Instacart Q2 2026 Earnings: Revenue Rises 14% as Free Cash Flow Accelerates

Instacart (NASDAQ: CART) reported Q2 2026 revenue of $1.043 billion, up 14% from $914 million a year earlier, while diluted EPS increased to $0.45 from $0.41. GTV and adjusted EBITDA posted double-digit growth, and free cash flow more than doubled, although GAAP net income declined as gross margin narrowed and below-the-line items offset higher operating profit.

Core financial results

Revenue growth was supported by both transaction revenue and advertising and other revenue. Gross profit increased more slowly than revenue, but operating expenses rose at a slower rate than the top line, allowing operating income and adjusted EBITDA to expand.

The quarter’s clearest improvement came from cash generation: operating cash flow reached $493 million and free cash flow rose to $480 million. GAAP net income, however, declined 4% despite higher operating income.

Adjusted EBITDA and free cash flow are non-GAAP measures. Instacart defines free cash flow as operating cash flow less purchases of property and equipment, including capitalized internal-use software.

Business and revenue performance

GTV increased faster than order volume. Based on the reported figures, GTV per order rose by approximately 4%, indicating that both transaction activity and higher value per order contributed to marketplace growth. Advertising and other revenue grew 16%, outpacing both GTV and transaction revenue.

Instacart said net-new customer activation over the past three quarters grew at its fastest year-over-year rates since 2022, although it did not provide customer counts. The company also expanded Storefront Pro, AI Solutions, Caper and FoodStorm with additional retailers, while more marketplace partners moved to no-markup pricing.

The company continued investing in AI and retail technology. It acquired grocery inventory intelligence company Arpalus, expanded integrations with Google Gemini and Google Search, and continued piloting its own shopping assistant. Orders placed through the AI assistant were larger on average than Instacart’s reported $115 average order value, but the company did not quantify the pilot’s contribution to quarterly results.

Operating leverage lifted EBITDA, but not GAAP net income

Cost of revenue increased 24% to $292 million, faster than revenue growth, reducing GAAP gross margin from 74% to 72%. Total operating expenses rose 10% to $608 million, slower than revenue, which helped operating income increase approximately 15% to $143 million despite the gross-margin pressure.

The non-GAAP expense picture showed greater operating leverage. Adjusted total operating expenses rose 8% to $468 million and declined from 4.8% to 4.5% of GTV. This helped adjusted EBITDA grow 19%, five percentage points faster than GTV, and lifted adjusted EBITDA margin to 30%.

GAAP net income moved in the opposite direction. Interest income fell to $5 million from $15 million, while the income-tax provision increased to $36 million from $26 million. Consequently, income before taxes rose only to $147 million from $142 million, and net income margin declined from 13% to 11% of revenue.

Stock-based compensation also increased to $142 million from $105 million. Because adjusted EBITDA excludes stock-based compensation and several other items, investors should distinguish the improvement in adjusted profitability from the smaller increase in GAAP operating income and the decline in GAAP net income.

Cash flow and capital allocation

The increase in free cash flow primarily reflected stronger operating cash flow rather than lower capital spending. Purchases of property and equipment, including capitalized software, were $13 million compared with $16 million a year earlier.

Working capital contributed materially to the cash-flow increase. Changes in accounts receivable generated $113 million of cash in Q2 2026, compared with a $67 million use of cash in Q2 2025—a $180 million year-over-year swing. Higher non-cash stock-based compensation and depreciation and amortization also supported the reconciliation from net income to operating cash flow.

Instacart repurchased $325 million of shares during the quarter and ended with approximately $1 billion in cash and similar assets. Management said the company remains on track to return the majority of 2026 free cash flow through share repurchases, without characterizing the shares as undervalued.

Q3 2026 guidance

Instacart widened its GTV and adjusted EBITDA guidance ranges to reflect its increased operating scale. At the midpoint, the outlook calls for adjusted EBITDA to continue growing faster than GTV.

Management continues to expect GTV to outpace order growth. For fiscal 2026, Instacart also expects annual adjusted EBITDA growth to exceed GTV growth, although it anticipates the rate of expansion will moderate as the company reinvests in growth and laps operating-expense efficiencies achieved in 2024 and 2025.

The company did not provide a GAAP equivalent for adjusted EBITDA guidance because stock-based compensation, legal and regulatory items, indirect tax reserves and other reconciling items remain uncertain.

Risks investors should monitor

• Gross-margin pressure: Gross profit grew more slowly than revenue, while cost of revenue rose 24%. Further compression would increase reliance on operating-expense leverage to sustain profit growth.
• GAAP and adjusted results are diverging: Adjusted EBITDA rose 19%, but GAAP net income fell 4%. Stock-based compensation increased to $142 million and remains a significant excluded expense.
• Cash-flow growth included a large working-capital benefit: The $180 million year-over-year swing in accounts receivable changes materially supported operating cash flow and may not recur at the same scale each quarter.
• Taxes and lower interest income offset operating gains: Higher operating income did not translate into higher net income because the tax provision increased and interest income declined.
• Profit expansion is expected to moderate: Management plans to reinvest across multiple growth initiatives while lapping substantial expense efficiencies from the previous two years.

Summary

Instacart’s Q2 2026 results showed balanced GTV and revenue growth, faster expansion in advertising revenue and adjusted EBITDA, and a substantial increase in free cash flow. The main offsets were a two-point decline in gross margin and a modest decrease in GAAP net income, despite higher operating profit. The next key measures are whether GTV continues to outpace orders, advertising maintains its faster growth rate, and adjusted EBITDA can remain ahead of GTV as reinvestment increases.