instacart may be considered forward-looking. These statements involve a number of risks and uncertainties that may cause actual results to differ materially. Any forward-looking statements made today by the company are based on assumptions as of today, and Instacart undertakes no obligation to update them. Please refer to Instacart's most recent Form 10-Q for a discussion of the risk factors that may impact actual results.

Emily may also reference certain non-GAAP financial metrics, and reconciliations are included in Instacart shareholder letters, which are available on Instacart's Investor Relations website. Check, we're all good.

Okay. So a lot of things to talk about in the grocery space. It's heavily evolving from competitive discussions, agentic discussions. So maybe let's sort of start with a big picture view. It's almost been 2 years with the company. You've done a lot of meetings with different types of investors, analysts like myself, consumer investors, tech investors. What do you think are sort of the 1 or 2 of the most misunderstood aspects of the company even today after like 2 years of talking it through with people?

Yes. It's a great question and something we try to address day in and day out. And in my view, I think the single biggest misunderstanding is the value proposition that we bring to bear in the market. We obviously get it with competitive announcements and worry about how are we going to continue to compete. And I think what we've seen is sort of twofold. One is that competition is truly not new to our sector. We get the question posed a lot around with increasing competition, what are you going to do? And our perspective would be that people have long understood that online grocery is an attractive market. It's underpenetrated. Many of them, if not all, have been at it for upwards of 5-plus years and trying a lot of different things.

Now what I think that those competitors are not able to do that Instacart brings to the table is the combination of things that customers really care about. Now we've talked about this in the past in terms of selection, in terms of quality, affordability and convenience. And I think maybe the thing that gets lost is that you need all 4. And when you talk about individual competitors, where people can be successful to a point is maybe they excel on one individual vector, and that can address some subset of the population. And again, the industry is huge. So that's okay. There's more than enough to go around. But what we do uniquely is provide that 1,800 retailers a selection. And of course, we are also white labeled across over 350 of our retail partner sites. The quality is really unmatched in terms of getting you what you want because of our understanding of both inventory as well as the quality of our shoppers.

Affordability, of course, has been a big initiative. But then we do that all at the convenience that people want, which we translate really into speed. And I think that also is misunderstood. I think there's this desire to believe that people will order their groceries in advance and they're going to get it on a 4-hour time window. And consistently, that's not what we see behaviorally. We see that 75% of our orders are ordered on demand, which is really next available delivery window. And for us, the median delivery time of those orders is under 90 minutes. We also have a sizable priority delivery window, which is 25% of which are delivered in under 30 minutes.

So we're seeing customers want it all. They want the full selection, the 50-plus thousand SKUs from their local retailer that they know and love or the club retailer, the specialty retailer, and they want it now and they want what they want, meaning we actually get 100% of the items that you ordered. And so I think that unique competitive advantage is what's allowed us to continue to grow double digits for the last 7 quarters and continue to show these results in spite of some of the concerns that we get from yourself and investors.

Yes. Let me unpack a couple of those key factors you talked about. Let me start with affordability. Maybe give us some examples of investments you've made in affordability that have driven more and more user growth and more frequency growth. And how do you think about the key drivers going forward to sort of keep the user growth going perhaps down middle to lower income cohorts.

Sure. First and foremost, I'd say, just as it relates to different income level cohorts, one thing that I think is surprising to many people about Instacart is that we do truly serve the full spectrum of income brackets, including those that are actually on government assistance. So in the U.S., the EBT SNAP, which is single-digit percentage of our business. Now that said, in terms of affordability, to get to your question, I think there's a number of different ways that we can get to affordability, some of which are things that we control and we invest in and other of which are more at the discretion of the retailer themselves.

So maybe I'll start with that and then work backwards. What I mean by that is that retailers set the item level prices on Instacart for the most part. And what that means is that if they want to, they can set those prices at the same as what you would get at the in-store location that you're shopping at or they can increase the prices at a markup, and they do that because they're offsetting some of the fees associated with being online. Now that's really dependent. It's a strategy level question for the retailer about how do they view online grocery as it relates to their regular business, what's their competitive dynamics in their own individual markets. And so it really is a management level decision around their views on the market.

Now we obviously have conversations with retailers about the benefits of going to lower markup to price parity. We've talked about price parity retailers growing at double-digit percentage higher rates than non-price parity retailers. So these are conversations we're having with retailers day in and day out, showing them the data, in many cases, doing tests with them in markets to prove out the value of if you, retailers invest here, what it can drive for the business. And so it's a dialogue. But at the end of the day, that decision was for retail. So we're seeing movement in the right direction. It's definitely shades of gray. If you reduce markup, that's great. If you provide price parity on flyer items, that's also great. But that's something that will be an ongoing conversation.

In terms of what we're doing, that's sort of more in our ball control, I would say you've seen us just as one example, we lowered our minimum basket size for IC+, Instacart+ members on our platform really starting end of last year, but into January of this year. And that would be an example of investing in price, right? It's specific to a category of baskets, but we've done things like that over time. And we're able to do that because we're driving efficiencies elsewhere in the P&L, such as through shopper pay efficiencies, and that's about how quickly we can get the shopper through the store or how many batches we can batch together as part of a delivery that drives down cost per order. We can then reinvest in things like consumer pricing.

Got it. Okay. That's helpful. I want to get into some more of those efficiencies later on in the discussion. But maybe just to talk about exclusives. I know this is -- I know you get asked this question a lot. I know I get this question a lot. We've seen some of your partners sort of come off exclusives now. What can you tell us about the impact you've seen on volumes from your retail partners? And any changes you see as they move off exclusivity to also be offer on other platforms?

Yes. It's a great question, and it's similarly a misconception, I think, that we've had over time. First and foremost, over 80% of our GTV is already nonexclusive. So we're not starting from a place where this is a big hill ahead of us that we have yet to have any visibility into what happens. In fact, the majority of it really has occurred. And interestingly, of the remaining GTV that is exclusive today, the majority of those are with retailers with whom we also have an enterprise relationship. And the reason I bring that up is that what we found is that retailers where there's an enterprise relationship even after they go nonexclusive, those continue to grow in the double digits in terms of GTV growth rate.

And so that's the type of data that gives us confidence that regardless of outcome and exclusivity isn't our strategy, hasn't been our strategy. This has been known to be the direction of travel, we're able to continue to really execute. Another sort of backdrop would be just our ability to execute over the last couple of years. We've had many retailers roll off of exclusivity, and we've been able to deliver 7 quarters of double-digit growth. So overall, I think we're seeing a picture where retailers may choose to be nonexclusive on the marketplace, and we're able to execute. What I think is also a key component of our strategy that we've started to talk about a little bit more specifically recently is the enterprise part of our business. That's not a new strategy, as you know, right?

We were -- we talked about at the time of our IPO that enterprise was 20% of our business. But it seemed that it was maybe misunderstood or underappreciated. And so we wanted to be a little more clear that enterprise is really unique because while someone can sit on multiple marketplaces, by someone, I mean an individual retailer, when it comes to enterprise solutions and who is your white label retailer.com provider, who's providing your ads technology, who's doing your fulfillment services, typically, you're really talking about one partner and you're also integrating deeply with that partner, which makes it much stickier. So we think that the enterprise side of the house also gives us access to a unique part of the market that really no one else that you would traditionally think of as our core competitors has access to.

No, I think you're right that the enterprise piece is one of the things we knew about at the time of the listing, but kind of forgot about it. And now as you sort of -- we look ahead and there's maybe a growing focus on enterprise a bit. So are there investments needed to sort of like grow that enterprise business further? Or is it more just sort of a source of leverage across the P&L and the base?

So what's really interesting about the way that we've built enterprise or really rebuilt it because we did sort of replatform a couple of years ago. And what that enabled us to do is that it's a single tech stack across marketplace and enterprise. And that actually is a really important fact because it's one of the things that actually adds value back to the marketplace because if we do integrations with a retailer because we are providing white label solutions for them that maybe the retailer might otherwise not do because their tech resources are scarce and are they going to contribute that to Instacart versus another priority, we can immediately take any benefit that we've built for enterprise, and it's available immediately on marketplace and vice versa. So any features that we're doing, specific things that we're building for enterprise customers, we have that capability. And so we think that brings us a really unique advantage.

In terms of incremental investment in enterprise, I would say the main no, not specifically outside of -- we just launched about a month ago, what we're calling kind of AI solutions, which is an umbrella term for a number of different things that we're developing. But it's a good example of because we have these enterprise-level relationships with retailers, we truly are their trusted technology partner. They're coming to us for help with some of the sophisticated technology that maybe as an individual retailer, depending on scale, you're not going to be able to build in-house. And so we're able to provide those services to them. And it's not just subscale retailers. It's -- you saw in our announcement that we're working with Kroger on enabling AI assistant in their experience. And so it's a wide range of retailers. So we are investing in some areas, but we think there's a lot of opportunity there and not just for our existing set of services, but for an expanding set of services.

Okay. Let's talk about Agentic. We've done a decent amount in kind of how we think about Agentic opportunities. And in our view, we think grocery and CPG may be the biggest bucket of consumer spend to be unlocked through Agentic. I still have my utopian dream of Saturday morning when an Instacart agent says to me, good morning, Brian. Here are the 25 things you and your family order every week. I found some dip that goes well with your favorite chips. Your almond milk is on sale. Anything else you want me to add, I will say Topo Chico and then you'll say Monday morning delivery and I will say sweet. How far away are we from that type of product with an Instacart agent like that being able to service your subscribers?

So I think we're making very quick progress towards that future. And I think the thing that you painted is exactly how we think about it, where grocery shopping can become really integrated into your day-to-day life in a way that is seamless, personalized, which I think is -- we'll get back to this, I think, when we talk about ads, but also just accessible to folks. And so I can see that in the things that we're experimenting with internally. And what you're seeing is the ability to do 2 things, take external context, things like weather, which maybe impact what you're willing to buy. Maybe if it's hot out, you're not buying soup and maybe if it's cold out, you're not buying ice cream.

And so I'm adjusting to the fact of, is there holidays around the corner, what might be top of mind for Brian and family with all of your personal information around your shopping behavior, the things that matter to you. And that may be your preference is your taste, but also that your child has an allergy, that your other child has some other nutrition consideration. And those are part of what makes grocery particularly unique.

If you're talking about certain other areas where things are more commoditized, it may be just fine to say that the agent, "Hey, buy me XYZ and whatever arrives is just fine, you don't really care. I think we can all agree that people care deeply about the products that come to their house when it comes to food and nutrition. They care about the brands. They care about ingredients. They care certainly about the nutrition components, particularly around allergies and other food restrictions. And so you have to have that personalization layer, and we can bring that to the table because of the data that we have, both on you, but also on just behavior broadly from 1.5 billion orders over time. So I think we're moving in that direction.

Yes. I think generic white socks are very different than a type of yogurt you are going to eat, right? What's the biggest gating factor to that? Is it inventory? Is it make sure the matching? Is it building the algorithms? As you're sort of thinking through the challenges of getting to that grocery agent, what are sort of some of the actual blocking and tackling hurdles that are particularly challenging?

It really comes back to personal preference. So the yogurt example is a great one. You walked down the yogurt aisle. There's 30 different varieties. And so even something as simple as saying, "Hey, you're dairy-free, I'm going to choose you a soy yogurt. Well, there's like coconut yogurt or something else, all the flavors, non-flavors, are you a sugar -- low sugar versus there's truly opportunities are endless for decision-making in grocery. And so that repetitive behavior in terms of what you're purchasing or the fact that school is out on Monday, you actually need more for this weekend because you've got a long weekend and maybe extra -- maybe an 18-pack instead of a 12-pack of eggs. And so it's the context -- the combination of context plus individual that you have to sort of ingest that information to be able to be responsive.

The other thing is, I like this example because it's sort of one that you make so -- it's like it's in your brain, which is you had guests over this weekend. So yes, normally on Monday morning, you order X, but it turns out if the assistant can know that you had a party, well, all of a sudden, I'm going to have a different view of what's in your pantry, which you probably used all your ketch-up and you probably used all your Topo Chico. And so maybe I'm going to double the order this week. And those are the kinds of things that like just have never been possible before. But if you're consistently ordering on Instacart and I know that you ordered for a party, well, now I know that probably you depleted your pantry in a way that I can now predict better what you need to restock.

Yes. I never have enough Topo Chico. And maybe this past week, I think it was yesterday, you have you announced a partnership with GPT, sort of an integration into GPT. So this is sort of the other question around Agentic. I do sort of always like to talk to the retail partners and the marketplace partners like yourself, how you're thinking philosophically about the disintermediation risk. How do you sort of philosophically ensure that it's not going to be a GPT grocery agent that's going to be reaching out to people on Saturday morning as opposed to an Instacart agent where you have subscription revenue and advertising revenue and all those other opportunities. So what are some of the key safeguards you have in place?

Yes, sure. I mean I think broadly, when it comes to AI, our philosophy is to be wherever the customer is and to make the experience easy, adaptable and personalized wherever you're going to shop. So we already talked about things we're going to do within the context of the Instacart app or instacart.com. You'll see some of that also through our enterprise integrations and our ability to do that on behalf of our retail partners. But we also believe that customers will, to some extent, engage on exploratory grocery conversations through whether it's ChatGPT or other players that we'll also speak with, we want to, first and foremost, focus on customer engagement, customer behavior.

