The news: Instacart defied the gloomy retail landscape with an upbeat forecast for Q2, after reporting its best order growth in over two years.

• Orders rose 14% YoY to 83.2 million, handily beating the consensus estimate for 81.1 million.
• Advertising and other revenues also climbed 14%, outpacing total revenue growth of 9%, a trend the company credited to growing interest from brands big and small.

Instacart expects gross transaction value (GTV) to rise 8% to 10% in Q2 to between $8.85 billion and $9 billion. The midpoint of this range is higher than the consensus estimate for $8.9 billion. Its profit forecast also beat expectations.

Behind the numbers: The uptick in Instacart orders shows how successfully the company has positioned its service as a necessity for many households, as well as the considerable upside from its Uber partnership.

• Instacart noted no pullback in consumer spending in the first four months of the year, with engagement remaining consistent across geographies and income brackets.
• Lowering the free delivery threshold for Instacart+ members to $10 is making its services even stickier as more shoppers turn to the platform to replenish groceries throughout the week.
• Its restaurant delivery deal with Uber is helping to increase order frequency and reactivate lapsed customers, as well as boost grocery basket size.

The advertising piece: Instacart’s confidence extends to its ad business, which it expects to thrive as advertisers seek high-ROI partners.

• The company is “leading in performance, both in terms of ROAS and CTR among multi-retailer ad platforms,” according to CEO Fidji Simo. That is drawing more spending from large and emerging brands.
• That’s creating a flywheel effect whereby increased demand lifts supply by making Instacart’s Carrot Ads platform more attractive to retailers, which then improves performance and enhances its value to advertisers.

Our take: While Instacart is mindful of the macroeconomic landscape, it sees opportunities to grow as consumers prioritize value—which encompasses not only price but also convenience, quality, and selection. That’s something the company believes it’s equipped to provide to shoppers as well as advertisers.