Eternal stock surges despite a 90% profit drop, a headline that seems to defy financial logic. On the surface, a ninety percent plunge in net profit would typically send investors running for the exits. However, for Eternal Ltd (formerly Zomato), the market is telling a completely different story. The company’s stock soared over 10% to a new record high following its Q1 FY26 earnings release, brushing off the bleak profit figures. The reason for this bullish enthusiasm lies beyond the bottom line, deep within the company’s operational metrics and its strategic pivot towards quick commerce. As multiple top brokerages issue ‘Buy’ ratings with a potential upside of up to 18%, investors are keen to understand what the market sees that the profit-and-loss statement doesn’t immediately reveal. The answer, in short, is Blinkit.
The Apparent Paradox: Diving into the Q1 FY26 Numbers
On July 21, 2025, Eternal announced its financial results for the first quarter of the fiscal year 2026 (the April-June period). The headline figure was stark: a consolidated net profit of just Rs 25 crore. This represented a staggering 90% year-on-year (YoY) decline from the Rs 253 crore profit reported in the same quarter of the previous year. Furthermore, the company’s consolidated EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for the quarter came in at Rs 115 crore, down 35% compared to the same period last year.
Despite these figures, the market’s reaction was overwhelmingly positive. The share price jumped significantly, reaching a record high of Rs 311.25 on the National Stock Exchange. This rally wasn’t based on a misinterpretation but on a deeper understanding of the company’s growth trajectory. While profit fell, revenue from operations painted a picture of robust health, rocketing up by 70% YoY to an impressive Rs 7,167 crore. This marked the eleventh consecutive quarter where the company posted over 50% YoY adjusted revenue growth, signaling a powerful underlying momentum that investors and analysts have chosen to focus on.
The Game Changer: Blinkit’s Explosive Growth Outshines Everything Else
The primary catalyst for this investor optimism is the phenomenal performance of Eternal’s quick-commerce arm, Blinkit. For the first time in the company’s history, the revenue generated by Blinkit surpassed that of its foundational food delivery business.
- Blinkit’s Revenue: Rs 2,400 crore in Q1.
- Zomato Food Delivery Revenue: Rs 2,261 crore in Q1.
This milestone is not just symbolic; it represents a fundamental shift in the company’s operational center of gravity. CFO Akshant Goyal highlighted this inflection point, stating, “Our B2C operations have now reached nearly $10 billion in annualised Net Order Value (NOV), with quick commerce accounting for nearly half of it.”
The Gross Order Value (GOV) for Blinkit tells an even more compelling story of hyper-growth. In Q1 FY26, Blinkit’s GOV reached Rs 11,800 crore, marking a breathtaking 140% YoY increase and a strong 25% quarter-on-quarter (QoQ) growth. This surge was primarily fueled by a 23% QoQ expansion in its Monthly Transacting Users (MTUs), indicating that the platform is not only retaining but rapidly acquiring new customers. This explosive growth in the quick-commerce segment is what has convinced the market to look past the temporary dip in profitability and bet on a much larger, more diversified future for Eternal.
Decoding the Brokerage Bull Run: Why Experts are Saying ‘Buy’
Leading financial institutions have analyzed the Q1 results and have come out with overwhelmingly positive recommendations, reinforcing the market sentiment. Their reports provide a clear rationale for valuing Eternal’s growth strategy over its short-term profit figures.
1. Nomura Retains ‘Buy’ with a Higher Target Price
The Japanese brokerage firm Nomura has reiterated its ‘Buy’ rating on Eternal and has increased its target price from Rs 280 to Rs 300, implying a potential upside of 10.3%. Nomura’s report highlighted several key strengths:
- Stable Food Delivery: The core food delivery segment showed steady growth, with GOV expanding 16% YoY, perfectly in line with expectations. Monthly Transacting Users in this segment also grew by a healthy 9.6% QoQ to 22.9 million.