Now I do think that over time, you still have an advantage as the vertical player that has the 1.5 billion orders of historical data that has all of Brian's order history, all of the things we already talked about that make the very specific things that you need you. But when -- when you're talking about the fact that the industry is 12% penetrated, the idea that you can address this much broader swath of customers that are maybe new to grocery that are driving incremental orders, we certainly want to be there. So I think you'll see us be very adaptive to any sort of changes in consumer behavior and be right there for them. But we think we have a pretty special experience within Instacart because of that personalization.

Is there an overemphasis externally when you meet with investors or you meet with analysts like myself around basket size? I feel like we've gone through iterations of one player is large basket, one player is small basket. Now they're sort of colliding. Like how do you think about the large versus small basket potential at Instacart? What are you seeing now? And does it even matter?

Yes, it's a great question. So the reason basket sizes matter are just a question of we want to serve customers for their full set of grocery needs. How do you assess whether we're doing that? It might be basket size, it might not. But typically, what we find is that in larger basket sizes and in 2/3 of our orders, we're seeing you purchase things like meat and produce, which to us signal that this is actually your weekly shop. If your order size is very low and it's more convenience-oriented orders, that suggests to us that we're capturing a sliver of your grocery spend and not actually the full basket.

So what we look at is over time, and this has been consistent that for the online grocery industry, 75% of the market has been and continues to be in large basket. So if you're not addressing large basket, it suggests to me that you're not truly addressing the full TAM of what is possible with online grocery. Now that said, our goal is to serve the full set of grocery needs of the customer, which means based on that data point, I've got to be able to serve large baskets, but I also need to be there for you on Wednesday when you realize you're missing something and you need to fill in order or maybe you're traveling this week and you just need a smaller set of items for yourself.

So we think about it really holistically about the customer, not about small versus large independently. But we have found that, that trend of large baskets being a key component of the overall industry really hasn't changed.

Got it. Okay. What about partnerships? You have other customer acquisition and volume acquisition partnerships you've signed over the course of the years. Any -- can you walk us through sort of where you've had success with those? And how do you think about further contributions from some of those third-party partnerships, traffic partnerships to come?

Sure. We have a variety of different types of partnerships. And I think they all have slightly different objectives. I think when it comes to -- maybe I'll start with we did a partnership about 1.5 years ago with Uber to bring restaurants to our ecosystem. That was an example of saying, "Hey, are there other things that we can bring for consumers that drive incremental engagement that ultimately bring you back to spend more on grocery. And I think that's important framing for people to understand that we are a grocery technology company. Grocery is our core business. It's what we do. It's what we focus on. It's also why we're very, very good at it. So when we think about a partnership like restaurants, it's not about building our own restaurants business. It's truly about how do I supplement and drive engagement back towards the core, which is grocery for us.

Conversely, sort of the partnership we recently did with Grubhub sort of does the opposite of that, which is we are now available as the grocery provider on Grubhub. So Grubhub can do that for their customers, but that's a great channel for us to drive what otherwise might have been a Grubhub grocery, we can shift that and actually execute that on our behalf. And so those are 2 types of partnerships.

I'd say maybe the third would be on -- which is more sort of order based. The third would be more around user acquisition. And you see us do that, and we'll continue to experiment with what types of partnerships drive first-time trying of Instacart, trying Instacart Plus. So those might be credit card type partnerships that you've seen us do and other -- and more to come. So partnerships, we found -- we're actually quite good at them. So you'll see us continue to lean into it, but they're also hard to find exactly the right thing. So we'll continue to iterate.

I imagine the answer to this question is there's a lot of pieces that go into it, but maybe I can keep you away from that answer. Can you walk us through sort of how you think about the key drivers to user growth the next couple of years? What are going to be the key things that will bring on the next 3 million, 5 million, 10 million Instacart users and hopefully Instacart subscribers?

Yes. Look, I think broadly, there is a continuing trend in the environment outside of grocery, but just generally around convenience. And we've seen that even when customers are pinched in their wallet, they seem like they're continuing to spend on convenience-oriented items. So I think that's generally a positive for our industry and for Instacart. The second thing is around -- you talked about user acquisition. I think for us, look, like it's not that complicated, right? Acquiring a user is not that complicated, but you have to do it at the right price and you have to have a really great experience. And so a lot of our investment is around continuing to make that experience better.

We talked about the 4 things that matter: selection, quality, affordability and convenience. I think quality is one I would talk about, whereas if you had tried Instacart 3 years ago or during the pandemic when the company was quadrupling and they were barely groceries on the shelves, maybe you didn't have the best experience. As we've invested in that and our fill rate has gone up by 15 percentage -- perfect fill rate, 15 percentage points over the last couple of years, these are meaningful strides. So if we can get you back into the ecosystem to try the experience again, the likelihood that you then stick with it and grow your spend over time is a lot higher. So we spend on obviously, on various forms of marketing. We spend to make that experience better to keep you there when you come back. And then as you said, there's other various, but no single partnership is really going to be the thing that drives the needle for us.

So a lot of areas you're investing to improve the platform, improve the courier experience, the restaurant, the eater experience. Talk to us about sort of the sources of efficiency you still have in the model. Maybe areas in which you still can improve productivity, new products you're rolling out with GenAI. So what are sort of some of the levers there on the other side to offset some of the investments?

Sure. I think there's probably 2 areas in terms of how I might think about this. There's the efficiency of the actual shopping experience, which is really important in terms of unit economics on a per order basis. And that is something that we've made a lot of progress in over the last couple of years, but I view as a place that we can continue to drive. Now specifically, what I mean by that is everything that makes it more efficient for the shopper to complete your order. That could be the fact that order density actually drives this in the sense that 50% -- over 50% of our orders, the shopper is already at the store or within a mile of the store because of the density that we have. That means when you think about the time it takes them to get there or start shopping is really condensed.

There's many things we do in terms of quite literally getting them through the store, whether that's integrating with the retailer's planogram, so we know where absolutely everything is. We have integrations with electronic shelf tags that light up the item in about 10% of our stores that we shop from, which means that rather than be searching for the shelves, you can really go grab that item right away, the replacements that we have to make sure that you can make a quick decision and you're not texting back and forth with the shopper, really getting through the store. Now you layer on top of that batching of orders, and that really accelerates this even more meaningfully. We've continued to improve our batch rate to the point where even our priority orders in 25% of cases are batched, which is something we couldn't have imagined a couple of years ago because we've gotten so good at it.

So that's really within -- we're still at the top of the P&L on the transaction revenue line, but these are really important things that we can do because it frees up dollars to reinvest in things like pricing and other ways to engage the customer. So more to come on that, but that's been an important source of leverage for us. And then there's sort of everything else, where I think we've just been very cost conscious as we've been growing the business. We've been very disciplined about things like headcount growth around all of our cost items. And you see us invest in areas. We will continue to invest in places where we see growth like R&D, of course, AI solutions, things like that, we think are really, really exciting things that can drive incredible growth for us in the future.

There are some places, though, where we're not looking to drive leverage. Sales and marketing has been one of those areas. That's a decision, but we are seeing great returns on the spend that we're driving in the market. And so not something I'm looking at this stage of the game at this level of penetration given where we are to pull back on. That all said, we've seen great leverage across non-GAAP OpEx over the last while, and I think that will continue. Obviously, we've talked about the pace of improvement moderating as we move forward because we're not in a rush given the penetration of the market to get to our long-term margin targets. I think we made quite a lot of progress. And so we'll continue to improve profitability over time and march towards those targets, but we're not in a rush together.

Let me wrap up on capital allocation. The 3Q earnings, you authorized a $1.5 billion repurchase program, I think a $250 million ASR accelerated program. It's a pretty meaningful percentage of the enterprise value or the market cap. So just sort of remind us like philosophically, how are you thinking about the timing of the repurchases, the focus on like share shrink and sort of a dilution? Like what is sort of the philosophy there?

Sure. It's truly opportunistic in nature. So if you think about just the history of our repurchase program, that's also been the case. I mean if you look back at '24, we were very, very aggressive in part because we had these moments of unlock around the post-IPO lockup period. We did some large private transactions. We had a chance to do another large private transaction in about August of '24. And so we had these very unique opportunities to take advantage of what we viewed as a very dislocated price, and I think that's been proven out.

And then we're continuing to be opportunistic in nature, which is why you see fluctuations quarter-to-quarter. I think what you saw us sort of say effectively through the relatively upsized authorization relative to what we've done in the past is we think that opportunity exists in spades today. And so I would expect us to continue to be opportunistic, but potentially more aggressive than we've been through the course of this year.

All right. Emily, thank you so much.

Thank you. Appreciate it.

Ladies and gentlemen, thank you for standing by. Welcome to Instacart's Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] 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 plan 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, and good morning, everybody. It's great to be here as my first call as CEO, and I appreciate you taking the time to join us. Over the past 6 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 -- make up 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 on how people use our service, improving delivery, speed and reliability and making shopping even more seamless across every touch point. Because of that focus, we built a growing and loyal customer base. We're attracting new customers to Instacart, we're 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 the longer that 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 that -- and it shows that demand for our service remains strong. And all of 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 programs.

So our marketplace is healthy and growing. And then we do what nobody else does. We take all of the innovation and 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 and 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 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 IV 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 paper cards, which will soon be available in nearly 20% of [ Wakefern ] stores. as well as with retailers, including Kroger and Sprouts and [ Wegmans ]. In addition, food storm, which provides retailers with technology to digitize the perimeter file of their stores like the deli and bakery and prepared foods, continues to build momentum with retailers like Ahold [ Delhaize ] Sprouts in 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 agent AI to gain a real competitive advantage across online store shelves, smart carts and more. Every single retailer [ Petatocti ] 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 comes 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 of price. And 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 get access to a growing and durable part of their business, and we have the opportunity to expand from there. And 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 on scale and 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 in 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 to 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 ILS 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. And 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 leaves the foundation for a powerful ads and data ecosystem that delivered over $1 billion of ads and other revenue over the past 12 months.

Now 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 businesses -- 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 services on Wilco, and we recently launched Storefront Pro with Restaurant Depot, a wholesale supplier that sells primarily to food service professionals.

Another example is international expansion. Today, the as majority of our success is in just North America, but we see tremendous opportunity to grow international -- internationally with an enterprise-led strategy primarily focused on storefront, paper and food storm. We know that there's demand for our technologies because we've already started to make inroads in Europe and Australia with Wind shop and with paper 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 ad 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 road map, 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. We 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 introduction of a $10 basket minimum for Instacart Plus 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% was 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 ad ecosystem remains stronger than ever. With our performance reach and diversification, we are confident in returning advertising of the 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, 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 and 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 a lot of questions. Operator, you may begin.

[Operator Instructions] 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, 7 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 of 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 cards and with Food storm.

And the final area that I want to highlight is ads and data. our ad business is very strong and highly performing, and I plan to continue to invest to build an ad ecosystem that really innovates, on platform with our high-performing and strong measurement off platforms 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 odd partners. So I feel strongly that these are going to accelerate our business. And then 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 on a follow-up. On the AI solutions, Chris, I guess how should we think about the monetization model here? And how you're 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, 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.

Yes. Thank you, Colin. For the first part of the question about AI, I mean, it's still early days. We announced our launch last week. Again, we have seen -- I have personally experienced that 100% of the retailers that I've spoken to you so far are excited about this. So we do believe we're on to something. And I just think that it's basically going to be a collection of enterprise offerings that brings AI power capabilities to our retail partners, all of our retail partners, regardless of size, and it's going to connect every part of the shopping journey from how products are discovered online to how shelves are stocked in stores.

And so for retailers and why we believe there's a monetization opportunity for us here because it means things like smarter operations, it means better product visibility with the in-store view that we're creating and in-store intelligence. It means more personalized shopping experience for their customers. So we -- early days, very promising start out of the gate, and we do believe that this is going to be something we can monetize over time.

And for the second part of the question on advertising, look, I'll say I'll start by saying, given the somewhat challenging macro that we're seeing, we are very proud of our Q3 results of plus 10%, which was in line with our expectations. And as we think about our guide for Q4 6% to 9%, at over 10% for the full year, we are awaiting several puts and takes across our brand partners.

So on the one hand, we're seeing real ongoing strength from mid-market and emerging brands. we have seen strong growth from this cohort all year. And then on the other hand, some of our large brand partners are moderating their spend as they navigate a tougher macro environment.

In addition, in Q4, we're up against some brands that leaned in heavily towards the end of last year. All of that said, I'm not satisfied with where we're guiding for Q4, and I'm focused on reaccelerating as another. I'm confident that we can return to double-digit growth next year, and I'm confident in our ability to achieve our long-term target of 4% to 5% of GTV. And this is because of the foundation that we've been laying over the past year with multiple irons in the fire. And I really believe it's a combination of things that are going to get us there.

As a starting point, we are consistently innovating on platform, on site on Instacart, where we can attract larger and larger budgets by innovating and by being laser-focused on driving performance for brands. We have new formats, like the ones I mentioned, shoppable recipes and bundles, but we're also doing enhanced optimizations, including ad relevant systems with LLMs driving stronger sponsored product engagement and higher click-through rates.

