Image source: The Motley Fool.
Instacart(NASDAQ: CART)
Q2 2024 Earnings Call
Aug 06, 2024, 5:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and thank you for standing by. Welcome to Instacart's second quarter 2024 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session.
[Operator instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Rebecca Yoshiyama, VP of investor relations, capital markets, and treasury. Please go ahead.
Rebecca Yoshiyama -- Head of Investor Relations
Thank you, Gigi, and welcome, everyone, to Instacart's second quarter 2024 earnings call. On the call with me today are Fidji Simo, our chief executive officer; and Emily Reuter, our chief financial officer. During today's call, we will make forward-looking statements related to our business plans and strategy, development in the grocery industry, and our future performance and prospects, including our expectations regarding financial results and partnerships. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated.
You can find more information about these risks and uncertainties in our last Form 10-Q filed with the SEC. We assume no obligation to update these statements after today's call, except as required by law. In addition, we will also discuss certain non-GAAP financial measures, which have limitations and should not be considered in isolation from or as a substitute for our GAAP results. A reconciliation between these GAAP and non-GAAP financial measures is included in our shareholder letter, which can be found on our Investor Relations website.
Should you invest $1,000 in Instacart right now?
Before you buy stock in Instacart, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Instacart wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $615,516!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of August 6, 2024
Now, I'll turn over the call to Fidji for her opening remarks.
Fidji Simo -- Chairman and Chief Executive Officer
Thanks, Rebecca, and hi, everyone. I hope you had a chance to read our latest shareholder letter. We posted strong Q2 results, including 10% year-over-year growth in GTV, our third consecutive quarter of positive GAAP net income, and impressive gains in adjusted EBITDA and operating cash flow. Our performance reinforces our leading position as the largest online grocery marketplace in North America and highlights our best-in-class customer experience underpinned by industry-leading delivery speed and order quality.
Across all dimensions, our deep integrations with retailers built over the last 12 years of an enduring strategic advantage that continues to pay off. We continue to deepen our selection advantage by offering multiple services like pickup, virtual convenience, EBT SNAP, catering, and more that all require deep integrations within retailer systems. Our quality is unmatched because we understand retailers' inventory dynamics better than anyone through billions of data points that help us figure out what's on the shelf or what the perfect replacement is and by linking with retailers' loyalty programs, digitizing their circulars, integrating their complex offers and powering their price optimization algorithms, we can also make our service more affordable to consumers in ways that are incredibly hard to replicate. These advantages don't just apply to our marketplace but also extend to our Enterprise Platform, which is one of the most underappreciated parts of our growth strategy.
So, I thought I'd spend some time today explaining this in more depth to show how the scale of our retailer integration, the foundation of our Marketplace, and white-label Storefront work together in a virtuous cycle and position us well for the future. In 2023, we completely rebuilt our white-label e-commerce Storefront solution from the ground up. By creating a shared architecture with our marketplace, our Enterprise Storefront partners can now immediately benefit from the latest features and technologies that we add to Instacart on their own and operated apps and websites. Most retailers can't match our pace of innovation on their own.
So, by integrating with us, they get continuous improvements that drive growth with minimal cost and efforts. These investments are showing up in our results as we rapidly onboard more Storefront retailers who are eager to turn in-store customers into omnichannel customers. About one in five Instacart orders are placed on our Enterprise platform. And as we continue to expand our white-label volume, this also benefits our whole ecosystem.
By increasing the density of orders that we serve in every store, we can best position shoppers to offer faster on-demand delivery windows. We can also batch more orders together, which is a key to unlocking our best-in-class unit economics in grocery. We are constantly looking for more ways to pass on these cost savings to customers and retailers while reinvesting in new initiatives to make our technology and services better, so the virtuous cycle can go on. There is a lot more runway to grow our Marketplace and Enterprise Platform online offshore.
But even if we double or triple online gross penetration, more than two-thirds of grocery shopping will still be in-store. And that's why our Enterprise technologies now go beyond e-commerce with a suite of in-store technology. Just today, we announced our first-ever international launch of our AI-powered Caper Carts in partnership with ALDI in Austria as well as ALDI U.S. launching Carrot Ads and an in-store mode inside our app.
We're also expanding our FoodStorm ordering kiosks pilot with Sprouts, and Schnucks will be our first retail partner to roll out Carrot Ads in electronic shelf label software chainwide. The beauty of all of our in-store technologies is that they connect directly with Storefront and with each other. So, it's really a seamless experience for customers to buy from retailers online and in stores. For example, customers can reorder online what they bought with their Caper Carts in one tab or bring their online shopping lease to the screen of Caper Carts to avoid forgetting ingredients in the stores.
This is increasingly important to retailers who are moving away from complex and fragmented point solutions and toward technology partners that can offer a simple and seamless customer experience across all of their channels. Scaling our Marketplace and Enterprise offerings, both online and in-store is also critical to our strategy because it's laying the foundation for a massive one-stop-shop omnichannel retail media network. While it may seem like new retail media networks are popping up less than right now, we know that brands have limited time and resources, and they will ultimately want to work with platforms that have scale across all channels. And this is exactly where Instacart Ads will shine because of our leading scale, performance, measurement, data, and product capabilities.
