By Juveria Tabassum

(Reuters) – Instacart on Tuesday forecast current-quarter gross transaction value (GTV) and core profit below estimates, indicating a potential decline in spending on its online grocery and food delivery platform during the holiday season.

Competition in the online delivery space has intensified, building on a pandemic-fueled boom that allowed firms like Instacart (NASDAQ:CART), UberEats, and DoorDash (NASDAQ:DASH) to diversify their offerings and increase transaction fees.

However, consumer spending has cooled as household budgets are strained by rising prices.

Instacart, which also provides same-day delivery from Home Depot (NYSE:HD), anticipates a fourth-quarter GTV between $8.50 billion and $8.65 billion, falling short of the $10.20 billion estimate, according to data from LSEG.

Furthermore, Target (NYSE:TGT) projected adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) between $230 million and $240 million, also below estimates.

In contrast, rival DoorDash forecasted fourth-quarter core profit exceeding expectations.

"Given the momentum of the business and how well Instacart performed last year during the holiday season, it is surprising to see a more conservative forecast," commented eMarketer senior analyst Blake Droesch.

Instacart’s shares fell 5% in after-hours trading.

Nonetheless, the company did turn a profit in the reported quarter and surpassed estimates on critical metrics, with orders increasing 10% year-over-year, bolstered by its cost-effective delivery options aimed at budget-conscious consumers.

Advertising revenue saw 11% growth in the third-quarter, remaining flat sequentially. Financial chief Emily Reuter mentioned during a post-earnings call that robust advertising spending from emerging brands helped offset a decline from larger consumer packaged goods firms.

Instacart has expanded its partnerships, adding companies like Party City and providing digital coupons from retailers, while its collaboration with UberEats onboarded new restaurants for food delivery.

"These developments clearly indicate that Instacart has big ambitions to evolve from a grocery delivery service to a versatile retail technology giant," Droesch added.

Third-quarter adjusted EBITDA of $227 million exceeded estimates of $212.08 million, while GTV climbed approximately 11% to $8.30 billion, surpassing estimates of $8.19 billion.