But in addition to everything that we're doing on site, we're making significant progress across this ad ecosystem that I referenced. We're up to 240 Carrot Ads partners. Again, that's where we power ad tech on our retailer websites like [indiscernible] who recently launched and on third-party marketplaces like Uber, grocery and retail in the U.S. But we've also signed room delivery, which is a convenience marketplace. And we just signed Bottle Caps, which is an alcohol marketplace. And we have a robust pipeline of other potential partners, which we think can contribute to long-term growth. We also recently launched ads on our paper cards with [ Wakefern ], where cars will soon be deployed at 20% of their stores. And we're also just very pleased with our off-platform partnerships. This is a foundational year for us on a platform with our newest partner, Pinterest, which we announced in Q2 and then TikTok in Q3, where we're the first end-to-end retail media partner to enable targeting and closed-loop measurement.

So when you stack all of these pieces together, combining our high performance on our platform and then extending that high performance onto all of this new supply, we see real growth opportunity over the long term.

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? And what is your go-to-market strategy versus how should we be thinking about your plans for near to midterm? And then finally, 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 the food service. We just launched Cub last week on other retailers. So 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. .

And then 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. And again, they're trying to solve the same problems as the retailers that I talk to in North America, how to build scalable e-commerce solutions, ads and in-store digital solutions for customers.

And 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. in a way that's aligned with our profitability objectives and our ability to deliver annual EBITDA progression. So it is probably we're sharing a little bit more about our approach here. So we're exploring the major markets like Europe, but we're doing that with our existing products like Storefront Pro and Caper and food storm. We're not building a new suite of technologies specific to these markets.

So 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 tend to be super disciplined and extremely focused on how we do that. And Truthfully, this is, I think, 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 abroad.

Great. And I can jump in on your question around framing the impact of EBT SNAP. So the way 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. But 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. And ultimately, 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. And as Chris mentioned earlier, we also are seeing continued momentum from our land and expand strategy with our enterprise partnerships. So 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 2? And where are we today versus your desired end goal on this objective?

And then 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 is anything after 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 is the retailer that brings us up with me. And as a result, we're working with almost all of our retail partners on our strategy and this can take many forms, including servicing deals more aggressively or reducing the markup or offering sale pricing or going all the way to the same as in-store pricing, which is, I think, is what you're getting out with the question.

On [ semis ] 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 markup retailers. We know they retain better. And that's why many retailers have moved. In the first half, we announced that Heritage Grocers has makers parity shops. When full price parity. And now we have several banners testing their way into it in major markets like Nashville and Chicago and Dallas and Tucson. So 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 stock 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.

And then for the third part of your question around our approach. For the most part, we're taking a consultative approach, and 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. And to the extent that we would invest there are many kind of financial puts and takes with retailers, given the breadth of products and services that we have with most of them. So 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 and make the decision and decide how to price their products.

And 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 cards top enterprise partner and the cadence for and looks for those retailers, the six retailers that were highlighted on the multiple platforms. Maybe the exception of most had a dip and then flattish growth for returning to that 10% average. So talk to us about the evolution here as competition ramps up or as the subsidy sort of dissipates here?

Yes, sure. Ron, this is Emily. I can start. I think just to sort of level set on sort of why we included the chart and what we thought was interesting about it. Obviously, we've had a lot of questions around loss of exclusivity and about how our enterprise relationships really solidify us for the future. And so what we looked at here was retailers where we had an enterprise relationship, what happens to the business when we go nonexclusive. And of course, we're quite pleased to see that in those cases, we're able to continue very strong growth across all of the retailers. And as you likely know, the vast majority, over 80% of our business is nonexclusive today. And of the remaining, that is exclusive the majority of those have an enterprise relationship with us. And so again, just wanted to underscore why we feel confident in our ability to continue to grow our business.

Now fluctuations in the chart can be -- there's nothing specific I would call out outside of things like seasonality or launches with individual retailers. So that's what is going to drive some of the fluctuations 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.

And then the 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 guys already provide? Is this the materiality of the AI offering, 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 this and how we're thinking about it. We have assessed the top markets that overlap with where Amazon is 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. And our mix looks good. We're not seeing a shift in basket composition between small and more 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 have been the in-store customers.

And so 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 as us more actively and aggressively engaging in our existing road map 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. And as part of this, we are discussing pricing strategies.

And as mentioned, some of our large retailers are testing price parity pilots right now in some of the major cities that I outlined. But I do think that retailers are keenly aware of what's happening in the competitive dynamic. We're helping bring them solutions in order to address that and 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 that this is going to speed up the entire industry. And the way that we're going about this is very similar to the way that we go about all of our all of our enterprise technologies. We're going to be innovating directly on in tear and then we're going to take that technology to retailers. And we're going to -- when we do these types of things, what we see as 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. And as a result, we do think we can deliver a also relevant in genetic experience for grocery with a great user interface directly on Instacart.

And then with what we called Cart Assistant last week, we will be bringing these conversational capabilities to our retail partners so that they are going to have similar capabilities at the same pace and scale that we're building out directly on our marketplace. And this is going to, we think, enhance the grocery experience in several ways. You could interact with an assistant upfront or you could interact with a digital assistant throughout the journey. So for example, you could give card assistant a prompt around a party for 10 people, and it would help you build a card based on your cost preferences and any other context that you provide about the other guests or you can shop normally and engage as needed.

So for example, at the end of the shop, you could say, check my entire basket for any gluten as an example. And so we're going to take that technology. We're going to make it available to our retail partners in the form of this AI solutions. And that means that we're going to be building a Agentic experiences on retailers owned and operated websites like the ones that 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 kind of concerns out there, but are you seeing any changes from new competition in October?

Okay. Justin, I'll start. 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 nondrug benefits. It increases our order density. It gives us cost and 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. And we're constantly working with retailers to launch a host of new services. But what I can tell you is that both marketplace and enterprise are growing parts of our business, both add to our bottom line both reinforce each other in a virtuous cycle. We're an investment in one, if we make an investment in marketplace, it helps us with our investments in enterprise.

Yes. I think the only thing I would add to that is just that enterprise is not a new part of our business. We're obviously talking about the opportunity for growth. But if you recall back at the time of the S-1, at that time, we talked about how Enterprise was about 20% of our business. So I just wanted to call out that the enterprise economics has been included to date. And so I thought that might be helpful.

Great. And on your -- the second part of your question, just in around 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 is relatively small relative to other e-commerce categories, but 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 -- as I've already said, we're an enterprise platform. And because of these key differences, we continue to be the clear leader in online grocery among digital first players. We're leading in share sales by far, were 3x higher than the next largest digital player. We're leading in new activation GTV where multiple tire and large basket activation, where multiples more effective at converting small basket activations to large baskets. So in my mind, 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 we changed that.

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 mail planning service for consumers, just beyond the weekly grocery delivery service? And how much of this experience needs is dependent on sort of like a 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? And do you think there's a runway to kind of improve the incremental margins for these over time? Thank you so much.

Thank you, Deepak. I'll take the first one around AI tools. So we're 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. And we want to use our rich data set to really capitalize on the rise of our product catalog spans 2 billion product instances were fined in the 17 million unique items. We've completed over 1.5 billion lifetime orders. And that gives us a real advantage to put personalized experience at the forefront of the consumer experience going forward, including the things like deals, which you've called out, we will have the ability to create customized meal plans based on inputs from consumers in the future, and that's all coming.

There's also -- 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, which analyzes customer behavior from -- and dietary preferences to surface that the most relevant products faster. So we've created virtual aisles today, which are live, which are tailored to specific household needs. So if you have a baby or if you have a pet and -- or a dietary need. We were also doing personal replacements, which is showing up today to consumers. That includes incorporating again, dietary needs as well as pricing and past preferences. So 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. So 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 back orders. And what you've seen is that the number of orders that we have per batch has increased by double digits over the last 4 years. So that's been a key focus of ours. 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. And we're now batching about 1/4 of priority orders that, again, allows us to really take advantage of that overall density. The other thing that we focus on is just time to fulfill an order.

And again, the time it takes for a shopper to fulfill an order has gone down by 25% over the last 4 years. So it's these kind of things that we're really focused on. Again, it's really about shaving off seconds or minutes of an order that allows us to get to a place where 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. That said, if I look at the sort of economics of basket sizes since that launch. I'm really, really pleased with our ability to improve the overall profile and really seeing effectively convergence of our ability to be profitable across any basket size. So that allows us ultimately to be the provider that can service any of the consumer needs.

Now we've talked about our strength in big baskets. And of course, we think that's critical to being able to serve the primary use case for groceries for families. But 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. Our basket size is becoming smaller and maybe shopping occasions becoming more frequent. Do you see any of this in kind of 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. In any ways you anticipate to mitigate those impacts.

Sure. Yes, I can start with the shopping behavior. So no, we're really not seeing what I would describe as change in -- I'll say consumer because I think when I think of shoppers, I think, of the person executing the basket in the store. So on the consumer side, which I think where your question was, but correct me if wrong, what we're seeing actually is that large basket growth remains consistent. So it is continuing to be the majority of the market. It's 75% of the market. And so really, what we're seeing is that by reducing the basket size, what we're adding is incremental use cases. And so overall, I think about it more as capturing the full set of needs of the consumer. But the -- in terms of what we're seeing in terms of just general behavior, we continue to see large baskets playing a critical role.

And for the second one on New York, I'll speak to it at a high level, and then Emily can speak to how we're thinking about it financially. So what we know is that New York City casual pass to build that establishes a minimum earnings standards for grocery delivery workers. Mayor Adam did veto the bill, but the council ultimately overwrote it. the bill extends existing earning standards restaurant delivery platforms have been operating under since 2014 to grocery delivery workers. And now we're working with the city during the rule-making process. So it's a little early to determine the impact.

But look, our mission is to help families put food on the table. And the reason we don't support these types of extreme regulations is that they do the opposite. We know that this is going to come at the detriment of customers shoppers in retailers in New York City, customers could see increased fees. Shoppers could see fewer earning opportunities, and they may leave the flexibility to achieve when and where they shop. Retailers will likely see few orders given the cost increase to consumers. But we have done with many regulatory changes over the course of Instacart's history. And we're confident we're going to be able to navigate this one and still deliver on our profitability objectives at a company level. To be clear, 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. So 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 is going to 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 a 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. I mean 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, and we've established a very strong base. We know -- we understand retailers and the types of challenges that they're trying to solve locally in U.S. and Canada. And we believe, based on all of our conversations, that it's the exact same challenges that they're trying to solve in these other markets. And so the opportunity feels right. Again, we're going with our existing set of products Storefront Pro and Caper and [ Feed storm ]. These are built. So yes, we're going to need to invest in the go-to-market motion. But for the most part, we're taking our existing technology, and we're extending that to retailers beyond just North America so that we can continue to grow our business in new markets.

Yes. I think the one thing I would just add just to clarify, the difference that Chris just mentioned is we're building on products that already exist today. What we didn't mention was trying to build a marketplace solution, which I think has a different investment profile, as you mentioned, Steven, than going with what our sort of effectively enterprise-led solutions.

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

Chris, you mentioned in a 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 the Carrot Ads need to grow larger for you guys to be able to reach that target? Any help there would be great. And 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? Kind of what's the plan to grow penetration on.

Yes. Thank you for the question, Andrew. Again, I want to reiterate that we do believe -- we're very confident in our ability to achieve our long-term targets of 4% to 5%. And but I do think it's going to come from a combination of things that are going to get us there.

As a starting point, we're consistently innovating on platform with new formats 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 now broadly available to brands. And then what's going to build on top of that, everything that we're doing on our own platform is just the ad ecosystem that we're building and the foundation that we've been building throughout the last couple of years.

Carrot ads is going to be a big part of our growth engine longer term, right? Again, we're up to 240 Carrot Ads partners today. So we're extending our existing tech and demand on to all of these retailers' sites, and we're continuing to launch more. And then ads on [ Keeper ] is, we believe, very promising. Again, we've just launched ads on [ Keeper ] at [ Wakefern ], where we're at 20% of stores having paper cards and we believe that that's going to be a very exciting use case -- in-store use case, actually, I think it's one of the most exciting omnichannel advertising use cases that exist today. because we have the ability to target customers and work with retailers to deliver personalized ads in the store. And so that is an exciting vector for us. And then again, we're really pleased with the foundation that we've made with all platform partnerships this year and extending that to more partners, including Pinterest and TikTok.

So again, when you take all of these, it's not just one thing. When you take all of these strategic pieces together, that's what's going to drive our long-term growth. We're going to extend our high performance on platform that brands they trust our performance. They trust our measurement, and then we're taking all of that performance to all of these new surface areas where we see real growth potential over the long term.

In terms of Instacart+, so this continues to be a really critical part of our overall strategy. We are focused on doubling down on Instacart+ because these are our best customers. In terms of where we are today, paid Instacart+ members continue to grow, the engagement of those users as a percentage of our monthly users continues to deepen. So that's something we like to see. It has been and continues to represent a majority of activity on the platform.