With us, CPG can reach audiences across our marketplace, retailers owned and operated sites through Carrot Ads as well as other destinations like Google Shopping Ads, Meta, the Trade Desk, and YouTube, where they can place ads pointing to Instacart and leveraging Instacart data. And in the future, this will also include in-store ads on Caper Carts screens, which can take the very best of online advertising and bring it to the store to people who are already in the aisles. Overall, as you can tell, I'm incredibly excited by the momentum we are building across our Marketplace, Enterprise, and Advertising platforms. We're placing really ambitious bets that will enable us to extend our lead as the leading online grocery marketplace and cement our position as one of the largest omnichannel retail media network.
As we execute on these growth strategies, I'm confident in our ability to generate more shareholder value over time and further our vision of building the technologies that can power every single grocery transaction. Now, I'll pass the call over to Emily for an update on our financials.
Emily Reuter -- Chief Financial Officer
Thank you, Fidji. It's great to see the momentum we're having across so many areas of the business. growing our core service and investing against our longer-term bets, all while staying disciplined on our financial performance. Now, let me provide a bit more color on our financial results and outlook.
Q2 was a really strong quarter for us with both GTV and adjusted EBITDA beating the high end of our guidance ranges. We delivered GTV growth of 10% year over year, comprising orders growth of 7% and average order value growth of 3%. Order growth was in line with our expectations, while basket size was the key driver of our outperformance. There were a few different factors that drove our basket size higher in the quarter, including new customer cohorts reaching bigger basket sizes faster, existing customers making larger purchases over time, and a higher mix of club orders.
Q2 advertising and other revenue growth of 11% year over year also outperformed our expectations. This was primarily driven by growth from emerging brands on our platform as we've steadily grown the number of active brands to more than 6,000. This growth more than offset the pullback in spend we continue to see from certain large brand partners experiencing challenges in their business. We also delivered strong profitability results across the board, which continues to reflect our strong operating fundamentals and our ability to manage multiple levers across our P&L to drive leverage.
This includes our third consecutive quarter of positive GAAP net income of $61 million, which was down quarter over quarter primarily due to ongoing noise in SBC following our IPO in September 2023, and the $95 million of restructuring and executive-related reversals we experienced in Q1 2024. After we lap our IPO quarter, we anticipate SBC will begin to normalize, while continuing to expect higher levels of SBC in Q2 due to seasonality. In the quarter, we also generated adjusted EBITDA of $208 million, up 89% year over year, and operating cash flow of $244 million, up 42% year over year. Looking ahead, we are guiding to Q3 GTV of $8.1 billion to $8.25 billion, representing year-over-year growth of 8% to 10%.
Our guidance expects the composition of GTV growth to continue to be driven more by orders than basket size. It also reflects ongoing strength in our core service and a modest growth contribution from restaurant orders. We are also guiding to Q3 adjusted EBITDA of $205 million to $215 million. The primary driver of our anticipated year-over-year growth in adjusted EBITDA as a percentage of GTV is ongoing adjusted operating expense leverage.
Similar to prior quarters, we expect to continue driving shopper efficiencies in transaction revenue, while reinvesting in opportunities like more affordable service options and consumer incentives. We also expect advertising and other revenue to grow year over year, largely in line with our GTV guidance. Overall, our business is performing well. Our operating scale and critical advantages continue to have us well-positioned to strengthen our lead as the largest online grocery marketplace in North America and generate more shareholder value over time.
This is why in Q2, we completed our initial $1 billion of share repurchases and authorized a new $500 million buyback program. As of June 30, we cumulatively repurchased 36.5 million shares, representing more than 10% of our fully diluted shares outstanding at the end of 2023, and had $425 million of remaining repurchase capacity. We have a lot of momentum to build on across all aspects of our business and remain focused on driving more profitable growth. With that, we will open up the call for live questions.
Operator, you may begin.
Questions & Answers:
Operator
Thank you. [Operator instructions] Please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. Our first question comes from the line of Colin Sebastian from Baird.
Colin Sebastian -- Analyst
Thanks. Good afternoon. I appreciate the questions. I guess, first off, given the momentum we're seeing in your business the last couple of quarters, really, curious in terms of how you're dividing resources around customer acquisition, retention, the use of some of the incentives for consumers, and balancing that with some of the more traditional customer acquisition marketing spend.
If you could comment maybe on how you're thinking about those resources. And then secondly, just on the competitive environment, given a lot of the attention on that as that evolves, if you're seeing any change in the competitive environment, that would be helpful as well. Thank you.
Fidji Simo -- Chairman and Chief Executive Officer
Thanks, Colin. I'll take both of those. On the first one, we continue to be extremely focused on accelerating online grocery adoption. And that does mean that we have a heavy focus on new customer acquisition and continue to be pleased by what we're seeing there.
At the same time, we also want to create habituated customers because we know that when we habituate the customer, we end up getting the entire grocery spend for the month, which is incredibly valuable. And so, we have a portfolio of marketing tactics, incentive tactics that really allow us to do both, both attract new customers as well as habituate them. We released the start, as you may have seen in the letter, that we have 25 million annual customers, and that's a really great opportunity for us to turn these infrequent customers who purchase on average 11 orders a year with us into much more habituated customers that look more like our typical monthly active orders. And we're doing that not just through incentives, but also through promoting Instacart+ through connecting these users to all of our affordability options that you can build a habit as well as introducing new use cases like restaurants, which we are seeing drive both new users, new customer acquisition as well as habituation of existing users.
