Instacart lays off 250 employees, or 7% of its workforce, less than 6 months after going public

Instacart said on Tuesday that it plans to lay off 250 employees, or about 7% of its workforce. The restructuring is aimed at directing the company’s focus towards what they consider to be promising initiatives. The announcement comes just five months after the online grocery delivery startup made its public debut. The company had a total of 3,486 employees as of June 30, according to regulatory filings.

Despite this workforce reduction, there is positive news for the company. Instacart projected higher-than-expected gross transaction value (GTV) and core profit for the first quarter, attributing it to increased grocery orders. However, the company’s shares declined by around 5% after the market closed, reacting to Instacart’s fourth-quarter revenue that fell below expectations due to a slowdown in the advertising business.

Instacart CEO Fidji Simo, addressing concerns on a post-earnings call, acknowledged some weakness among advertisers but noted that it was not widespread. The fourth quarter saw a 7% increase in ad and other revenues, compared to the previous quarter’s 19% growth. The deceleration in the advertising business is of particular concern as it historically contributed significantly to the company’s rapid growth and high margins.

“We are seeing (some weakness among advertisers) in pockets, but it is not widespread,” Instacart CEO Fidji Simo said on a post-earnings call, according to a report from Reuters.

Total revenue for the company rose by 6% to $803 million but fell short of analysts’ expectations of $804.2 million. Transaction revenue growth slowed to 6%, as Instacart offered more incentives and promotions, especially during the holiday season, to compete with rivals like DoorDash, Uber Eats, Amazon.com, and Walmart.

Despite these challenges, total orders increased by 5% to 70.1 million in the reported quarter, reflecting growth among Instacart’s newer customer base. Looking ahead, Instacart anticipates a current-quarter GTV between $8 billion and $8.2 billion, exceeding analysts’ estimates. The company also expects adjusted EBITDA between $150 million and $160 million, slightly surpassing analysts’ projections of $151.6 million.

Founded in 2012 by Apoorva Mehta, Brandon Leonardo, and Max Mullen, Instacart, headquartered in San Francisco, California, offers same-day grocery delivery services. The company has rapidly expanded to over 220 markets, partnering with major national chains like Albertsons, Kroger, and Costco, as well as local and regional grocers such as Publix and Wegmans.

Instacart’s services are available to a significant portion of households in the US and Canada, covering more than 5,500 cities. The company plans to utilize its new capital to enhance customer experience, support retailers’ eCommerce needs, and strengthen its advertising platform to connect brands with online shoppers.