And then last but not least, I think I would just say that they're more engagement of higher retention than non-Instacart+. And that's why we continue to look for ways to make the Plus membership even more valuable. You've seen us add subscriptions like New York Times Cooking. You've seen us add restaurants delivery on restaurants over the course of the last year. So you can expect us to continue to find ways to make membership even more valuable and drive continued penetration of the membership.

And the next question comes from Jason Holstein 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 like either people who don't have, let's say, another subscription program and again, you can kind of answer that question, however you want.

And then second, it seemed like this earnings season, we heard more commentary from some competitors about deemphasizing large baskets and focusing on 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. In terms of Instacart+ -- sorry, I think the first question was just around whether we think there's greenfield opportunity. I mean I think, look, the reality is we're focused on sort of our own product and service and what we're able to bring to the table. And we know that our membership brings the best of grocery capabilities to users as well as through our partnership with Uber Eats, a leading grocery selection. And so we've seen that be a really powerful combination. And we haven't seen specifically any competitive impacts in terms of our ability to grow those users.

So again, it's really about focusing on the suite of services we provide, which is far and away, best-in-class grocery across selection affordability, quality and convenience. Layering on the restaurants capability and then additional partnerships. The other thing that we try to do is continue to make that membership more valuable, things like we extended family accounts to three members. We have partnerships extended with programs like Chase United, their co-brand cards, the Chase [indiscernible] cards, with in-app monthly credit. So again, we're continuing to find new ways to make these more valuable. But we do think there's continued opportunity to grow our Instacart+ membership base. And again, ultimately, that will drive growth for us.

And 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 toward smaller baskets. 75% of the market is still in large baskets, $75 and above. As I mentioned, we're not seeing a shift in basket composition between the two. We're not seeing meaningful change in our AOV. What I think it's possible that new entrants in these use cases are driving incremental small baskets online, and I think those baskets are coming from the physical store, which is what we're seeing with the Amazon baskets.

I'll also just point out that although we're exceptionally strong in large baskets, we do 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 $10 minimum basket, for example, and we're successful in small baskets. As Emily mentioned, we drive efficiencies. We're also converting small basket users to large basket users at multiple times higher than others. And so yes, we're not seeing an overall trend towards small basket, but it is an area that we also do well in.

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

I'm excited to have the team from Instacart here. We've got Chris Rogers, now CEO of Instacart.

Before we get started, I'm going to read a safe harbor. Some of the statements made today by Instacart may be considered forward-looking. These statements involve a number of risks and uncertainties that could cause actual results to differ materially. Any forward-looking statements made today by the company are based on assumptions as of today, and Instacart undertakes no obligation to update them.

Please refer to Instacart's most recent Form 10-Q for a discussion of the risk factors that may impact actual results. Chris may also reference certain non-GAAP financial metrics, and reconciliations are included in Instacart's shareholder letters which are available on Instacart's Investor Relations website.

Okay. Thank you for sticking with me through the safe harbor. Chris, welcome to your first Communacopia Technology Conference. Thanks for being here.

Yes. Thank you.

Okay. First, Chris, congrats on the new role. You are Instacart's CEO. You were elevated that role from Chief Business Officer. Why don't you level set for those who don't know you in the audience? Give us a little bit of your background and your history with Instacart.

Sure. Well, first of all, thank you, Eric. Thank you for the congrats. Thank you for having me. I'm really happy to be here. Building a strong relationship with the investor community is important to me. So I do appreciate this opportunity.

I'll start with a little bit of my background prior to Instacart, and then I'll talk about my Instacart journey and then -- and a little bit on my approach. I started my career at Procter & Gamble, leading relationships with large national retailers and local regional retailers, really learning how to build a business at one of the largest CPGs, and then I moved to Apple. And I spent 11 years at Apple, first leading the consumer business in Canada and then the iPhone business in Canada in an intensely competitive market. And then ultimately went on to be the Managing Director for Canada, so leading the team and the business there.

In 2019, I made the decision to leave Apple and join Instacart. I was really drawn in by just the massive market opportunity and the ability to transform and innovate this $1 trillion industry. I started with a focus on retailers with a mandate of deepening our retailer relationships and expanding our retailer relationships, which I was able to do from 300 when I started to 1,800 retailers today. And perhaps more importantly, we were able to grow our enterprise platform from being, I would say, very nascent when I started in 2019 to what I would consider to be one of our most critical advantages today.

Also been leading our ads platform, our retail media network, so including R&D, so product and engineering and sales and operations on the ad side, putting multiple irons in the fire there to make sure that we're a Top 5 Retail Media Network, which we are, and we expect to continue to be in the future. Also led our partnerships team. So think partnerships like our partnership with Uber Eats as an example on our platform. M&A, which is -- we've been buying companies like Wynshop, which is a grocery technology company. We bought Rosie, Eversight, Caper, as you probably know, also led corporate strategy, some of our longer-term bets like Instacart for Business.

So that's been my journey at Instacart. I think looking ahead with me in this role, what you can expect is, on the one hand, continuity in our strategy and our vision and a real commitment to ongoing profitable growth. I believe in our strategy. I helped to craft this strategy with the leadership team. And clearly, it's working. But on the other hand, and I want you to hear this from me is I am not here for just the status quo. My objective is to really extend our lead in online grocery and continue to win disproportionately as I come in.

Well, Chris, maybe building on that answer, what do you see as the most compelling opportunities in front of you that can result in that level of accelerating growth you're aiming for?

Yes. There's really 3 things you're going to see me double down on. One is affordability. Affordability is probably the biggest unlock to grocery adoption -- online grocery adoption. We know that it's the #1 reason that people churn off of Instacart. So that's going to be a large focus. We're doing quite a bit in that space. We're doing loyalty integrations. We are doing weekly flyer integrations. We've integrated with SNAP, but I want to go -- I want to be much more aggressive in the space. And for us, that includes working with retailers on their pricing strategies.

Retailers decide how to price up on Instacart. We want to work with them to price at or just above in-store prices. And it makes sense for the retailers because we see price parity retailers outperform marked-up retailers on the platform. And we're going to come at this a couple of different ways. One is we're going to really show the business case to retailers and show them the compelling reasons why they should do this and also just make sure that we're educating them on the broader digital landscape.

And then the second thing we're doing is we're going to continue to test and iterate directly in our app, different merchandising mechanisms for us to highlight price parity retailers, things like stores that help you save in those types of banners. So that's one is affordability, and you'll see us lean in that area.

The second is our enterprise platform. So this is where we actually build the technologies for retailers on their owned and operated sites. It's a growing part of the industry, and it's an area that we really excel as a company. We have best-in-class technology, including Storefront Pro, Storefront. We do fulfillment of pretty much every -- any flavor for retailers, pick and deliver, pick only, deliver only. We have an app, a picking app that many of our retailers use. We have Carrot Ads. This is where we extend our ad tech and our ad demand onto retailer sites, Caper Carts, Carrot Tags and in-store suite of solutions.

So this has been going really well. We have momentum, but I just see so much opportunity for us to do more in the enterprise space. It kind of comes in a couple of different forms. One is signing and launching new retailers. We've built our tech stack in a way that we can now launch quickly with retailers. We launched 40 retailers in the first half of this year. That's more than we launched in all of 2024. And then we're also very strong at what we call land and expand, where we cross-sell our products, our enterprise suite of products to multiple retailers that we're already working with.

And then the final thing I just would want to call out on the enterprise side is I see an opportunity for us to expand beyond North America for the first time. When we bought this company, Wynshop, it kind of exposed the fact that there is real product market fit for our enterprise suite of products beyond -- they operate in Ireland, they operate in Australia. We've been in Europe, and we see that as an opportunity area for us.

And then the last one that I'll touch on quickly is just accelerating our ads and data revenue. We're building an ads ecosystem for our brand partners. We're really trying to unlock value for brands. And this -- we have best-in-class technology on platform, including with our performance and our measurement capabilities. We've been diversifying our demand, working with the largest CPGs, of course, but also working with the mid- and long-term -- long-tail brands. And then we've been building out this off-platform portfolio to really extend our scale and reach. We're at 240 carried ad partners now. We've gone off-platform in partnerships with The Trade Desk and Meta and Google and Roku and NBCU, and we just announced Pinterest. So you're going to see us extend our reach in that way.

And then finally, I mentioned data earlier. We haven't really monetized our data up until now, and we've just recently launched our Consumer Insights Portal, which we call CIP, which is giving brands access to some of our first-party data on the marketplace for them to inform their business. And we see that as an interesting 0 to 1 bet. So those are the 3 areas that you're going to see me accelerate.

Okay. Good stuff. And I think we're going to come back to a couple of those topics because I just want to mine them a little bit deeper as we get through the conversation. But I think as you get to know the investment community better, you're going to find that most people have an acknowledgment that there's a big market opportunity out there as delivery moves more into these ecosystems. You guys have a unique leadership position with respect to this category as well. How do you think about the unique and durable position you sit in today? And how much room is there for competitive density against the market opportunity?

Yes, it's a great question. You're absolutely right. It's a $1.2 trillion market, and it's only penetrated at 13%, and that's only the U.S. so it's massive. And we are the category leader when you look at share of sales. In fact, we're 3x larger than the next digital-first partner, so player in the space. So for us, our objective is to really drive online grocery adoption. And we want to do that by meeting all of the customers' grocery needs. And that includes really nailing big baskets, which is so important.

75% of the sales in grocery and even more of the profits exist in large baskets, that's baskets over $75. And this is where we really excel. These are the types of shops that have over a dozen items in it, have meat and seafood and produce and dairy. It's what shoppers go -- consumers go to, to stock up their fridge and stock their pantry for the week, and this is where we're so strong.

But to get to your question of why are we so strong in large baskets and what makes us unique and durable, it's really -- we focus on the things that we believe matter to consumers the most. And that's one, selection. Retailers have been building their brand and building trust with retailers or with consumers for sometimes generations. And we have 1,800 of these retailers on our platform. And we know that this matters because the average consumer on Instacart shops on average from 5 retailers. Our Instacart+ members shop at almost twice as many. Also, the 1,800 retailers that we have a compounding effect because so many grocers have tens of thousands of SKUs. And so we have 1,800 times tens of thousands. You can get pretty much anything that you want when you visit Instacart for grocery. So that's kind of the first area of selection.

The second one is quality. We are maniacal about quality, and we're obsessed with making sure that customers get exactly what they order or the best possible replacement. We have multiple work streams on quality, including in very close partnership with retailers. We leverage the fact that we have the scale. We've done 1.5 billion orders to date. If you look at how often we're sending shoppers into some of our largest stores, we're sending them on average 14 times per day. So we know what's in stock. We learn from that, and we drive that scale.

I'll also add that quality matters so much when it comes to perishables specifically because I think you need to trust your shopper to pick your produce and your meat and your seafood and customers trust us. And it's because we have this amazing shopper fleet. We have -- on median, our shoppers that have done over 1,000 shops are now doing almost 2/3 of our shops on Instacart. So quality matters a ton, and we are nailing quality.

The third one is speed. Convenience is the #1 reason why consumers come to Instacart. We know that we are fast. 75% of the orders now -- the delivery orders on Instacart are on demand, which means they're delivered on median under 90 minutes and 25% of our priority orders are now delivered under 30 minutes. So we are fast. But again, when it comes to perishables, we know that predictability matters quite a bit, knowing exactly when your order is going to land. And we know that's important. I don't think people want their meat and seafood sitting on their front porch because it happens to get delivered when you're not home.

And then the fourth one, the other thing that makes us durable is all of the work that we're doing in affordability, and I touched on this a little bit, but loyalty integrations as an example. This unlocks so much value for consumers because consumers get loyalty pricing in some cases, they get loyalty rewards. They get sometimes fuel points. So there's a win for the consumer. Retailers love it as well because loyalty engaged consumers actually spend more. They have higher AOVs. They have more items in the basket. So you're going to continue to see us double down in that area as well. So those are the big differentiators for us.

Okay. Building on the competitive theme, Amazon obviously made some announcements recently about same-day delivery and perishables. Can you help share your take on what you're seeing in some of those pilot markets, how you might respond to that competitively, how it might change the landscape?

Yes. So first of all, we weren't surprised by this at all. We've been busy building our business, and we know that competitors are trying to break into grocery. But to the first part of your question, what we've seen. So we've studied the pilot markets closely. And what we've seen is that our GTV growth in the 3 pilot markets is in line with our growth in the overall U.S. Also, our Instacart+ activations, our Instacart+ engagement, our Instacart+ churn is all in line in the 3 pilot markets as the balance of the U.S.

When we look at this experience and going off what we've studied, but also what they've said, it looks like there's a few thousand perishable SKUs. It looks like delivery windows of 4 to 5 hours, which you could believe will be conducive to add-on orders or small baskets. And again, we feel very differentiated because of our strength in large baskets, things like coming back to our selection, a few thousand SKUs at Amazon relative to -- I mean, we have 17 million unique SKUs now on Instacart. And we know that matters because 70% of our customers have at least one dietary preference. And then they trust us because of our speed and our quality.