We do all of that based on a five-year NPV, and we continue to invest as long as we see those returns. Now, on your second question on the competitive environment, we are not seeing much change to the environment. As a reminder, we are the leading category share with 50%-plus share of small baskets, 70-plus percent share of large basket of about $75 which is incredibly important because that represent 70 large baskets -- represent 75% of the industry and even more of the profits. We continue to see that we are approximately 5x better the new entrants at activating large baskets, and that means that we bring multiples of GTV into the industry compared to these players.
And we also see that we're about 5x better at turning small-basket customers into large-basket customers than these new entrants. So, we continue to see extreme strength with our leading selection or leading service and that is translating into this category share and this ability to really excel in large baskets.
Operator
Thank you. One moment for our next question. Our next question comes from the line of Eric Sheridan from Goldman Sachs.
Eric Sheridan -- Analyst
Thank you. Maybe I can ask a two-parter, if it's OK, on the broader advertising environment. There's been a lot of data points on the health of CPG advertisers and the way they're sort of processing budgets in a post-inflation or lapping-inflation world. Would love to get your perspective on the broader CPG landscape and how it impacts your views about your advertising opportunities in the back part of the year.
And the second part of the question would be you continue to push forward on a lot of innovation on advertising solutions. Maybe talk a little bit about the product road map as we think about, again, the end of this year, but more broadly over the medium-term horizon. Thanks so much.
Fidji Simo -- Chairman and Chief Executive Officer
Thanks, Eric. So, what we're seeing on the CPG side is quite consistent with what I talked about last quarter, where we are seeing some large brands struggle in their business broadly and therefore pull back on advertising. In general, we're not the first advertising platform that they pull back from because we're so measurable and highly performant that we're not the first one to be cut, and it tends to be a lot more widespread. However, the thing that is really exciting for us is that the growth that we are seeing in emerging brands from our platform now at 6,000 emerging brands has more than offset the pullback that we're seeing with large brands.
And that's very in line with the strategy I talked about last quarter of really diversifying the business and continuing to lean into the strength of emerging brands while also continuing to deliver great results for large brands as well. In terms of innovation on our platform, we continue to innovate on our marketplace with new ad formats. This quarter, we just announced recipes, occasions, and bundles, which are a great example of innovation where CPGs themselves have told us that they would love to do merchandising online that we really cannot do it out of a store. Like, for example, if someone searching for spinach, having an advertiser be able to promote a recipe for spinach lasagna and therefore, if their pasta advertisers, they can earn their way into this particular query an advertiser, the retailer of soda brand advertising next to hot dogs so that you have the perfect summer pairing for barbecues.
And so, this is a great example of the Fiat format innovation, we continue to drive and are excited about. We also continue to push our measurement capabilities. We think that we have incredible performance. And the more we can demonstrate that whether it's partnership with Circana, with others, the better it's going to be for ready to show that for our advertisers.
And then we're also medium-term, to your point, innovating on what we're doing outside of our marketplace. We power ads on 100-plus retailers on an operated website. We launched new retail power media partnerships with Meta and YouTube. In the future, we're going to add advertising on Caper Carts that will allow us to have ads inside the store, and therefore, have a real portfolio of different advertising tools, both on our platform and outside of our platform that can make us a real one-stop shop for CPG.
So, that's really leading the foundation for being a really great retail media network, and that gives us enormous confidence in our long-term add another revenue target of 4% to 5% of GTV.
Operator
Thank you. One moment for our next question. Our next question comes from the line of Nikhil Devnani from Bernstein.
Nikhil Devnani -- Analyst
Hi. Thanks for taking my question. I wanted to ask about a couple of your recent partnerships. So, first, on the Uber Eats commentary is encouraging.
Could you please elaborate on what you're seeing and how we should think about the ramp in order growth and GTV there? It seems like there's an explicit contribution embedded in your Q3 outlook. And then with respect to your Chase partnership, it also looks like DoorDash is now the exclusive grocery partner here for those cardholders. So, how much of a headwind is this going to be to your growth going forward? And how do you aim to counteract this challenge? Thank you.
Fidji Simo -- Chairman and Chief Executive Officer
Thanks, Nikhil. I'll start with Uber Eats. We're extremely pleased with the partnership with Uber and the early results. For context, we fully rolled out restaurants nationwide in mid-June, and we see our strategy paying off by partnering with Uber, we're ramping restaurant adoption at a much faster pace than we see any new entrants be able to accomplish in grocery after years and billions of dollars in investment.
So, we're really excited about the ramp working and the adoption we're seeing. This early data also confirms our belief that restaurants can help our entire ecosystem by attracting new customers to Instacart, by increasing order frequency for existing customers, by driving adoption of Instacart+, all of that has been confirmed by early data. And that's why, longer term, we really believe that restaurants can create a flywheel that helps grow our entire business, including groceries. Now, on the Chase partnership, I would encourage you to fact-check what you heard because as you may see online, we published a blog post yesterday that shows the depth of our existing partnership with Chase.
So, clearly, we have a deep grocery partnership with them. The thing that has changed to explain to you the change in strategy is that we had an embedded benefit partnership on some parts of their card portfolio, but what we saw is that actually, two-thirds of the redemption happened in Year 1. So, you tend to really get the value -- a lot of the value of these partnerships in Year 1. And then we saw that because we have such a superior service, these people converted into being in Instacart+ customers and retail with us because they see the value of Instacart.
