DoorDash (NASDAQ: DASH) delivered a mixed second-quarter report on Wednesday, with adjusted EBITDA surpassing expectations but earnings per share falling short. The company's upbeat third-quarter margin guidance, however, has investors focused on the potential for profit growth to outpace order value expansion.
For the second quarter, adjusted EBITDA came in at $914 million, an 8.6% beat over the London Stock Exchange Group (LON: LSEG) consensus of $841.8 million. GAAP diluted EPS of $0.46 missed the FactSet consensus by one cent. Revenue rose 36% year-over-year to $4.454 billion, while total orders climbed 27% to 970 million, exceeding the 933 million FactSet estimate. Marketplace gross order value (GOV) grew 36% to $33.078 billion, topping the LSEG forecast by 3.1%.
Looking ahead, DoorDash's third-quarter guidance implies an adjusted EBITDA-to-GOV margin of 3.06% at the midpoint, roughly 30 basis points higher than the 2.76% recorded in Q2. This suggests profit is growing more rapidly than order value—adjusted EBITDA is projected to climb 12.1% sequentially, while GOV is expected to rise just 1.3%. That profit growth is nearly 9.5 times larger than the increase in order value, a significant development for a stock trading at nearly 99 times trailing earnings.
The Q3 EBITDA midpoint of $1.025 billion exceeds the LSEG consensus by 4.6%, while the GOV midpoint of $33.5 billion is ahead by 2.6%. The market responded positively, with shares up 2.4% in regular trading and an additional 1% after the bell.
The beat, however, came at a cost. Free cash flow jumped to $742 million, more than double the previous level, but GAAP net income dropped 30% to $200 million amid a 52% rise in research expenses and a 39% increase in administrative costs. DoorDash continues to project $1.2 billion to $1.3 billion in stock-based compensation for the year.
Expansion outside the restaurant sector is starting to pay off, according to eMarketer analyst Rachel Wolff, who cited growing demand from grocery and retail segments, as well as increased frequency and user retention driven by DashPass. Around 75% of U.S. grocery and retail orders were made by DashPass members, though DoorDash noted that orders from members generate a lower gross-margin percentage compared to non-members.
The margin progression is not linear. DoorDash anticipates the EBITDA-to-GOV ratio will decrease in Q4 compared to Q3, citing higher costs for Dasher pay, insurance, technology, and autonomy investments. As such, the Q3 outlook does not set a lasting minimum for margins.
DoorDash outperformed other delivery-platform stocks on Wednesday. Uber Technologies (NYSE: UBER) fell 5.29%, while Maplebear, the owner of Instacart (NASDAQ: CART), dropped 0.66%. DoorDash's trailing P/E of 98.73x is 5.8 times Uber's multiple and 3.9 times Maplebear's, limiting the potential for a short-term margin increase.
Despite a 7.1% gain between July 29 and Wednesday's close, DoorDash stock remains 27.4% below its 52-week peak of $285.49. Analyst sentiment ahead of earnings was largely positive, with targets ranging from $205 to $272, but the consensus price target of $236.26 implies just 14% upside.
The upcoming sector catalyst is scheduled for Thursday, when Maplebear will release its second-quarter results, providing further insight into grocery delivery demand. Risks persist, including the integration of Deliveroo, labor and insurance expenses, regulatory factors, and autonomy investments. Additionally, the timing of payments to merchants is projected to lower 2026 reported free cash flow by $700 million to $800 million.
DoorDash has provided the operational update investors sought, but with its valuation at such lofty levels, maintaining the Q3 margin conversion is now essential.