But to the question of what are we going to do differently, we are going to use this as a routing cry with our retailers. In fact, I think with a lot of our retail partners, I was their first call when that announcement happened, they were trying to understand, okay, how do we react competitively, and we are very tight with so many retailers in the balance of the market. And so what you're going to see us use this as an opportunity to get deeper to use our technology in more ways to help retailers compete. We have a little bit of pattern recognition when it comes to this because when Amazon bought Whole Foods in 2017, that was an accelerant for the overall industry, but also our technology on both the marketplace side and on the enterprise side. So you can expect us to continue to use that as a routing cry with the rest of the retail partners that we have.

Okay. You talked earlier about affordability. Reflect a little bit on how you view the Instacart consumer, what you're seeing in trends from that consumer today and how affordability might evolve that consumer in the years ahead?

Yes, it's a great question. I think this might surprise people that believe that our consumer is more affluent when actually we are in line with the U.S. in terms of things like income bands and urbanicity. And so -- sorry, what was the second part of your question?

No, I was saying the Instacart consumer today, trends around that consumer and how affordability can change the consumer for the longer term.

Yes. So when we look at consumer trends, we aren't seeing anything that's unexpected there. The way that we gauge this is we look at our operating metrics. And our operating foundation is super strong. We're looking at cohorts in 2025 larger than pre-pandemic cohorts. Our retention is up year-to-date year-on-year. In fact, it's especially up for our new 2025 customers. So customers that are coming to our platform in 2025 are retaining better than in the past. We're driving order growth. Users are up. Order frequency is up, Instacart+ engagement is up, paid members are up. So when we look at kind of our core fundamentals, they are very strong.

But when it comes to can we retain more, can we resurrect more consumers, can we retain more consumers, you're right that affordability is going to be a key lever. And you're going to see us just do everything in our power to continue to lean into this. The initiatives that I talked about, we're going to also have, I would say, more delivery options like no rush and next-day delivery. And then we're going to continue to really work with retailers on price parity because we know how important that is.

In the past 12 months, on average, price parity retailers have grown 10 percentage points faster than marked up retailers. And we're also seeing on our platform that users that are shopping on price parity retailers are retaining better. So the data is suggesting that this is a strategic move for our retail partners. And we're seeing retailers move. In Q2, we announced that Schnucks went to price parity, heritage Grocers. We launched Patterson Group in Canada at price parity. Walmart Canada lowered their markup. Costco in Canada -- or Costco Same Day lowered their markup. So we have momentum, and you're going to see a big focus on continuing to build on that momentum.

Okay. You referenced earlier the enterprise side of the house, which I, my own opinion, doesn't get enough attention. We write about it, but it doesn't get as much attention from investors. So I think laying out your key strategic priorities on the enterprise side, I think it will be pretty critical to this conversation. And then one in particular, talk a little bit about what the learnings have been from Caper Carts in terms of what that might do to the business over the long term.

Yes. Well, first of all, I'm so glad you're asking about enterprise because I agree, I feel like this is the most underappreciated part of our business. And this is just very core to who we are. We are a retail enablement platform. In fact, our stated vision is to power every grocery transaction in-store and online using our technology. And that's not just on our marketplace. That is in partnership with retailers to build for the future.

And this is just so highly strategic as well because we're innovating on the marketplace side, where we're doing hundreds of millions of orders and then we're taking that tech and we're providing it to retailers. And it's very difficult for retailers to build this without that kind of scale. We're taking all of our learnings and our fulfillment efficiencies and all of the various elements of that experience, and we are giving it to retailers to use. And so it's highly strategic.

If you were to break down kind of the core areas and how to think about the enterprise platform overall, we have our storefront technology. We're up to 350 e-commerce storefronts that we power. And that's not just small and long-tail retailers. That's Publix and Costco Same Day and Sprouts and then hundreds more. And then for those retailers, in almost all cases, we're doing fulfillment. So our shoppers will go in and they'll do the pick and deliver or they'll just do the delivery only or they'll do just the pick only.

Lots of retailers use our picking app. If a retailer happens to have built their own front end, their own e-commerce experience, then we can also power the fulfillment only with our shopper network. So take Kroger as an example, they built Seamless, and we do the same-day delivery for Kroger. We go in and we do the pick and deliver for them on their owned and operated properties. Same with ALDI. ALDI uses our picking app. It goes on and on.

And so when you start talking about the fact that we're partnering with retailers on the core part of their e-commerce, it unlocks so much strategically and operationally for us. So we have first seat at the table. I have multiple top to tops. We do QBRs. We have joint OKRs, joint road maps. We have access to a growing part of the market. So imagine you live in Florida and you've been shopping on Publix your whole life and then you want to place your first online order, you might go to publix.com. Well, that's us that powers that. It drives order density for us across marketplace and enterprise.

And of course, a really big unlock for us is this ads concept where we can launch Carrot Ads on these sites. Almost all of our new retail partners that are lighting up storefronts with us are enabling our ads platform, and they love it. I had a retailer recently tell me that the amount that I'm writing them a check for the ads business is larger than the SaaS fee that they're paying us for the storefront. So it's a major unlock.

And then as we get deeper in the tech stack and we have vertical integrations and POS integrations coming back to our ability to cross-sell, it's really powerful for us to be able to then go and sell things like FoodStorm, which is our catering software. We now have hundreds of catering.coms, which is powering consumer experience for delis and bakeries and floral and catering overall. We just last week announced a partnership with Ahold Delhaize, where they're going to be using FoodStorm for Food Lion and the Giant Company and Giant Foods. So we're going to continue to cross-sell our products in that way.

And then Caper, which you touched on, we're really pleased with the progress on Caper. We're now in 100 cities in 15 states, including internationally. We have Kohl's in Australia. We just this morning announced a pilot with Morrisons in the U.K. and it's going well. I think some of the learnings to your question would be consumers love it. Consumers love the product and love the experience. Retailers also love it because it can help digitize their consumers. There's not a lot of mechanisms to do that. It can provide advanced personalization. There's an ad surface area for them. So they're happy about the idea of monetization. There's the potential to grow the basket. So retailers are really excited about it as well.

And then the final thing I'll just say on the enterprise business, I know I'm going on, on this because I just -- again, I feel like it's such a strategic part of our overall business is we've built all of this in a way that is modular and it all just works together. So retailers can pick and choose the items that they want to meet their needs as they're coming online and as they're digitizing their consumers. And we've -- so we've built it in a way that really allows us to scale in a way that's tailored to retailers.

Yes. I really appreciate it, Chris. I think that I agree with you, and I think it's important to get into that level of detail. Maybe a quick 2-parter on advertising. The shorter-term question is we live in a volatile macro environment, you're exposed to advertising dollars. You have a mixture of large and emerging brands advertising. What are you seeing in the macro environment with respect to ads right now? And then I'll come back to a longer-term question on ads.

Yes, it's a good question. So as a reminder, I've been leading our ads platform for some time. So I talked to CPGs, large, small -- including small brands. And what I'll say is pretty consistent with the past. I think there was a lot of optimism. The tone was very positive coming into 2025. And then around, I want to say, March timing, quite a bit of uncertainty introduced into the market, tariffs, obviously, but also regulation changes around food diets and SNAP. And all of that created quite a bit of pressure for CPGs to navigate whether or not they were going to hit their profitability targets.

In addition, there are also consumer shifts, consumer trend shifts in the market. So for example, high-protein breakfast foods are in, high-protein snacks are in, low sugar, everything, natural sodas. There's been a general shift away from ultra processed foods as an example. So all of that is basically putting brands in a bit of a wait-and-see approach. We were very happy in Q2 that we were able to we were able to hit our 12% year-on-year on ads and other despite the fact that one of our largest brands pulled back in that quarter, even though there was all that uncertainty. And in Q3, we're guiding to in line with our anticipated GTV despite some of the macro uncertainty and the volatility. So we're pleased with that.

Okay. Building on the short term and aiming our direction towards the long term, what do you see as some of the critical priorities to build and scale the advertising business in the years ahead?

Yes. So we think about this as building momentum across our portfolio of key initiatives. And our ultimate goal, as I mentioned earlier, is to build an ads ecosystem that really unlocks value for brands across multiple surfaces. It all starts with performance and measurement, especially given the macro I just described. Brands need to really feel like their next dollar is working for them, that is performance. We are highly performance. We have, on average, a 15% sales lift. We have leading rollout, leading click-through rate.

And that's because on our platform, we are really innovating, including with AI. We're constantly using AI to improve the experience for our brand partners. As an example, we've launched AI landing pages. We just launched a new recommendation engine directly in our ads manager. We have what's called universal campaigns where you can take one budget and one campaign and we'll automatically extend that across multiple formats like sponsored product and display. So we're continuing to innovate.

We recently launched a new sales velocity metric, which is a new to shelf, where you can drive awareness and sales on brands that are new to shelf, and we're seeing really exciting results coming out of our pilot, a 6.5x lift of that product. So the first thing is innovate, drive performance, drive industry-leading measurement. And then what you do -- what we're trying to do is diversify as much as possible, work with as many brands as we can, up to 7,500 brands that we're working with today. So that's largest brands, all of the large CPGs that you would expect, all the way down to emerging brands on the platform. We're a great solution for them.

And then from there, it's about extending your scale and reach to collect more budgets, but also just to unlock more value for brands going forward. And this is where Carrot Ads plays a significant role. Again, 240 retailers use Carrot Ads today, and this is going very well. We recently launched with Uber Eats in the U.S. on their grocery and retail experience. We launched with Thrive Market. We recently announced that we're working with Hy-Vee on RedMedia. I think this week, we actually announced that we're going to be launching that within a week. So that's continuing to go well.

And then with our off-platform partnerships, we're just continuing to do more, expand our partnerships and go deeper. So for example, with The Trade Desk, we're the, I think, the first and only retail media network that's embedded their grocery selection directly into their self-service tools to drive more value for brands. And we recently announced Pinterest, where you can now go to Pinterest and use our first-party data to plan your campaign. And then soon, it will be shoppable directly back on Instacart.

And then the final piece of this kind of build here is the data that we're sitting on, which, again, I've already touched on, but we have digital-first robust, very valuable data. We're launching this in modules that unlock quite a bit of value and leverage our uniqueness. So just to give you a sense of some of the uniqueness that we offer here, we have a module that talks about substitutability. And if you're out of stock, is your product substituted, brands can take that data to retailers. We talk about the impact of price and promotion on growth. We talk about we have path to purchase. We have basket affinity, all of the types of things that we think are really going to appeal to brands, especially with an AI's future when the brands with the best data are going to win.

Okay. We only have a few minutes left, but I do want to hit up on a couple of topics quickly. I'm contractually obligated to ask about AI because I'm running a technology conference. So with AI, just talk -- give us a few examples of how you're implementing AI in the company and how you think about AI as part of your broader strategic priorities.

Yes. I think it's fair to say that AI is part of our DNA at this point. And being AI first is fundamentally changing how we're operating as a company. We're using it throughout the organization. In Q2, we cited the fact that 80% of our code was AI assisted. This is just increasing the velocity for our engineers. And what we're seeing is mergers are up 30%. This is allowing us to move faster, launch products faster.

So on the tech side, it has been a key enabler for us to accelerate our output there. But we're using it everywhere. We're using it in operations and support. We're using it in sales and marketing. The sales team is using it actually to generate outbound e-mails to the sales teams. We're using it in G&A. We are -- the legal team is using it on inbound e-mail. So we're using it throughout. But really with all of that loss when you're AI first, we're really focused on the consumer experience and what that can unlock.

We launched Smart Shop, which is an AI-powered personalization engine, which looks at customers' habits, how much -- what do they order, do they have a dietary preference, and we're tuning the relevancy for those consumers in real time. So just to give you one example, we launched last quarter virtual aisle. So again, we're looking at the household, the household needs like do you have a baby, do you have a dog or a cat, do you have dietary preferences in the house, and we're tailoring the aisles for that specific consumer. And what we're seeing is that consumers are engaging with this and they're fast to take items off this virtual shelf because we're nailing that experience.

And then on the ad side, we're using it to unlock value for brands in so many different ways. To go one layer deeper on this recommendation engine that I mentioned that unlocks value for brands. This brands can go in and it will automatically optimize their campaign performance for their objectives. And it will find things like, okay, you don't have images for certain items in your catalog. So we're just using it in so many places. It's core to our DNA, and we're excited about what it's going to unlock for us.

Okay. I know we only have a few minutes left. But maybe a bigger picture question just to bring us home on as you move into the CEO role, as you partner with the CFO and as you bring these messages back to the Board, maybe the balance you want to strike. We've talked a lot in this conversation about growth initiatives, where you want to take product, where you want to take platform. How should we be thinking about your philosophy around balancing growth investments, incremental margins and capital allocation broadly as a company? Just to end on the big picture question.

Yes, it's a great question. I think with me in the role, you can expect -- I'm making a commitment to long-term profitable growth, annual progression of adjusted EBITDA. That said, we are the category leader in this massive underpenetrated category. We're not rushing to hit our long-term profitability targets because we want the flexibility to be able to reinvest in growth.

And when you look up and down our P&L, we have lots of levers that allow us to take a portfolio approach. So for example, we can drive efficiencies throughout the organization, and then we can reinvest that in short and medium and long-term growth. So for me, it is a balance. I am committed to long-term profitable growth and annual EBITDA progression, but I also want the flexibility to be able to invest in growth where -- to capture the massive opportunity. And then on your capital allocation question, our continuity in our strategy here.