So, there isn't much point in continuing to pay for ongoing benefits when you have highly retained users. And instead, what we want to focus on is actually directing this energy toward new users, new customer acquisition because as a category leader, that's really the No. 1 priority for us. And that's why you'll see what we announced this Chase yesterday, we are directing our investments toward offers for a much broader part of their portfolio and especially their co-branded cards that we hadn't previously touched, and putting an offer in front of their customers of 10% cash back, which we think is going to allow us to tap into a fundamentally new audience.
So, we're very pleased with the result of the Chase partnership to date, and we are very excited about this next phase of the partnership that should really allow us to focus on new customers.
Operator
Thank you. One moment for our next question. Our next question comes from the line of Justin Post from Bank of America.
Justin Post -- Analyst
Great. Thanks for taking my question. I wanted to ask about AOVs. It looks like it flipped to positive -- quite positive this quarter, and you're looking for growth next quarter.
How much of that is versus you're able to drive it with suggestions and product offers, which actually could be helping your grocers? And kind of what's your outlook for AOVs over the next year? Thank you.
Emily Reuter -- Chief Financial Officer
Thanks, Justin, for the question. This is Emily. I'll take that one. So, in terms of specifically.
In terms of what's driving AOV, there was a couple of different factors. It is more of an outcome of what's happening in the market versus something that we try specifically to influence. So, what happened in Q2? We do have new customer cohorts that are reaching bigger baskets faster than prior cohort. So, that does influence the overall AOV.
In addition, as has always happened, existing customers continue to make larger purchases over time. So, that weighs the overall AOV picture. And then lastly, we did have a higher mix of club orders in the period. We don't guide specifically to AOV or the composition of GTV on a go-forward basis.
But that gives you a bit of color as to what happened in Q2.
Fidji Simo -- Chairman and Chief Executive Officer
And Justin, I will add that the mix of club orders increasing is an intentional thing. As we've mentioned in the past, we definitely want to direct sort of our incentives toward customers adopting clubs because we see that when you adopt club, you're more likely to retain over time. And as a result, that has been a big part of our incentive strategy, I will highlight that clubs are doing exceptionally well in Instacart now, in particular, with Costco, we recently launched EBT SNAP with them, we upgraded them to our new Storefront Pro website, which is working incredibly well. They sell Instacart+ membership on their site.
We sell Costco membership on ours. So, really the depth of the partner share is showing up in higher club adoption.
Operator
Thank you. One moment for our next question. Our next question comes from the line of Andrew Boone from JMP Securities.
Andrew Boone -- Analyst
Thanks so much for taking my questions. You added Home Depot and Sally Beauty in the quarter. Can you talk about your supply with nongrocery merchants? How do you feel about that? And what are your plans to grow it as well as what's the consumer response you guys continue to add selection there? Thanks so much.
Fidji Simo -- Chairman and Chief Executive Officer
Thanks, Andrew. We continue to be pleased with what we're seeing here, both with existing non-grocery retailers as well as new ones that were onboarding. What we find very often is that because people are used to placing large baskets in grocery, they are prime to place large baskets with these other retailers as well. And so, that has been a very big benefit for them and for us as well.
And it is an incremental use case that allows us, once again, to take some of the more infrequent customers and either of them discover Instacart through these retailers, especially during seasonally events like Valentine Day and things like that where you're coming to Instacart for last-minute purchases that are not necessarily in the grocery category. And so, that allows us to attract new customers to our ecosystem and then convert into grocery customers or take grocery customers and increase their frequency with these new use cases. This is also adding to the strength of Instacart+ because when you buy Instacart+ now, you're not just getting grocery, you're getting restaurants, you're getting a lot of other verticals in beauty, in home improvement, etc. And so, when you look at this whole picture on average, customers are an Instacart shop from size plus retailers on our marketplace and Instacart+ members shop at twice as many retailers and nongrocery categories are a contributor to that.
Operator
Thank you. One moment for our next question. Our next question comes from the line of Shweta Khajuria from Wolfe Research.
Shweta Khajuria -- Analyst
Thank you for taking my questions. Could you please talk about cohort behavior? You mentioned that in your letter. Could you provide a little bit more color on how the magnitude of the improvements you're seeing in the cohorts? And how should we think about it in the back half of this year? And then the second question is on Enterprise growth. In the past, you've mentioned that generally speaking, Enterprise grows in line -- has grown in line with the rest of the platform.
What would you need to do or see for it to accelerate at a clip faster than the overall platform? Thank you.
Emily Reuter -- Chief Financial Officer
Sure. I can start with the cohort question. So, thanks for the question. In terms of -- first of all, I just want to take a step back and it relates to obviously the performance of the cohorts.
But the business is performing really well, and that obviously is an indication of the health of the underlying cohorts. So, delivered 10% year-over-year growth in Q2, and we're excited about the Q3 guide. Now, if we look backwards to 2023, we talked a lot about specific cohort trends because they were a significant headwind to 2023 growth, really, the COVID cohorts, in particular, the decline as folks that came to the platform for very specific COVID-related use cases churned off the platform. Now, at this point, all of our cohorts, we're really pleased to see both mature and new are healthy.