- Blinkit’s Path to Profitability: While Blinkit’s adjusted EBITDA margin is currently at -1.4%, it has improved by 50 basis points, supported by lower marketing spends. Critically, Nomura projects that Blinkit will achieve break-even at the adjusted EBITDA level by the fourth quarter of FY26.
- Strong Cash Position: The report made a crucial observation: “The company is not burning cash at the EBITDA level (because of strong cash generation in core FD).” This means the profitable food delivery business is effectively funding the expansion of Blinkit without straining the company’s overall finances.
2. JM Financial Sees a 17.8% Upside
JM Financial is even more bullish, assigning a ‘Buy’ rating with a target price of Rs 320, which suggests a significant upside of 17.8% from the current market price. The brokerage was impressed not just by the numbers but by the confident tone of the management.
- Peak Losses are Over: JM Financial noted that the “Adj. EBITDA losses in Blinkit have peaked out, not only in margin terms but also on an absolute basis.” This signals that the period of heavy investment is beginning to yield operational efficiency.
- Strategic Expansion: The report praised Blinkit’s future strategy. The plan to double its dark store count from 1,544 to 3,000 shows a clear and aggressive roadmap for capturing more market share. Furthermore, a shift to an inventory-led model is expected to boost margins by approximately 100 basis points with minimal capital outlay.
- Blinkit Outweighs Misses: Acknowledging that Blinkit’s adjusted EBITDA loss of Rs 162 crore was slightly higher than anticipated, JM Financial firmly stated its belief that “the positives in Blinkit are likely to outweigh the misses in other businesses.”
The Verdict: A Strategic Bet on Future Dominance
The narrative surrounding Eternal’s Q1 FY26 performance is a classic case of the market prioritizing long-term growth over immediate profitability. The 90% dip in net profit is not a sign of operational failure but rather a consequence of a deliberate and aggressive investment in scaling the Blinkit business—a strategy that is clearly paying off in terms of revenue, user acquisition, and market share.
Investors and analysts are rewarding a forward-thinking management that is successfully building its next engine of growth. The fact that the highly profitable food delivery segment can finance this expansion without external cash burn provides a solid foundation for this strategy. With brokerages confident that Blinkit’s losses have peaked and profitability is on the horizon, the current stock rally appears to be built on a solid understanding of the company’s evolving business model. For investors who believe in the future of quick commerce and Eternal’s ability to dominate it, the consensus on Wall Street is that this growth story is far from over.
Key Highlights of Eternal Ltd’s Q1 FY26 Performance & Stock Surge
| Key Aspect | Details & Insights |
|---|---|
| Stock Reaction | Stock surged over 10% to an all-time high of ₹311.25 despite a 90% drop in net profit. |
| Net Profit (YoY) | Declined from ₹253 crore to ₹25 crore, showing a 90% fall in Q1 FY26. |
| Revenue from Operations | Rose 70% YoY to ₹7,167 crore, maintaining 50%+ growth for 11 consecutive quarters. |
| EBITDA | Fell 35% YoY to ₹115 crore, but remains in the positive zone. |
| Quick Commerce (Blinkit) | Generated ₹2,400 crore in revenue, surpassing Zomato’s food delivery revenue of ₹2,261 crore. |
| Gross Order Value (Blinkit) | Grew 140% YoY and 25% QoQ to ₹11,800 crore, reflecting strong customer demand. |
| User Growth (Blinkit) | Monthly Transacting Users increased 23% QoQ, showing growing user engagement. |
| Cash Flow | Company is not burning cash at the EBITDA level; food delivery operations are funding Blinkit’s expansion. |
| Brokerage Ratings | Nomura: Target ₹300 (10.3% upside) JM Financial: Target ₹320 (17.8% upside) |
| EBITDA Margin (Blinkit) | Currently at -1.4% but improving; break-even expected by Q4 FY26. |
| Expansion Strategy | Blinkit plans to increase dark store count from 1,544 to 3,000 and shift to an inventory-led model to boost margins. |
| Market Sentiment | Analysts believe Blinkit’s growth justifies current valuations, outweighing the temporary dip in profitability. |
Why This Matters for Investors
- Eternal’s shift toward quick commerce is driving rapid revenue and user growth.