So there's kind of 3 things that we think about on capital allocation. One is, again, reinvesting in the business and having the flexibility to do that. Two is maintaining some firepower for strategic M&A that could be complementing our existing products, but it could also be bringing in a new product and using our enterprise machinery to sell that product. So there's various M&A opportunities, we think, and we want the flexibility to go after that.

And then finally, it's going to be saving some further firepower to opportunistically repurchase shares, which we've been doing. In the first half, we bought -- we repurchased $205 million of Instacart stock. And so that's how we're thinking about that.

Yes. And super consistent with what I think investors have heard from the team, especially over the last 12 months. So I appreciate you putting your view on that. Chris, thank you so much for being part of the conference. Really appreciate the opportunity to have the conversation. Please join me in thanking Instacart for being part of the conference.

Good day, and thank you for standing by. Welcome to Instacart's Second Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now hand the conference over to Rebecca Yoshiyama, Vice President of Investor Relations, Capital Markets and Treasury.

Thank you, operator, and welcome, everyone, to Instacart's Second Quarter 2025 Earnings Call. On the call with me today are Fiji Simo, 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, impacts from macroeconomic conditions and our future performance and prospects, including our expectations regarding our financial results. 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'll 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 Fidji for her opening remarks.

Thanks, Rebecca, and hello, everyone. I hope you had a chance to read my shareholder letter, where I highlighted yet another strong quarter for Instacart. Our performance reinforces how central we are in helping family save time money and effort when it comes to putting food on the table and the vital role we play in building the technology that will power the future of grocery together with our partners.

While this is my last earnings call as Instacart's CEO, I can't imagine a better time to step aside. The strength of our business and the opportunities ahead make me incredibly confident in the future we build for these companies. It's [indiscernible] firing on all cylinders. We've extended our supply advantage by building innovative technologies that make our service easier to use and more affordable while deepening our retail partnerships and helping retailers grow faster. This includes launching personalized shopping services, family accounts, loyalty integrations and digital [indiscernible] to higher frequency offerings like our restaurant partnership with Uber Eats, an industry-leading $10 minimum basket size for Instacart plus members to get wave delivery fees. Together, our efforts are driving strong user growth and higher order frequency while also delivering better retention, especially among new 2025 customers compared to last year.

Paid Instacart+ members are also growing and that engagement as a percent of monthly users continues to deepen too. We're also for selling orders more quickly and accurately an exceptionally tough challenge when it comes to big basket grocery shopping. This is where our technology, operating scale and data really set us support, whether it's AI-driven inventory prediction, new personalized replacement models, store planograms or real-time receipt scanning to catch issues were relentlessly improving every step of the process from helping you place your order to when it arrives on your doorstep.

In addition, experienced shoppers who have completed a median of over 1,000 Instacart orders now shop for nearly 2/3 of our orders. Together, over the past 4 years, these advantages have helped us complete orders approximately 25% faster while achieving all-time highs in sound and fill rates. Fulfilling customers' desire for convenience while ensuring they get more of what they order keeps customers coming back to our service and gives us a strategic advantage that is incredibly hard for competitors to replicate.

Another one of our biggest strength is our interconnected ecosystem. Improvements we make on our marketplace fit directly into our enterprise solutions and vice versa. -- creating a virtuous cycle. This allows us to offer scalable, flexible tools to help retailers innovate and compete, especially at a time when the rate of technological change is only increasing. This is evident in the velocity at which we are onboarding new store from partners, and our capabilities are also benefiting big B2B players too, like Costco business centers across North America.

With in-store technologies like Paper carts and Carrottags, we're creating omnichannel solutions at bridge digital and physical shopping. Paper carts, for example, are now deployed in over 15 states and are growing globally with retailers like ALDI and [indiscernible]. It's still early, but I'm incredibly optimistic about the role Instacart will play as the retail enablement partner that will transform omnichannel retail and accelerate growth across our ecosystem.

Because of all our key advantages, Instacart continues to be the clear share of sales leader amongst digital-first players based on third-party data. To put a finer point on this, our share of sales is more than 3x larger than the next player, and we continue to attract the most new GTV to the online categories. Our leadership position is driven by our ability to meet customers' full grocery needs, which means winning a big basket $75 an up because this is worth 75% of grocery sales and even more of the profits consistently lives.

We continue to activate big basket customers at rates multiples higher than others, and we are also far more effective at converting small basket customers into big basket customers. When looking at our top 20 retailers that have gone nonexclusive, we see our growth on other platforms, eventually plateaus that grocery basket sizes remain under $75, and we remain the share of sales leader among digital first players that is retailers. This indicates to us that these players are fundamentally serving a different use case and further reinforces the importance of our deep retail of integrations and Enterprise Advantage.

Sprouts in particular, is a retailer that is more leaned into our services. And based on third-party data, we continue to fuel the strong majority of their online sales while helping them grow faster than our overall platform too. Based on what we've seen to date, even if all our retailers were to sit on other marketplaces, we remain very confident in our ability to remain the clear category leader amongst digital first players. Overall, the strength of our operating model reinforces our ability to deliver value for retailers and customers in addition to strengthening our Instacart ads platform.

Over the last 4 years, we scaled advertising and other revenue to now have $1 billion in annual run rate while expanding from now over 4,000 active brand partners to over 7,500. By continuing to deliver leading performance and attracting more brands to our ecosystem, we are making our platform more resilient and we're driving more value to [indiscernible] partners and extending our scale advantage as a top 5 retail media network.

Beyond our platform, we're also helping brands more effectively attract customers on partner sites like Google, Meta, Pinterest, the Trade Desk in addition to now monetizing our consumer insights data, which we believe will become even more valuable as AI transforms our business operates. Our strong financial foundation and operational discipline drive all of this. We've grown gross profit per order to over $8 in Q2. We've achieved this through our relentless focus on scale and efficiency, which includes batching more holders and shaving seconds and pennies off of our delivery cost per order.

At the same time, we've made aggressive but disciplined reinvestment into our business as well as deliberate capital allocation decisions. We've made strategic acquisitions to accelerate the growth and capabilities of our enterprise offering and cumulatively as of the end of Q2, we've bought back over $1.6 billion worth of shares clearly demonstrating our confidence in our ability to execute.

Finally, I have to highlight AI once again because it's built into our DNA as a company, improving our customer experiences enabling faster product launches and making our teams more impactful. More than 80% of the code we deployed in Q2 continues to be AI-assisted and now we've also seen the volume of code deployed per engineer growth significantly with average mergers per engineer up 30% year-over-year. We're also using AI to automate code reviews and reduce tech depth while transforming nontechnical functions. For example, our sales team has tripled account outreach to high priority accounts which resulted in twice as many meetings booked and our legal team is spending significantly less time aging weekly e-mails.

Becoming an AI-first company has fundamentally changed how we operate and we're just getting started. As we look ahead, I could not be more confident in Chris Rogers as he steps into the role of CEO. He has played a pivotal role in everything we've accomplished from scaling ads and enterprise partnerships to developing new growth strategies. Our business would not be what it is today without him, and that's why he's a perfect person to lead Instacart into its next chapter and to further accelerate our lead in the years ahead. I know he's looking forward to stepping into the role and meeting with investors over the coming weeks, and I can't wait to see the impact that he had in this seat.

I want to see a deep thank you to all our shareholders for your confidence and support. It's been an immense privilege to serve as CEO over the last 4 years. Thank you, and now I'll pass it over to Emily to cover our financials.

Thank you, Fidji. It's been an honor to work with you, and on behalf of the team, we're grateful for the incredible vision, strategy and edge you've established in Instacart. There's so much momentum for us to build on, and I'm confident in all that's ahead for us. Now let me provide a bit more color on our most recent financial results and outlook. We delivered strong Q2 results across the board. We grew GDV by 11% year-over-year, driven by 17% growth in orders. which came from both order frequency and user growth.

As we anticipated, our average order value decreased by 5% year-over-year, primarily due to the addition of restaurant orders and our lower basket minimum of $10 for Instacart+ members, partially offset by growth in basket sizes elsewhere. Transaction revenue grew 11% year-over-year, held steady at 7.3% of GTV year-over-year, an increase from 7.1% quarter-over-quarter. While this sequential expansion was primarily driven by shopper efficiencies, as a reminder, we expect this metric may fluctuate quarter-to-quarter as we reinvest in growth opportunities and manage multiple levers across our P&L.

Advertising and other revenue grew 12% year-over-year, modestly outpacing anticipated GTV growth as we expected. This performance demonstrates the increased resiliency of our ad platform as our diversification efforts are working. For example, in Q2, one of our largest brand partners pulled back from some of their ad spend due to macro uncertainty and reasons specific to their business. A year ago, this pullback would have decreased our advertising and other revenue year-over-year growth rate by several percentage points. But as you saw in our strong results, we were able to more than offset this pressure with growth from emerging and midsized brand partners.

In Q2, advertising and other revenue was 2.8% of GTV, which remained flat year-over-year, even as we've scaled restaurants, which contributes to our GTV, but is not advertising addressable. Overall, profitability remains strong. GAAP net income was $116 million, up 92% year-over-year, and adjusted EBITDA was $262 million, up 26% year-over-year.

We also generated operating cash flow of $203 million, a decrease of $41 million year-over-year, primarily due to fluctuations in working capital. On a trailing 12-month basis, operating cash flow was up 21% year-over-year. In Q2, stock-based compensation was $105 million, up $39 million quarter-over-quarter, which we expected due to the timing of our annual equity refresh grants. We anticipate stock-based compensation to be lower in Q3 versus Q2, primarily due to just over $20 million of reversals associated with previously announced executive departures.

In Q2, we also bought back $111 million worth of shares and authorized a $250 million increase to our buyback program. We ended the quarter with $357 million of remaining buyback capacity and approximately $1.7 billion in cash and similar assets on our balance sheet. Looking ahead to Q3, we anticipate GTV to range between $9 billion and $9.15 billion, reflecting year-over-year growth of 8% to 10%. During this period, we expect year-over-year orders growth to continue outpacing GTV growth, with some moderation compared to Q2 as we lapped the first full quarter of restaurant contribution.

We're also guiding to Q3 adjusted EBITDA of $260 million to $270 million. This reflects our expectation of advertising and other revenue growing year-over-year, in line with anticipated GTV growth in the period. a solid outlook given the cautious approach some large brand partners are taking in today's macro environment. This also highlights our continued ability to deliver year-over-year adjusted operating expense leverage. We remain well on track to achieving year-over-year growth in adjusted EBITDA, both in absolute terms and as a percentage of GTV in 2025.

Overall, our business continues to perform strongly, and we are well positioned for long-term success. With a solid foundation of operating and business fundamentals, we are making deliberate investments to further drive profitable growth and strengthen our leadership in the category. With that, we will open up the call for live questions. Operator, you may begin.

[Operator Instructions] Our first question comes from Eric Sheridan with Goldman Sachs.

Thank you for everything and wishing you the best in the roles ahead. I wanted to come back to some of the comments Fidji you made about the competitive landscape more broadly. When you think about the array of supply that the company is bringing into the ecosystem and widening out experiences that consumers have. Can you talk a little bit about improvement in conversion and frequency of behavior and some of the things that we should be thinking about in terms of LTV across the landscape as we look at how the company evolves in the years ahead.

Thank you so much, Eric. Yes, so we think of supply in many different ways. First is continuing to onboard more retailers, but also it's going deeper with existing retailers, and that has been a very, very large source of our growth without that to power their enterprise sites, expanding with them into new categories like alcohol, enabling more services with them like BT Snap. All of this deepening of integration is a way to unlock more selection and more services with retailers in general. In fact, this is very much working because with all of the technology improvements we've made to our enterprise platform are now able to onboard these retailers much faster, and we had 40 net new retailers this year alone. compared to 30 last year. So that gives you a sense of the acceleration in bringing that supply not just online but actually powering their own websites as well.

This is a part of the market that we have access to that others don't, and that gives us a very, very strong competitive advantage. In addition to that, we have to add new categories to our supply. Obviously, the Uber Eats partnership is contributing a supply of restaurants, which is increasing the types of use cases. That means the car -- we continue to grow in retail and in new verticals. And all of that combined is contributing to the strong user growth that we're seeing and higher order frequencies.

It's also contributing to better retention. We called that out, but we are seeing that especially with the new cohorts that we are acquiring in 2025, showing better retention than the 2024 cohort at the same time last year. That's also translating in [indiscernible] members are growing and deepening in engagement because as we unlock more supply, obviously, they have more selection and more things to do on the site.

We are seeing that Instacart+ customers shops at on average, more than 5 different retailers and that shows you that selection really matters and of selection lead continues to be a very critical advantage of our competitors.

Our next question comes from Nikhil Devnani with Bernstein.

I had a couple on growth, please. Maybe for the first one, nice to see the acceleration in the quarter around order growth. Can you just help us understand the composition of that between grocery and restaurants. I appreciate you think of it as one ecosystem, but it would just be helpful to understand if grocery orders and GTV also accelerated this quarter? And then I'll follow up with my second one.