Their behaviors have really normalized. And so, for that reason, the specifics of any individual cohort really aren't as important. And as I said before, as a company, we think about cohorts as an output, not really as an input. And what I mean by that is we don't have any strategy around 2019 cohort or 2022 cohort.
What we are focused on is deepening engagement with our existing and infrequent customers. So, we talked about -- or Fidji talked about earlier, the 25 million people that use Instacart in the last year. We're really excited about the strategies we're seeing start to work on deepening engagement with the full spectrum of different customers we see in that 25 million. That means we obviously have high single-digit millions that you use people -- use Instacart monthly, but we also have people that we're trying to get from five times a year to monthly from one time a year to six times a year.
So, there's a lot of work we're doing around engagement with those cohorts. In addition, as Fidji mentioned earlier, we are continuing to attract new users. We're still bringing in GTV from new cohorts that are higher than pre-pandemic. So, overall, just really pleased with the picture.
Fidji Simo -- Chairman and Chief Executive Officer
And I'll take the question on Enterprise. You are correct. We are seeing strong growth in both marketplace and enterprise. We are seeing overall momentum with enterprise, as I mentioned.
And really what I'm looking at is our ability to onboard more retailers to our Enterprise products faster and so for example, we onboarded 30 retailers in H1 to our Storefront products, and that's faster and more retailers than what we've been able to do in the past because we have revamped our system and therefore, like when we do that, and you get a retailer to shift from their particular solution to an Instacart solution, this is straight up incremental GTV, which is definitely contributing to growth. The other thing I will call out is that these businesses are not separate. That's what I was mentioning in my introduction. Our Enterprise business helps our marketplace business grows in many ways because you're a retailer and you really want an integration on your Enterprise website, like integrating with SNAP, like integrating with catering, like integrating like doing pickup, it becomes incredibly easy to apply all of these integrations seamlessly to Marketplace, and that contributes to the growth of Marketplace.
So, we have really seen a virtuous cycle between these two things. And we don't think of it as like one needs to go faster than the other. Instead, we think of it as like let's integrate more and more deeply with retailers so that both our Marketplace and our Enterprise business grow fast.
Operator
Thank you. One moment for our next question. Our next question comes from the line of Ross Sandler from Barclays.
Ross Sandler -- Analyst
Hey. Just following up on that 25 million comment. So, top of funnel, how is the 25 million growing compared to the monthly active, meaning like the top of funnel growing faster, slower? How did that look a year ago? And I guess, how are you guys evolving the incentive program to bring people down that funnel? And then the second question is just on the off-Instacart ads opportunity. The retail media.
You mentioned about the social media sites that you're deeper integrating with. How big is that opportunity in front of you for off-site ads?
Fidji Simo -- Chairman and Chief Executive Officer
Yeah. So, let me start with the 25 million. We don't report on specific numbers here, but it is growing year over year. And we like what we're seeing here in our ability to continue habituating these users, as Emily mentioned and as I mentioned earlier.
I think what it's going to take to really habituate these users is not just the incentive that we mentioned, but also introducing new use cases like restaurants, which are high frequency and that we are seeing these users as well as power users really adopt, also connecting these users to all of our affordability initiatives so that you start realizing that you can actually get your entire grocery habit moved to Instacart at a very competitive price. And we're doing that through loyalty integration, digitizing circulars, optimizing pricing with retailers, all of that compounds to really having a service that people realized you can use weekly and really adopt the weekly shop, which is a fundamental end state for us. On your question on retail power media, it is still nascent for us. So, it would be a fairly negligible impact on current advertising revenue.
However, it is a fairly significant piece of our path to getting to our target of 4% to 5% of GTV. These things take time to ramp because usually, you have to connect to different stakeholders at the CPGs that are different between the one that plays ads on Google and Meta than the one that plays ads on Instacart. So, it's a new sales motion, it's a sales motion that we need to put in place with partners. So, it takes a little bit of time to ramp up the results and expand.
But we are very pleased with what we're seeing in the early days in terms of performance, and that's giving us extreme confidence in continuing to expand this, continuing to prioritize that. And if you look at the last year, we have added partnership after partnership from Google to YouTube to Meta to NBCU to the Trade Desk really because we see the potential that this line of business could have for us long term.
Operator
Thank you. One moment for our next question. Our next question comes from the line of Tom Champion from Piper Sandler.
Unknown speaker -- -- Analyst
Hi. Thanks. This is Jim on for Tom. So, just a follow-up on ads.
We've seen the active brand partners move to 6,000 from, call it, 5,500, I guess as we think about that 4% to 5% goal, do we see the larger opportunity being ARPU or the number of advertisers on the platform? Thanks.
Fidji Simo -- Chairman and Chief Executive Officer
It's going to be a mix of both. What we are seeing is that quite a large opportunity in onboarding more brand partners. In fact, what we did in the last quarter is increase our emerging brand team, both on the sales side with really great ROI as well as on the product side to make the product much easier to onboard onto. And that's why you're seeing this increase in number of partners advertising and we think we are very far from having tapped the four markets there.
But we are also seeing that when these partners come onto the platform, they like to spend, see the result, and then expand our spend and really discover the value of a across the entire funnel. Many of them might start with sponsored products and realize that we also have shoppable displays. And so, over time, we really want to make sure that they use all of our capabilities and expand our ARPU. So, definitely lots of opportunities there with emerging brands.
