DoorDash (NASDAQ:DASH) faced a challenging market on Tuesday, May 6, 2025, as its stock fell in early trading following the release of its first-quarter earnings report and announcements regarding significant acquisitions. Despite reporting a year-over-year increase in total orders and revenue, the company's share price dropped by 5% amid investor concerns over its financial outlook and the implications of its latest deals.
In its earnings report, DoorDash disclosed that total orders increased by 18% year-over-year to 732 million, while the Marketplace Gross Order Value (GOV) surged 20% to $23.1 billion. This growth reflects the company's ongoing efforts to expand its market presence and enhance its service offerings. Revenue for the quarter reached $3.03 billion, a 21% increase from the same period last year, although it fell short of analysts' expectations of $3.09 billion.
DoorDash's net income for the first quarter was reported at $193 million, translating to earnings of 44 cents per share, compared to a net loss of $23 million, or 6 cents per share, in the same quarter the previous year. The company also reported an adjusted EBITDA of $590 million, significantly up from $371 million in Q1 2024.
In a strategic move to bolster its market position, DoorDash announced the acquisition of the U.K.-based food delivery service Deliveroo for approximately $3.9 billion. This acquisition is expected to create a combined entity with operations in over 40 countries, enhancing DoorDash's ability to compete globally. Deliveroo, which has faced its own challenges in the competitive food delivery market, recently reported a turnaround to profitability, making it an attractive target for DoorDash.
DoorDash CEO Tony Xu expressed optimism about the merger, stating, "We believe both SevenRooms and Deliveroo will expand our ability to build world-class services that increase our potential to grow local commerce and support our financial goals." The acquisition of SevenRooms, a New York City-based restaurant booking and technology platform, is also set to close in the second half of 2025 for $1.2 billion.
However, the market reacted cautiously to these announcements. Analysts noted that while the growth in orders and revenue is positive, the missed revenue expectations and guidance for lower adjusted EBITDA than previously forecasted may raise concerns among investors. For the upcoming second quarter, DoorDash projected adjusted EBITDA of between $600 million and $650 million, below Wall Street's expectations of $639 million.
The contrasting fortunes of DoorDash and Deliveroo highlight a broader trend in the market. Since their respective IPOs, DoorDash's market value has soared, while Deliveroo's has struggled. When Deliveroo listed on the London Stock Exchange, DoorDash was worth five times as much, and now, four years later, it is valued at 35 times more than Deliveroo.
According to financial analysts, the disparity in market valuations between U.S. and U.K. companies can be attributed to several factors, including the higher average valuations of U.S. stocks and a decline in domestic investment in U.K. equities. The S&P 500, which comprises the 500 largest publicly traded U.S. companies, is valued at an average of 28 times its profits, while the FTSE 100, representing the largest U.K. companies, is valued at just 12 times earnings.
This trend has led many U.K. companies to consider moving to U.S. exchanges where they can access greater capital and higher valuations. Danny Rimer of Index Ventures stated in 2023 that if he had the chance, he would have opted for a U.S. listing for Deliveroo, highlighting the growing preference for U.S. markets among investors.
In response to this trend, the U.K. government has introduced the "Edinburgh Reforms" aimed at making the London stock market more attractive to companies. These reforms include allowing companies to sell a smaller proportion of their shares to the public while retaining more control for founders.
Despite the challenges, some financial leaders have expressed optimism about the potential for U.K. stocks. Larry Fink of BlackRock and Jamie Dimon of JPMorgan have both noted that the U.K. market appears undervalued and has shown signs of outperforming U.S. markets in early 2025.
The implications of DoorDash's acquisitions extend beyond immediate financial metrics. The integration of Deliveroo and SevenRooms into DoorDash's operations could reshape the competitive landscape of the food delivery and restaurant technology sectors. As DoorDash expands its services, it aims to provide local businesses with improved tools and technology to thrive in an increasingly competitive environment.
While the future remains uncertain, the strategic moves by DoorDash signal its commitment to growth and innovation in the food delivery space. As the company navigates the complexities of its acquisitions and market pressures, investors will be closely watching its performance in the upcoming quarters.
In conclusion, DoorDash's recent financial results and acquisition announcements reflect its ongoing efforts to solidify its market position amid a challenging competitive landscape. The company's ability to adapt and innovate will be crucial as it seeks to capitalize on the growing demand for food delivery services worldwide.