- The company is maintaining positive cash flows despite heavy investments in expansion.
- Brokerages are confident in its long-term growth and profitability roadmap.
- Strategic execution and operational momentum make it a strong contender in India’s digital commerce space.
Frequently Asked Questions (FAQ) About Eternal Ltd’s Q1 FY26 Performance
Q1. Why did Eternal Ltd’s stock price rise despite a 90% drop in net profit?
Answer:
The stock surged over 10% because investors focused on the company’s robust operational growth, especially in quick commerce (Blinkit), rather than its temporary profit decline. Revenue grew by 70% YoY, and Blinkit’s performance surpassed expectations, indicating a promising long-term growth trajectory.
Q2. What were the key financial highlights of Eternal’s Q1 FY26 results?
Answer:
- Net Profit: ₹25 crore (90% YoY drop)
- Revenue from Operations: ₹7,167 crore (up 70% YoY)
- EBITDA: ₹115 crore (down 35% YoY)
- Stock Price Peak: ₹311.25 (all-time high)
Q3. What is driving Blinkit’s rapid growth?
Answer:
Blinkit recorded ₹2,400 crore in revenue in Q1, surpassing food delivery for the first time. Its Gross Order Value (GOV) reached ₹11,800 crore, growing 140% YoY and 25% QoQ. This was driven by a 23% rise in Monthly Transacting Users, reflecting high user retention and acquisition.
Q4. How are analysts reacting to Eternal’s Q1 performance?
Answer:
Leading brokerages like Nomura and JM Financial have maintained ‘Buy’ ratings:
- Nomura Target: ₹300 (10.3% upside)
- JM Financial Target: ₹320 (17.8% upside)
They believe Blinkit’s losses have peaked and profitability is on the horizon, supported by steady food delivery revenue.
Q5. Is Blinkit profitable yet? What’s the timeline for break-even?
Answer:
Blinkit is not profitable yet, but it’s on the path to break-even. The adjusted EBITDA margin improved to -1.4%, and brokerages expect Blinkit to reach EBITDA-level break-even by Q4 FY26, helped by reduced marketing spends and scaling efficiencies.
Q6. What are the future expansion plans for Blinkit?
Answer:
Blinkit plans to:
- Double its dark store count from 1,544 to 3,000
- Shift to an inventory-led model, expected to improve margins by 100 basis points
- Expand operations with minimal additional capital outlay
This strategy is expected to strengthen market share and operational profitability.
Q7. Is Eternal Ltd burning cash to fund Blinkit’s expansion?
Answer:
No. Eternal is not burning cash at the EBITDA level, thanks to strong cash flows from its profitable food delivery segment. This internal funding reduces financial risk while supporting Blinkit’s rapid scale-up.
Q8. What makes Eternal a strong long-term investment despite weak profit figures?
Answer:
Eternal is shifting towards a high-growth quick commerce model, with strong customer metrics and revenue momentum. With Blinkit set to become a major revenue driver and analysts forecasting profitability soon, the stock is viewed as a strategic long-term growth bet.
Q9. How does Eternal’s performance compare to the previous year?
Answer:
Compared to Q1 FY25:
- Net profit fell by 90% (from ₹253 crore to ₹25 crore)
- Revenue jumped 70%
- Blinkit’s GOV grew 140% YoY, surpassing the traditional food delivery segment in revenue for the first time
Q10. Should retail investors consider buying Eternal Ltd stock now?
Answer:
Analysts suggest waiting for short-term volatility to settle, but many see current levels as an entry opportunity given the strong fundamentals, future profitability of Blinkit, and diversified revenue streams. It’s a stock that aligns with long-term growth investors’ portfolios.