I will call out as well that there is still a lot of opportunity to deepen and expand with large players as well. We have called out the fact that some large players are coming back, given the challenges in their business, but that shouldn't mask the fact that some large players are really doubling down with us, investing a lot more and seeing the results, and we're seeing real performance driving increasing investment. And that's why you're seeing us focus not just on new formats and new partnership but also continuing to develop our measurement capabilities because we have like the best proof point to put in front of advertisers to demonstrate that they should be investing more and that it's a good ROI to do so.
Operator
Thank you. One moment for our next question. Our next question comes from the line of Bernie McTernan from Needham.
Bernard McTernan -- Analyst
Great. Thanks. Maybe just a follow-up to the conversation around advertising and in offering a portfolio of advertising solutions to different CPG companies. If we're thinking about providing Facebook or YouTube, what's the benefit from -- for the CPG operator to using one retail media network to access all these other platforms? Is it the data that you provide is better? Just trying to think about what's from their point of view.
Thank you.
Fidji Simo -- Chairman and Chief Executive Officer
Yes, that's exactly right. I would say there's two very critical benefit. One is our data, and that goes both for targeting because you can go on one of those platforms and target customers based on their activity on Instacart, but also use that data for closed-loop measurement, meaning that, as you know, a lot of first-party data has kind of disappeared and has left these platforms with less sophisticated measurement capabilities, whereas by partnering with us, they are able to prove that the ads that are being shown on this platform actually leads to a purchase in many cases within -- and obviously in the ad. And so, we think this is incredibly powerful to have this data both on the targeting side and the measurement side and a primary reason why advertisers choose to use these solutions.
In addition to that, the other thing that we offer is pointing these ads toward an Instacart brand page. So, if you look at CPG ads regularly, like, sometimes, they don't really have a clear destination or they point to a website where you cannot buy the product. whereas if you point your CPG ad to an Instacart page, it means that a customer can go from looking at the ad on Facebook, like landing on Instacart, buying the product right there and having the products in their hands in an hour, that's a really, really magical customer experience and loop that you can create as an advertiser. And so, we act both as a great destination as well as a data and measurement partner to increase the performance of the ad by measuring them and optimizing them.
Operator
Thank you. One moment for our next question. Our next question comes from the line of Jason Helfstein from Oppenheimer and Company.
Jason Helfstein -- Analyst
Thanks. So year-to-date GTV is up 11% year over year. I think most of us are still like 6% GTV in our models for the next two years. I mean, barring any change in economic conditions, which obviously is a big if, I mean, is there any reason why growth should slow given what sounds like pretty impressive commentary around cohorts? And just a second follow-up.
Any additional color you can provide on Instacart+ activity in second quarter perhaps contribution to GTV or just any other color? Thank you.
Fidji Simo -- Chairman and Chief Executive Officer
I'll take Instacart+, and Emily can take the first question. On Instacart+, we are very pleased with what we're seeing. We are seeing growth in Instacart+ members, but we're also seeing faster growth in Instacart+ members or regular monthly active orders to translate into deeper penetration of Instacart+ within our customer base. So, we're really excited about that.
We think that it's because the value of Instacart + continues to grow and increase over time with the addition of restaurants with the partnerships we are striking with Peacock, with New York Times, and more, and that's really translated into the growth that we're seeing. We don't report on specific numbers, but we can confirm that Instacart+ is still the majority of our GTV and that's something that continues to grow.
Operator
Thank you. One moment for our next --
Emily Reuter -- Chief Financial Officer
Excuse me. Sorry, Gigi, there was another part of that question. Sorry. Thanks, Jason, for the question.
So, as it relates to GTV, as you mentioned, GTV up really strongly this year. What I would -- we're really pleased with the momentum that we've had in the first half of 2024. I would remind everyone that in Q1, we did have a number of one-time benefits, the combination of the benefit of leap day IN February as well as some one-time seasonal benefits from bad weather. So, that does factor into the overall picture.
As we look forward, we're very pleased with our Q3 guidance. As you mentioned, two quarters of double-digit growth. As we look into Q3, we're pleased to have double-digit growth in the high end of the range. But as we've said in the past, when we think about our guidance range is really what we're doing is looking at the data that we're seeing on the ground day to day.
We obviously, as any business, does look at the upsides and downsides and try to give our best view of the range of outcomes. And that's the philosophy that you're seeing play out here again. So, we feel good about the guidance range that we've given based on what we're seeing in the data today. Longer term, we don't comment beyond next quarter.
But what we have said is we really want to see that continued momentum in all of the data, whether that's the cohort dynamics that you mentioned, the acquisition dynamics we've talked about already, the continued engagement of existing customers. So, I'm not going to comment on the longer-term view at this point in time.
Operator
Thank you. One moment for our next question. Our next question comes from the line of Mark Kelley from Stifel.
Mark Kelley -- Analyst
Great. Thanks very much. Good afternoon. I want to go back to the advertising business really quickly.
You've got Microsoft just shut down their retail media business. I'm just curious if that's kind of a near-term opportunity that you think you might be able to go after. And then the second one, as you focus more on growth or establishing a footprint outside of the U.S., can you remind us if there are any geographic specific investments that you think you need to make or if you think the product that you have right now is something that will resonate with markets outside the U.S.? Thank you.
