DoorDash Revenue Rose 35% Last Quarter as Consumers Continued to Order In

The rate of growth for the quarter marked a sharp slowdown. The company’s revenue nearly tripled year-over-year in the corresponding quarters in 2021 and 2020.

“These are very large numbers you are talking about, so the growth rate alone belies the size of the platform,” Chief Financial Officer

Prabir Adarkar

said in an interview, adding that DoorDash now earns more in a quarter than it did throughout 2019.

A lot of businesses took off during the health crisis but “not everyone held on to customers and created habits,” he said.

DoorDash shares rose more than 7% in after-hours trading following the release of the first-quarter results.

Rival

Uber Technologies Inc.’s

Uber Eats, which trails DoorDash in the U.S. food-delivery market, is also experiencing a slowdown. Uber Eats’ revenue growth slowed to 12% in the first quarter from nearly tripling in the same period a year earlier. Order volume grew at DoorDash and Uber Eats but orders placed on America’s third-largest food-delivery app, Grubhub, fell during the first quarter. Grubhub is up for sale less than a year after it agreed to be acquired.

DoorDash has been one of the biggest winners of the pandemic. The app’s share in the food-delivery market in the U.S. jumped to 57% in March from 44% two years ago, according to market research firm YipitData.

Analysts say the company outflanked its rivals thanks to a strong delivery network in the suburbs, a wide selection of restaurants and greater efficiency in delivering the food itself. DoorDash expanded its options during the health crisis to include grocers and convenience stores, pinging consumers as they paid for food to ask them if they also wanted household items from a nearby store.

The value of orders placed on its platform grew 25% to $12.35 billion during the quarter, beating analysts’ forecast of $11.7 billion. Order value more than tripled in the same period a year ago. The rise stems in part from price increases, Mr. Adarkar said. Restaurants raised menu prices to make up for higher food costs and some further marked up the prices on delivery apps to make up for the fees apps charge them.

DoorDash said it expects order value in the current June quarter of between $12.1 billion and $12.5 billion, compared with Wall Street’s expectation of $12.1 billion.

The company raised its guidance on the value of orders placed on its app for the full year. It said it expects 2022 order value to be between $49 billion and $51 billion, up from the $48 billion to $50 billion it projected last quarter. Wall Street expects $49.51 billion in order value this year.

DoorDash’s future growth will depend on whether restaurants can handle demands for delivery while taking care of returning diners, particularly as restaurants struggle with staffing. Some big chains temporarily paused delivery orders when their kitchens became too busy serving dine-in customers last year.

Food-delivery prices have inched up during the pandemic, as restaurants are raising prices on apps and the apps shift new regulatory costs to consumers.

Price-sensitive consumers could weigh on growth amid a broader economic slowdown, according to a Morgan Stanley Research report. DoorDash could be in for more competition as Uber expands into U.S. suburbs, the report said, and it will take time for DoorDash to build up its international business, on which it is placing expensive bets.

DoorDash shares were down more than 40% this year as of Wednesday’s close, more than double the decline in the Nasdaq Composite Index.

The food-delivery company said Thursday that its U.S. restaurants business will continue to be the main source of cash and that the company would spend money to scale it.

Making money off food delivery has been tough despite record sales. DoorDash and Uber Eats trimmed their losses during the pandemic, but DoorDash is the only major food-delivery company that turned a quarterly net profit during the health crisis—in the second quarter of 2020.

The company’s first-quarter net loss widened to $167 million from $110 million a year earlier; analysts on average were expecting a $141 million loss.

The company was profitable on a full-year adjusted earnings basis before taxes, interest, depreciation and amortization in 2021. It posted a profit by the same measure in the most recent quarter and also forecast a profit in the current period.

Companies often point to an adjusted metric that strips the business of certain costs to show investors a path to profitability.

An important factor in DoorDash’s potential profitability going forward will be the fees it can charge consumers and restaurants, its main source of revenue.

Commissions have long been a point of contention between apps and restaurants. Big chains have used their scale to negotiate better terms compared with independent restaurants, which paid as much as 30% of an order in app fees before the pandemic.

The company began offering concessions to restaurants last year, such as allowing them to choose from a sliding commission scale of 15% to 30% of an order with varying degrees of support based on the level chosen.

Many cities temporarily capped what apps could charge during the health crisis, hurting apps’ earnings. The apps sued some cities that made them permanent. The company lost around $20 million in first-quarter revenue because of these caps, Mr. Adarkar said.

Even though ride-share companies have been struggling to recruit enough drivers, DoorDash isn’t facing a gig-worker shortage, he said.

Write to Preetika Rana at [email protected]