Grab logs standout quarter as deliveries growth rebounds, touts revenue potential of ads

A love fest.

That’s one way to describe how well Grab’s unaudited second quarter results were received by analysts and investors, who sent the company’s shares up 11% in the trading day that followed.

This was in stark contrast to US-listed Sea Group, which saw a historic 29% plunge after its Q2 2023 results were released earlier this month.

Unlike Sea, which had investors spooked over the prospect of renewed competition and losses at Shopee, Grab managed to convince investors that its business units would keep growing while margins will be held in check.

Quarterly revenue at the Singapore-based super app was up by 77% year on year, while adjusted EBITDA and net income losses continued to narrow.

Grab’s management expects this trend to continue, and even brought forward its guidance for adjusted EBITDA breakeven from Q4 to Q3 of this year.

Walking the tightrope

The company’s mobility and deliveries units – the two largest and most lucrative among its businesses – steadily grew while remaining profitable.

Mobility revenue and segment adjusted EBITDA increased by 29% and 31% year on year, respectively. Meanwhile, deliveries revenue rose by 118%, with Grab attributing the jump to business model changes implemented in Q4 2022. If these changes were made earlier in 2022, year-on-year revenue growth would have been 39%.

Perhaps most importantly, deliveries gross merchandise value (GMV) made a comeback after three quarters of decline, reaching an all-time high.

In a previous analysis, Tech in Asia noted Grab’s stagnating deliveries GMV in Q1 2023 and warned that it needed to “find ways to grow GMV while keeping a lid on expenses” to hit its profitability goals.

The company seems to be managing this – for now, at least – while keeping its adjusted EBITDA margins inching closer to its steady-state target of 3+%.

This growth comes as some of its rivals are battling sluggish GMV numbers.

Grab boiled its strong performance down to two factors: using its scale to reduce its cost to serve and deepening its engagement with users through its GrabUnlimited subscription program.

To boost the affordability of its services and, in turn, the number of users on the platform, Grab rolled out carpooling options for users in Malaysia and Indonesia. It also improved the efficiency, safety, and service quality standards of its two-wheel offering in the Philippines.

GrabUnlimited directly benefits Grab’s finances in several ways. First, subscribers had a rate of retention that’s 2x higher than non-subscribers over the first half of 2023, according to the company. Second, they spend 3.8x more than non-subscribers on food deliveries. Third, it allows for better targeting of incentives because subscribers are less likely to be low-value users who are just looking for the cheapest deals on any platform.

Serving the underbanked

Advertising as a highlight