Fidji Simo -- Chairman and Chief Executive Officer
Thanks. So, on the advertising question, I'm not commenting on Microsoft specifically, but I would say that we have a product that is really designed to take our entire advertising stack and make it available to other parties, whether that's retailers or other players in the market that want to stand up in the retail media business. This gives also very clear signals that standing up these businesses and doing that at scale is really hard. We have done that successfully.
We have made the investment over the course of many years, and now we're incredibly excited about the fact that we can take these investments and add scale by offering these to our retailers and to other sites. And allow them to create an immediate new line of business while also expanding our scale and really becoming a one-stop shop. So, I would say the fragmentation of this market does help us because CPGs are going to want to deal with fewer platforms that are really at scale. And I think we're going to see more and more retailers and smaller retail media network want to benefit from the scale we bring to the table and want to partner with us on both technology and demand.
So, we're excited about that. On international growth, we are very focused on the North American market because there's a massive opportunity there. The market is only 13% penetrated online, we are the clear category leader. So, we really want to focus on driving deeper penetration there.
However, in the same way that Caper Carts are generating a lot of excitement with U.S. courses we are starting to see international grocers like ALDI Austria be excited about the capabilities that Caper Carts can bring. And in general, our overall suite of in-store products. And so, opportunistically, we are definitely looking at retailers that might be interested in deploying this technology inside their store because we think that these technologies could very easily expand from the U.S.
to international markets. especially as all retailers are dealing with the digital transformation, not just online but in their store as well.
Operator
Thank you. One moment for our next question. Our next question comes from the line of Ron Josey from Citi.
Ronald Josey -- Analyst
Great. Thanks for taking the question. Fidji, I wanted to go back, and I think you might have gotten a part of this question earlier, so I'll try a different way of asking it. I want to go back to the comment on the 25 million customers who have used Instacart in the past year.
Would love to hear your thoughts on how the behaviors of these users have evolved over the past year because I know many have come back, and whether the tools the team has launched at Instacart like they like the incentives platform has led to improving repeat rates based on the data that you're seeing. So, that's one question on the 25 million. And then Emily, I wanted to get to take rates they expanded sequentially for the third consecutive quarter. I would love to hear about the drivers here in terms of driving these improvements.
Is it the delivery process changes that the team has made? Is it the incentive updates? Once again, we talked there or maybe store relationships. Any details on take rates would be helpful. Thank you.
Fidji Simo -- Chairman and Chief Executive Officer
So, Ron, we're definitely seeing good trends in this growing 25 million number. And as you know, we have been very focused on arbitration. I mentioned past quarters about our new incentive platform, which is really -- has made it much easier for us to deploy incentives toward the habituation formula that we know works, whether it's adoption of Instacart+, whether that's adoption of clubs, whether that's putting new retailers in new verticals, in front of these customers, whether that's launching restaurants with great success. All of this is giving us a lot of confidence in our ability to get these users to improve their frequency over time.
As a reminder, we mentioned that, but these yearly active orders are already placing 11 orders a year with us. So, it really is a matter of getting them to realize that the weekly shop is something that they can afford every week, connecting them to all of the ways in which they can afford that. And then also making them discover the more -- the higher frequency use cases like restaurants so that we can see this kind of compounding frequency for them. So, it's a massive opportunity because I think in the past, we primarily talked about our power users that were kind of monthly active orders.
But we have a much bigger top of the funnel that we can habituate and that represents a big opportunity now that we have the tools in place to do so.
Emily Reuter -- Chief Financial Officer
Great. And I'll jump in on the second question about take rates. So, you're right, we have expanded take rates for the last couple of quarters, though I would note that last quarter was a pretty modest expansion. The rounding makes it look a bit sharper than it actually was.
And that continues to be a lot of the same trends we've been seeing for the last couple of quarters. So, first, on the positive side, really continuing to see shopper efficiencies in terms of the payments that we make to shoppers to make deliveries. And that's driven by our order density at the end of the day, being able to drive batch rates, which really only results from multiple large batches happening at the same store at the same time. And this kind of goes back to Fidji's point earlier.
This is sort of our marketplace being reinforced by the white-label storefronts that drive this -- this level of order density. So, continuing to see benefits there, and we expect that to continue. At the same time, we have decided to take much of that efficiency and reinvest it in other parts of the business. We have talked about incentives in the past, and we continue to invest in targeted incentives, but we're also investing in our product portfolio.
So, we have mentioned some of the range of different affordability options that we're leaning into like saver options that allow folks to schedule delivery later in the day or pickup options being free. And so, that shows up also in take rates. Now, the last thing I'll say is, I've said this previously, we're really pleased with where we are from a transaction revenue standpoint. We are in the top half of our long-term range already.
And so, for that reason, I really don't expect transaction revenue to purely be up and to the right. We expect this could move around over time, and that's really driven by the fact that there are a number of decisions that we're making day to day, month to month in terms of how we're running the business, meaning we may lean more heavily into incentives in one quarter because we're seeing better return. That's going to show up in transaction revenue versus leaning more heavily into something like paid marketing, which shows up in sales and marketing. As I mentioned earlier, leaning into certain price options shows up in transaction revenue, these are choices that we're making across the portfolio.
