Value-focused ecommerce platform Meesho has reported a sharp deterioration in profitability for the October–December quarter, with its net loss widening more than 13-fold year-on-year to Rs. 491 crore (US $ 53.55 million), even as operating revenue rose 31% to Rs. 3,517 crore (US $ 383 million).
The surge in losses was largely driven by costs growing significantly faster than margins, reflecting increased spending on customer acquisition and the rapid expansion of its logistics arm, Valmo. The company said it would continue to track free cash flow as a key performance indicator, arguing that it provides a clearer view of underlying financial health than traditional accounting measures.
In a letter to shareholders, founder and chief executive Vidit Aatrey said free cash flow captured factors often overlooked by accounting metrics, including working capital discipline, capital intensity and cash generated after reinvestment. He added that Meesho’s negative working capital cycle and asset-light operating model created structural cash flow advantages and reduced capital intensity, which had historically eroded returns in consumer-facing businesses.
Meesho, which is backed by investors including SoftBank and Elevation Capital, went public following a Rs. 5,421 crore (US $ 591 million) initial public offering.
During an earnings call, Aatrey said the company expected margins to improve over the next two to three quarters, even as it maintained a strong focus on growth.
Operational metrics showed continued expansion during the quarter, with annual transacting users increasing 34% year-on-year to 251 million. Net merchandise value (NMV) rose 26% to Rs. 10,995 crore (US $ 1.19 billion). Aatrey said platform-based businesses typically benefit from increasing returns to scale, which explained Meesho’s prioritisation of growth to build long-term, compounding advantages that could support sustainable profitability.
However, contribution margin — defined as revenue minus variable costs — declined to 2.3%, down 198 basis points year-on-year. The fall followed an accelerated expansion of Valmo’s logistics network, which was undertaken amid broader industry disruption after third-party logistics provider Delhivery acquired Ecom Express last year. The integration led to temporary inefficiencies and higher per-order costs for Meesho.
The company said that during the second and third quarters of FY ’26, it rapidly expanded Valmo’s network, resulting in issues such as under-utilised routes, redundant nodes and longer delivery distances. These factors reduced contribution margins by 1.1 percentage points in Q2 FY ’26 and a further 1 percentage point in Q3 FY ’26, including a one-off network restructuring cost of 16 basis points in the third quarter.
Meesho said it was taking steps to optimise the logistics network and reduce per-order costs. Despite higher fulfilment expenses, the company did not raise charges for customers during the festive season, instead absorbing the costs to protect user growth and retention. In its shareholder letter, the company said temporary pricing volatility during peak demand periods was detrimental to long-term customer retention and that costs were absorbed due to a clear expectation of normalisation. It added that any structural cost increases would eventually be passed on to consumers.
The impact of higher costs was also evident in Meesho’s marketplace business, where losses widened sharply. Adjusted EBITDA swung from near breakeven in the same quarter last year to a substantial deficit, with an adjusted EBITDA loss of Rs. 460 crore (US $ 50.17 million) for the October–December period, compared with a loss of Rs. 21 crore (US $ 2.29 million) a year earlier.