Thanks so much for the question. This is Emily. Yes, so as you mentioned, we really do think about the overall ecosystem driving performance, both in orders and GTV because there is a reinforcing effect that you get from a product like restaurants, in terms of consumers coming to the platform, ordering on restaurants. And when they do that, we see them come back and order more frequently from grocery.

Now that all said, as we talk about the impact, if you look over the last several quarters in terms of order growth, what you've noticed is there has been a meaningful acceleration in orders growth. And that has been largely driven by 2 things. The first is the addition of restaurants, which has a higher order frequency -- is a higher refrequency use case as well as more recently, the introduction of lower minimum basket size. So just in sort of acknowledging that, of course, what we're saying here is that those are factors that are definitely driving overall orders growth.

We also mentioned earlier on the call that as we move into Q3, we would expect some moderation in orders growth, and that is, of course, driven by the fact that we are lapping the first full quarter of restaurant contribution from a year ago. So definitely playing a role. But again, what we're happy to be seeing is the fact that our suite of products is driving more engaged management on the platform more order frequency, and then that flywheel back to grocery, where we're seeing more engagement on the grocery side as well.

And then just on the Q3 guide commentary there. So the Uber Eats lapping commentary is clear. On the grocery side of things, are you seeing any moderation or embedding any moderation there as well? Or is it predominantly just the comps in restaurants that you're flagging here?

From a guidance perspective, really, the main thing that we wanted to call out was on the restaurant side. I think from an underlying dynamics perspective, we're really pleased with what we're seeing really across the board, right? So now growth, we're seeing order frequency growth as well as, as Fidji mentioned, some really great dynamics around customer retention with customer retention in stronger than what we saw in the same sort of time period in 2024. So overall -- and then maybe one more thing to add is just on the Instacart+ engagement and the penetration of Instacart+ as a percentage of overall mail continuing to grow. So nothing to add really specific to grocery.

Again, we do look at it on a platform basis. But as we think about the guide, the primary impact I would think about is on the restaurant side.

Our next question comes from Colin Sebastian with Baird.

Great. And Fidji best wishes, good luck and hope to cross paths again as well. I guess I'd like to talk about the Instacart platform. We hear a lot about Storefront Pro and priority delivery, but maybe you could talk about which parts of the platform are getting the most interest, how much cross-sell opportunity you have and how the enterprise pipeline looks like, including even outside of grocery.

Thank you for the question, Colin. So you are right, a big part of the focus is on store front because that's really the kind of first product you want to sell expand platform so that all of these retailers working with us can be powered by our technologies on [indiscernible] operated website. And that's why we've invested a lot in this platform. And now it's paying off both in terms of the ability to onboard more new retailers as well as go deeper and add more functionality for existing retailers and allow them to do more things on their own [indiscernible] like adding priority delivery, which we added with Costco, for example, and Kroger recently.

And so that's a very big part of what the platform does. But then once you have that sells a lot more products that we can upsell. An obvious one is carried as where we allow retailers to monetize their store properties. And even when they're not powered by storefront in the case of for example, we can also allow them to use carrot ads even if they're not using after from technology. And that has been a very, very popular option for retailers who realized that they were going to be too subscale to really operate a retail media business on their own. But by joining our network, they are able to create a completely new profit line really overnight, and that has resulted in us having over 240 [indiscernible] partners in a really like short amount of time.

Then on top of that, we see retailers asking us to expand beyond powering that online properties to powering their stores as well. And that's why we have invested of in-store technology with [indiscernible] attacks. And we are seeing a lot of virtuous circle between these 2 technologies. So for example, if you are deploying [indiscernible] inside your stores, you can tell customers after they're done purchasing in a keeper cart to order all the items it just ordering stores you can like ask them to reorder them online on your website and maybe give them a coupon to be able to do that. So that drives the acquisition of multichannel customers, which are more valuable than online-only customers or in-store only customers.

[indiscernible] is another example where by powering peak to light on electronic shelf tags inside retailers store we are able to improve the quality of our online orders because it allows our shoppers to find these items a lot faster. And now we have Keratax, powering 10% of orders, which is really incredible knowing that it increases fund rate and fill rate meaningfully. So very excited about all of that. We really glad for the question because enterprise is one of the most underappreciated parts of our business and a really critical advantage that other competitors are really not able to touch

Our next question comes from Lee Horowitz with Deutsche Bank.

I wanted to spend some time on ad revenue. Appreciating the resilience you guys highlighted in the breadth of customers that are allowing you to deliver that. I guess a penetration was I think you guys have pointed to that being up. I just wonder if you could give any update on what the CPG environment looks like today versus what you had mentioned before. Are there still some concerns? And how do you think that maybe may evolve over the back half of the year and into next year?

Yes. Thank you for the question. Yes, we are very proud of the resilience for revenue and the fact that the diversification strategy is working. The investment rate has indeed remained stable. When it comes to the CPG environment, I would say it's similar to what we've talked about before, which is that there is a lot of uncertainty in the environment. that's not just tariffs, but I would say regulation at large, whether it's Snap, [indiscernible], et cetera, -- and all of this puts additional pressure on companies to deliver on their profitability objectives. And that comes on top of other business-specific challenges, including ongoing changes in consumer preferences. Like for example, we're seeing fast-growing interest in high-protein snacks and breaka food, the lower sugar and natural soda options less processed foods.

So if you have a large CPG that is not -- doesn't have a portfolio that indexes heavily towards that, you are having to make a lot of decisions to kind of reposition your portfolio and really optimize for profitability. And that puts a dampen our ability to invest. And so that's what we're seeing primarily with the large guys, I would say, we are taking a little bit more of a wait-and-see approach of really trying to figure out how to profitability during a time of change. But the good news is that during this time, what we are also seeing is that when CPG pull back some spend, it allows emerging brands and challenger brands to really rush in and gain share, so large CPGs are realizing that that's not a good long-term strategy and that the right strategy is to continue capturing the online customers as these customers move online because it's much more expensive to regain them over time. And so we continue to remain focused on demonstrating that to the large brands, getting them to optimize for the long term, not just for that short-term bottom line, but really for continuing to maintain or increase our market share in the face of very aggressive emerging brands that are definitely determined to gain share on our platform.

And then maybe just one follow-up on the online grocery industry at large. It seems to us that over the past several quarters, sort of digital penetration rates of the industry have have gone up quite nicely after being fairly stagnant for some time despite the fact that inflation has remained fairly sticky. I wonder from your [indiscernible], what you're maybe seeing that's sort of supporting that for the overall industry where you're able to grow well. competitors and the like. Any shifts you're seeing in demographic trends, pricing trends, anything that you would maybe point to that's perhaps driving that shift more recently?

I think the biggest thing is the one you mentioned, which is kind of like price sort of stabilizing. That's always something that we look closely at and certainly during a time of inflation, we see that dampen our ability to grow online penetration for the industry in general, now that does stabilize, that's certainly much more encouraging. At the same time, the TAM is like massive. This remains one of the industries that is the least penetrated online among all of commerce. So there's a lot of runway to go. And what we are seeing, in particular, with regards to CPT is that the brands are really seeing the next 5 years as the biggest opportunity to gain share or lose share depending on how the [indiscernible] given that our customers are moving online.

And when they move online with a certain brand they tend to stick to that particular brand online. So it's really critical to capture the online customer as they move online. That's why it's so critical that we continue to have the leading outperformance in the market. So that really allows brands to capture that customer with the highest efficiency.

Our next question comes from Ross Sandler with Barclays.

Great. And Fidji, I know your first job over at the new place is going to be wiring up operators, so you can all order our instacard through the new just to follow up on the advertising question. I think we all understand the macro weakness in large CPG. But if we look at stronger growth in emerging brands and then all this new kind of off-site retail media network stuff with like Pinterest and DTD. How should we think about those 2 areas, the emerging brands and the off-site data deals in terms of contributing to overall ad revenue growth. Like when are those going to be big enough to move the needle relative to the big CPG.

Yes. Thanks for the question. So the way I think about it is, one, diversification is working. We've been talking about it for a while, and we are seeing the results of that in what Emily was talking about in intro -- we saw one of the largest brands really pulled back some of their spend, and we were able to more than compensate for that with strength in both emerging brands and midsized brands. So really a lot of strength across the segments, whereas a year ago, it would have taken us down by several points of growth.

We have built a lot of tools for emerging brands and midsized brands for them to be able to ramp up on our platform. a lot of AI tools that are allowing them to operate their campaigns much more efficiently, whether that's AI-generated landing pages, whether that's AI optimization and new goals that they can specify that we can optimize for. So -- all of these new product innovation is really working in attracting emerging brands and allowing them to have very high-performing campaigns on a self-serve basis.

On the off-platform side, I would say it's slightly earlier in its journey. Everything we've done to date has been more about establishing very strong foundations of partnerships and -- you've seen that with Google, Meta, the Trade Desk, Pinterest. But we still have to really found our right scale motion to start really ramping up these businesses. We are seeing great performance. We are finally at the point where we have the right integration. The integration we did with the Trade Desk was really industry-leading this quarter where any brands that advertise on the trade desk can now really specify a set of audiences using Instacart data and purchased programmatically directly from the Trade Desk. So we feel like we have all of the right capabilities in place, all the right measurements, right performance in place with these platforms now to be able to scale and that's still small now, but we expect it to grow the future given that we feel like we have nalthe fundamentals now.

Our next question comes from Andrew Boone with Citizens..

You highlighted gains in batching on the letter. What I'm trying to understand is whether you guys have now more dollars put towards promotion or customer acquisition or however you want to frame that today versus a year ago? So can you talk about the gains that you're getting from batching and then how you're deploying that and kind of the intensity of that?

And then Fidji in your prepared remarks, you talked about the efficiency of AI that's coming across kind of the platform on the back end. Can you connect that either to head count or OpEx? Or what should our expectations be as AI is just more broadly deployed across Instacart from a cost perspective?

Thanks so much for the question. So on the first part, in terms of gains in batching. So I'd say is we have had gains sort of broadly in Shopper Pay, batching is 1 piece of the equation that we've talked about, but really finding ways to optimize the shopping journey really from beginning to end. So batching is a piece of the puzzle. But Shopper Pay broadly is an area that we've driven pretty meaningful leverage over the course of the last few years as we've really squeezed out efficiencies.

As you pointed out, batching has been a key area where we've been able to do a number of things. That's increasing the number of orders per batch, but it's also increasing the types of orders that we can batch. So we mentioned that 25% of our priority orders are now batched, and we're still able to complete those in a way that gets those orders to our customers on the same time frame, which, in many cases, is under 30 minutes, which is pretty incredible to see. In terms of what are we doing with those savings, -- we talked about this in the past, we really are looking for ways to reinvest across a number of different areas. So you mentioned incentives. That's definitely something that we look at in and when it's the right opportunity when we think that we can meet the consumer at the right point in their customer journey to change the behavior and ultimately create a more retentive consumer.

But actually, it's broader than that. So a couple of other examples of places you will have seen us invest. Obviously, we talked earlier this year about reducing the minimum basket size. That is something that ultimately drives down is a negative to transaction revenue, but we can fund that because of the tremendous gains we're able to get on Shopper Pay. So that's just one example, but you can imagine a whole host of things that we've done over the course of last year, making pickup free as an example, as I just mentioned, reducing the minimum basket size, we are ultimately focused on trying to drive affordability for the end consumer. And so if we can drive gains in Shopper Pay and give that back to the consumer in forms a cheaper delivery as an example or better targeted incentives, those are the kinds of areas that we're looking to double down.

Sorry, can you repeat the second question?

AI efficiencies anything to note in terms of head count or OpEx that we should be thinking through as it's further deployed across that platform?

Great. So at this stage, nothing to call out. I think we are certainly very focused on AI adoption across the company, as Fidji mentioned earlier, definitely AI first in terms of how we think with greater than 80% of our code that we're generating today, AI assisted. And really, it doesn't stop with the engineering team. We gave a couple of examples earlier, but all of our teams are looking for ways to become more efficient.

Now -- we don't have immediate plans to have that have an impact from an OpEx perspective. But what you've seen us do to date is to be able to continue to grow this business while being incredibly disciplined from an OpEx perspective. And so first principle standpoint, I think that's the first way that you'll see it come through. Over time, as we're able to really translate these gains, maybe that's something we could see, but not something we're committing to at this point in time.

Our next question comes from Shweta Khajuria with Wolfe Research.

I have one on advertising. -- as you develop your [indiscernible] stack and your advertising business in general, how are you thinking about on-platform advertising versus perhaps some of the partnerships that you are getting and expanding into for non Instacart placed ads? And how should we be thinking about it in terms of contribution to your business?

Thanks for the question. So the way we think about it is that we really want to become the one-stop shop for all CPG brands. And we're well on with doing that. We are a top 5 retail media network and what we're hearing from the CPG brands over and over again is 2 things matter: scale and performance. And we are able to reach maximum scale through 1,800 retailers in the marketplace. -- more than 240-carat partners, but also through the offside partnerships that I mentioned earlier and in the future, scaling in-store as well through ads on keeper cards, which are really kind of the holy grail of advertising of combining the advantages of online advertising, but in [indiscernible] environment.

And so our view is that advertisers should come to us because we can actually optimize for their goals across our entire network. And that's why we've really invested in what we call universal campaigns and optimize bidding, which is a way for advertisers to tell us what our budget is and what our goals of and for us to optimize their campaigns across our entire network across all of the pieces of the network, both on on platform and outside of the platform.