And so, that's why, at the end of the day, you may see transaction revenue move around over time.
Operator
Thank you. One moment for our next question. Our next question comes from the line of Michael Morton from MoffettNathanson.
Michael Morton -- Analyst
Hi. Thank you for the question. Two if I could, one following up on Nikhil's question earlier, but I appreciate the callout for the Chase kind of cashback bought post yesterday. But would love to know if you could maybe contextualize or size for us for Instacart+ members.
How many of those are self-paying or then how many are Instacart+ members as part of a partnership that would maybe be some helpful commentary. And then big picture on the Caper Carts. It sounds like the holy grail of closed-loop advertising, right? You show someone an impression, then you can see they put it in their cart, and they pay for it. What are some of the restricting factors to rolling these out as fast as possible? In theory, you'd want to have them in every grocery store in the country tomorrow.
So, I would love to learn some more about that. Thank you.
Fidji Simo -- Chairman and Chief Executive Officer
Thanks, Michael. On Chase, just want to make sure I understand the question, but I would say partnerships in general is a lever for us to drive in Instacart+ adoption, but that's why no means the biggest driver. As I mentioned earlier, we're seeing very strong adoption of paid IC+ memberships, and that's really across the board across all of tactics. And partnership is just one of the levers but not a big one.
And so, I just wanted to clarify that. In terms of your question on Caper Carts and Ads. So, we completely agree with you that it really represents the holy grail of advertising and being able to take the best of online ads and really bring them to the store and have foreclosed book measurement, Advertiser are very excited about it, and we want to roll that out as fast as possible. We see a lot of retailer excitement as well as consumer excitement when these are rolled out.
We see higher average basket sizes. We see high NPS score of about 70. So, we're really excited by what we're seeing. At the same time, it's operationally heavy to roll out a lot of costs in retailer stores.
You have to partner with them to integrate with our point-of-sale system, integrate with all of your loyalty system. So, good news is that we have a massive head start for having done that for our marketplace for having done that when we power their own and operated site. So, it accelerates our ability to deploy this cost into their IT systems and therefore into their stores way faster than if we were -- we hadn't done all of these enterprise integrations, but it still requires new incremental integration that you have to do with our physical stores. as well as training of their sales team and all of these things.
So, to give you a sense, this year, we're going to go from hundreds of carts on deployments to thousands of carts deployed, and expect to continue scaling that fast next year. And we think that we will rapidly gain the scale that we need for that to be very interesting for advertisers to advertise on. So, we're really excited about that. We're seeing high demand from retailers both large and small.
I mentioned a couple in the letter and it's really just a matter now of really doing this rollout, making sure that the rollout go well in a couple of stores to start with, and then expand with these retailers across all of their stores.
Operator
Thank you. One moment for our next question. Our next question comes from the line of Walter Piecyk from the LightShed Partners.
Walter Piecyk -- Analyst
Thanks. I apologize if you had addressed this earlier, but the first question is just on the AOV. if you could just drill down and talk about what was the impact of the sequential growth there. Was there any type of price increases on the groceries themselves, and if there were decreases, what was more than offsetting that, maybe higher tips? I mean, just anything you can give in terms of greater color, excuse me, on AOV? And then just a second question, I know Uber is kind of early.
Do you expect there to be a noticeable impact in next quarter's results from the Uber relationship?
Fidji Simo -- Chairman and Chief Executive Officer
Great. I can jump in. Thanks for the question on AOV. So, a couple of things that we highlighted on AOV as it relates to Q2 specifically, were a couple of different factors.
So, some of them are just really broad-based and not necessarily specific to what's going on in an individual item basis, but I'll get to that in a moment. So, first is just that our new customer cohorts are actually reaching bigger basket sizes faster. So, as they blend in, that is resulting in higher AOVs overall. Our existing customers are also continuing to make larger purchases over time, which is a trend that we've always seen, and that blends in.
And then lastly, that we do have a higher mix of club orders and club AOV is higher overall. So, that will blend in. In terms of sort of the broader picture, though, we are continuing to see individual basis peaking and number of items troughing, meaning that we don't believe that this is really an inflation or individual price item-specific phenomenon. As I mentioned earlier, club items, club AOVs are higher, and that's largely because club item prices are higher, not because they're more expensive but because the scale of the items you might be getting are a bit bigger.
So, overall, that's really what we're seeing. And for that reason, going forward, we're not commenting on the specifics of what we expect to see the composition of GTV in Q3.
Operator
Thank you. This concludes today's conference call. [Operator signoff]
Duration: 0 minutes
Call participants:
Rebecca Yoshiyama -- Head of Investor Relations
Fidji Simo -- Chairman and Chief Executive Officer
Emily Reuter -- Chief Financial Officer
Colin Sebastian -- Analyst
Eric Sheridan -- Analyst
Nikhil Devnani -- Analyst
Justin Post -- Analyst
Andrew Boone -- Analyst
Shweta Khajuria -- Analyst
Ross Sandler -- Analyst
Unknown speaker -- -- Analyst
Bernard McTernan -- Analyst
Jason Helfstein -- Analyst
Mark Kelley -- Analyst
Ronald Josey -- Analyst
Michael Morton -- Analyst
Walter Piecyk -- Analyst
This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.
The Motley Fool recommends Instacart. The Motley Fool has a disclosure policy.