So we're not -- we're really thinking about it as like one network and advertisers are thinking about it as 1 network. They are telling us that they do not have the bandwidth or desire to spend a lot of that energy on subscale retail media network, and you see us as the aggregator for the industry. across all of the different retailers that we already have. And that's a very big part of our value proposition.

Retail Media is still very new. We feel like we're very well positioned by that aggregator.

Our next question comes from Steven Fox with Fox Advisors.

I had 2 questions, too. From a big picture standpoint, you mentioned personalization in your letter, and I was just curious if there's any KPIs that you're tracking in particular, that shows success there or anything you can describe as recent and future success. And then Emily, I was just curious, just on the cash flows, it looks like what you're describing for the second half of the year is sort of seasonal from a working capital standpoint. I don't know if that's correct or not, but if you could help on that.

I'll take the first one. So personalization is 1 of the biggest advantage of doing grocery online versus in stores. So that's why we really want to lean into that. And all of the advances in AI are really helping us take the 13 years we have of proprietary data and nearly 1.5 billion lifetime orders and really put that data to use by personalizing the experience.

I would say that customers were using [indiscernible] frequently are seeing a ton of personalization across the board. It starts with the basics, like buy it again, which is used by more than 3/4 of our customers to buy at least one item. To the much more sophisticated things we've done more recently like AI pairings, well, if you add avocados, we can surface items, you may need for broker-only or small shop where we have created health packs, personalized shopping aisles for like organic products, butane products, all the way to like new recommendation model of substitution that take into account your dietary needs. -- all of your pricing and past preferences.

And so when we look at kind of how to assess the success of that we look at it both in terms of does it get existing customers to buy more -- add more items to their cart and discover items that they weren't used to buying before, which is always a great sign of success. But also when we get new customers onboarded onto the platform, can we do a better job faster by showing them things that are really relevant for them and help them build the basket as well as do the same for lapsed customers that were redirecting. And I would say across the board, we are seeing that all of these personalization efforts are working and are driving more engagement across all of the segments, so we're really excited about what' we are seeing.

I can jump in on the cash flow question. So what I'd say about cash flow for us is a little less about seasonality and more about there's -- there are certain elements to our business that can drive fluctuations quarter-to-quarter in terms of flow through to cash flow. So what I mean by that is, occasionally, those are related to just delayed retailer payments. So we saw that. You may recall in the back half of last year where we had a bit of an AR buildup that unwinded in Q1. So you saw some impact there. Some other areas of the business that just have longer payback periods include alcohol and EBT [indiscernible]. So depending on timing of launches and sales around those categories, those can result in some lumpiness to cash flow.

So the way that I think about it is that we will likely expect to have lumpiness over time over sort of multi-quarter period, we do sort of trend in line with -- from a flow-through perspective, if you think about 2024 flow-through, what I just commented on meant that our overall EBITDA to free cash flow rate was slightly depressed because of that AR build up in the back half of last year. So I'd say that was sort of on the lower end of what we'd expect to see. But again, quarter-to-quarter, we will see fluctuations.

Our next question comes from Jason Helfstein with Oppenheimer.

I'll just ask one [indiscernible]. So I guess what will it take for advertising to accelerate? Do you need a healthier CPG spending environment broadly -- are there actions that CART can take to improve to drive more demand. Thank you.

Thank you for the question. So I think it's a combination of things. First, I think we have planted all of the right teams to make sure that advertising can continue to thrive in the future. And I touched on some of them, but obviously, continuing to have leading performance, continuing to invest in our measurement capabilities to demonstrate that performance. Continuing to diversify the business. We're on a great trajectory there and the more we diversify more we can lean into emerging and midsized brands, which are growing faster than the rest and investing more into advertising that large brands. And then I also touched on gaining more scale through all of the actions we are taking to expand our networks to [indiscernible], keeper ads and upside power ships.

So we remain highly confident in our ability to reach the 4% to 5% investment rate that we had talked about. But on any given quarter, there are going to be some puts and takes. Sometimes as Emily mentioned, we are seeing some large brands pull back. We are able to more than compensate for that with the strength in other segments.

But obviously, if we were operating under a better macro, we would see more strength. We, in fact, in Q1, we had higher advertising growth. And that's because we saw strength in both emerging brands as well as the large brands in parallel. So certainly, the macro would make things easier. But at the same time, we really believe that with all of the initiatives that we've put in the work, we have the levers to grow in the future.

Our next question comes from Michael Morton with MoffettNathanson.

I wanted to talk a little bit about affordability initiatives. We've heard a lot about that from the grocery delivery industry. And what we've seen this year is some of your direct competition has tried to get more competitive by following you into the fee reductions on small baskets and it's clearly not impacting the momentum in the business. So I would love to learn some more about is what you've learned in the first half of the year, watching this consumer behavior, maybe you could talk about the stickiness about it. And your ability to retain the kind of core customers but also accelerate the business. And then while we are on the small basket topic, I would love any incremental details you could share about how a theoretical small basket unit economics compare to a traditional order maybe in regards to some batching rates or asset density take rate. Anything would be great.

Great. I'll [indiscernible] second part, but I'll answer the first. So on our affordability initiatives, first off, I want to clarify that the change we made to small basket is one factor that our affordability strategy is much more broad-based. We are getting more adoption of flyers of loyalty linking of a variety of affordability initiatives. And we are working with our retailers to to dynamically adjust their markups and with some go all the way to price parity, and we've made some progress with [indiscernible] like Snacks with ParinGroup in Canada, launching a price parity and more. And we think that's incredibly important because our price parity retailers are growing faster on the platform than price retailers. So really, what we see is that it takes a multipronged approach of delivering affordability through many different ways to the end customers.

And we are very committed to all of these different levels. On the tender on minimum basket changed specifically what we have seen is that it has allowed us to grow [indiscernible] overall and more frequency without cannibalizing large baskets, which is really important because that's something where we really wanted to address all of the needs and shift the mix. And that's certainly what we've seen. It was very incremental and has allowed us to tap into the kind of top-up use case for these customers. So we're really excited about what we're seeing. That's why very committed to this change.

But I would say, generally, our affordability changes go much broader than this particular change.

Yes. On the small basket unit economics, I think, first and foremost, I would just say before thinking about the unit economics, really, what we're trying to do is create a platform that is there for our customers for all of their shopping needs. And we know that the majority of shopping happens in large baskets, large weekly shops, but we also know that customers have use cases when they need to do a fill-in shop midweek or forget something or have a sick kid and need something from the pharmacy. And we want to be able to make sure that we're there for them. And so that's really a big part of the focus on lowering the minimum basket size and really lowering the threshold at which customers think of Instacart as a provider for all of their needs. So that's sort of the starting point.

I think how is Instacart able to create a price point that is sort of best in class from a minimum basket size. And that starts with the fact that we have already an existing large network with density of orders at all of these stores. So when you reduce the minimum basket size, you layer on what our incremental orders to an existing dense network -- that means we're able to serve these orders out of the gate that economics that are already much better than you would be if you're starting from scratch. So our starting point, when we did this back in the earlier part of the year was, hey, we can do this out of the gated economics we like. That doesn't mean that's where we're satisfied with, and you've seen that in some of our commentary around strategies like batching, right? So we've continued to drive up back rate. We've increased orders per batch meaningfully over the last couple of years, and you've seen us talk about now batching 25% of priority orders, which we think is again, really incredible because we're still getting these orders to customers in under medium 50 minutes in many cases, under 30 minutes. And that is really a key part of our success to driving the unit economics here. So we're seeing the engagement we like to see from consumers. We're seeing those incremental orders. We're not seeing trade down to these orders, which I think is really, really important when you think about the economics because as long as we can do these orders at economically like, and we're not hurting our existing base of business, then we think of this as truly additive to the overall ecosystem.

And we know that if we engage you more regularly throughout the week, ultimately, what we hope is that, that drives you back to Instacart for your weekly shop more regularly. So really focused on the overall use case, making sure that we're there for customers, regardless, and we're very happy with being able to serve those use cases for customers.

Our next question comes from Deepak Mathivanan with Cantor Fitzgerald.

Great. So Fidji, you now have a great view into how consumer experiences are going to emerge for the [indiscernible] world, how do you think this affects marketplaces like Instacart as maybe agents take a more prominent role in transaction activities directly on the marketplaces. Where would you say Chris and team should be focusing and putting their accelerated product development efforts for, say, the next 6 to 12 months as they get tech and plumbing ready potentially for a more independent Agentic world.

And then second question, another big picture one. I mean we've now seen delivery growth pretty much accelerate across all 3 large players in the U.S., including you, Uber and DASH. I know there is a unique aspect for each, but do you think there is some kind of high-level theme on whether there is a new leg to user growth or consumer behavior for the services that we are finding right now?

So on your first question, the main thing that I think is a good principle for Instacart to follow is that we should always be where users are -- and as long as you can provide a better experience, you can always find a way to monetize that. So in terms of where to go with agents, I think integrated deeply with these agents that we can make it easy for agents to [indiscernible] sites and actually pick the right item for the customer is going to be really critical. I happen to think that Instacart has really critical advantages in an Agentic world, thanks to the selection that we bring to the table. 1,800 different retailers, 100,000 stores, a tons of different products and doing that with data sets that have incredibly rich that we've collected over 13-plus years. So I think we're really well positioned, and it's really a matter of figuring out the right integration, the right user experience, which I think is still very early and embryonic and then figuring out monetization once the use of experience is nailed, but very optimistic about our position there.

In terms of the delivery growth accelerating across the market. I would say points to the fact once again that grocery is still very underpenetrated even with this wave of growth, we are still vastly behind on our categories of commerce with lots of room to go. And I think our service is getting better and better, and that's why you're seeing this accelerated growth. We think that we are improving the experience across all aspects of selection, affordability, speed and quality and obviously continuing to deepen our lead in our ability to deliver these orders with [indiscernible].

We are also seeing that retailers are really leaning in and realizing that, again, the next few years are going to be a really big opportunity for them to either gain share or lose share and we're seeing them lean into the enterprise properties, which again gives us a very big advantage because we power those and when retailers are leaning in, they're usually directing their dollars on an operated property is more than third-party marketplaces. And so we're benefiting from these retailers really wanting to accelerate that online growth and us powering that online growth. And in general, also, this retail is leaning into affordability, as I mentioned, which is also accelerating market adoption.

Got it. And I appreciate all the help over the last several years.

Thank you so much.

And our last question comes from Justin Patterson with KeyBanc.

This is Miles on for Justin. I would like to go back to Instacart+ on your comments of penetration increasing there. You guys have added a lot of value to the membership over the last year. So curious if you could just provide any more information on how you're seeing adoption trend or behavior within members like retention and order frequency or anything on that. And then one follow-up on the Costco partnership. I thought that was pretty interesting. Should we be expecting more of these unique retailer offerings moving forward? Or is that just more of a one-off with Costco being such a big retailer.

I'll take Costco. I will say that we are doing types of deep integrations with a lot of our retailers. With Costco, obviously, it takes a particular forms because they have a specific business model, and we are very excited to be doing a ownership with them to offer discount from executive members on any orders on Costco same-day or on Instacart? I assume that's the one you're referring to. So very excited to be able to get so much exposure to the tens of millions of executive members. But if you look back even at the history of Costco partnership, there has been many times where we have done these types of integrations with them, whether that's powering their entire CMD side, expanding with Costco Business Center more recently in Canada, whether that's power in now them, whether that's doing all kinds of integration.

And so I don't think it's -- we should consider that a one-off. These are things that we do with a lot of our retailers. Another example, just this quarter is with public who are powering their storefront app for delivery, but now the integrated that directly into [indiscernible] app. It's a very deep integration, very strategic for both companies. and allowing us to drive more growth. So these are the kinds of things that you can do when you are not just simply a marketplace that retailers put their selection on but you are actually a strategic partner at the table with their strategically [indiscernible] IT department and really driving deep integration into the core business of these retailers instead of being just a very [indiscernible] of integration.

On the Instacart+ question, I think it's a couple of comments that I would make there. So first of all, Instacart+ numbers continue to grow. The engagement with the platform has always been strong. So it's accounted for the majority of our activity for some time. It continues to do so. And the reason it's critical to us and a big focus of ours is that these are the most loyal and high spending customers that we have. And so -- for that reason, we find it attractive to continue to invest in the overall program because we know if you are an Instacart+ member that over time, you spend significantly more GTV on average than non Instacart+ members. So those are a couple of factors.

We are seeing now Instacart+ members represent more of our monthly users over time. And that's for a number of reasons, as you mentioned, making Instacart+ more valuable. We now have over the last roughly year, launched our restaurants product for customers. We've reduced the minimum basket size to $10. We have reciprocal memberships, things like Peacock and New York Times cooking, et cetera. And then we've also expanded it so that family accounts allow multiple people to participate in a single Instacart+ membership. And we know that when you shop with others, first of all, it's more convenient. You can shop and all the adding to the same card, but you also end up spending more, too. So we love the Instacart+ membership. It's an area we'll continue to invest in, but overall has been a continued growing part of our portfolio.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.