Delivery service DoorDash (DASH) reported its largest quarterly profit to date at $193 million for Q1 2025 — a remarkable swing from a $23 million loss this time last year. Yet, shares have tumbled over 10% as the company also announced two major acquisitions totaling $5 billion, leaving investors wondering whether the food delivery giant is growing too fast for its own good.
The answer isn’t immediately clear. Therefore, investors might want to hold off on this one for now and let the dust settle a bit.
Impressive Growth Falls Short of Heightened Expectations
DoorDash has executed a significant turnaround, with Q1 revenue climbing 21% year-over-year to $3.03 billion, while total orders surged 18% to a record 732 million. Perhaps most impressive was the adjusted EBITDA jump of 59% to $590 million, which helped it beat expectations with earnings per share (EPS) of $0.44.
The company’s subscription service continued gaining momentum, with higher order frequency and a lower customer churn rate. Further, grocery delivery has become a growth driver with an increasing average spend per customer. These suggest DoorDash has finally cracked the code on generating profitable growth in the notoriously challenging food delivery space.
However, despite the impressive growth, revenue came in slightly below Wall Street’s $3.1 billion estimate. For a growth stock like DoorDash, even a small revenue miss can spook markets, especially when management simultaneously announces massive M&A spending.
A $5 Billion Bet on Global Expansion
DoorDash’s recent acquisition spree looks to reshape the company’s next chapter. The first is Deliveroo, the UK-based food delivery platform, with which it has a deal to acquire for approximately $3.86 billion.
With Deliveroo, DoorDash gains immediate access to 12 European countries where it previously had minimal presence. Deliveroo generates about 62% of its order value from the UK and Ireland alone, where it holds roughly 25% market share. Combined, the two companies will serve 50 million monthly active users across 40+ countries, processing an estimated $90 billion in annual orders.
The second deal is the $1.2 billion acquisition of SevenRooms, a restaurant technology company specializing in reservations and guest management capabilities that complement DoorDash’s delivery expertise. It is DoorDash’s first major software-as-a-service (SaaS) acquisition, and it signals a strategic shift for the company as it will now seek to become a complete restaurant operations platform.
The Challenge in Europe
Interestingly, Europe’s food delivery market has been a fiercely contested market for companies like Deliveroo, Just Eat Takeaway (JTKWY), and Uber Eats (UBER), which have collectively lost over $20 billion since 2021. It is mature, competitive, and difficult to profit from.
However, DoorDash’s entry could disrupt the playing field. The company’s approach to logistics technology and data-driven pricing and route optimization could provide a boost to Deliveroo’s historically thin margins.
Further, regional competitors aren’t likely to stand idly by as DoorDash gobbles up market share. Just Eat still holds the #1 position in several markets and has deep pockets to defend its territory, and Uber Eats, which has been gaining ground in Europe, may respond with its own acquisition or aggressive pricing strategy.
Finally, European regulations are stricter than those in the U.S., and the acquisition is likely to face scrutiny from antitrust authorities concerned about reduced competition.
Financial Implications
The $5 billion is a significant chunk of DoorDash’s resources, and integration costs will likely put pressure on margins in the short term. For example, DoorDash’s Q2 guidance already reflects caution, as adjusted EBITDA estimates are being revised slightly downward. However, if successful, these acquisitions could accelerate DoorDash’s growth as it evolves into a global logistics and technology powerhouse.
It is worth noting that the company also authorized a $5 billion share repurchase program alongside the acquisition announcements, suggesting management is confident in its financial position and future cash generation.
In addition, the SevenRooms deal is particularly intriguing because it opens new revenue streams. Instead of just taking a commission on delivery orders, DoorDash could now charge restaurants for software subscriptions, marketing tools, and operational analytics. This model typically offers higher margins and more predictable revenue than traditional delivery commissions.
Is DASH a Buy, Hold, or Sell?
Analyst reaction to recent news has been mixed but generally positive. Cantor Fitzgerald reiterated an Overweight rating with a $210 price target on the shares, while Needham raised its price target to $230, praising the acquisitions for expanding DoorDash’s total addressable market. DA Davidson increased its target to $190 while maintaining a neutral rating, noting solid Q1 results but expressing caution about execution risks.
However, not everyone is sold on the immediate upside potential. Truist lowered its price target slightly to $230 from $235 but kept a Buy rating, emphasizing DoorDash’s strong execution across all business segments. UBS lowered the price target to $196 (from $197) while maintaining its Neutral rating, citing a preference for Uber over DoorDash since it views Uber as a steadier long-term opportunity.
Still, Wall Street is mostly bullish on the company’s prospects. The stock has a Moderate Buy rating overall, with 22 Buy versus 9 Hold ratings over the past three months. Furthermore, the average price target for DASH stock is $218.34, representing a potential upside of 18.97% from current levels.
DoorDash is at a crossroads. After years of burning cash to gain market share, the company finally achieved consistent profitability. Yet, management clearly believes the window for global expansion won’t stay open forever, and it’s choosing to reinvest those hard-won profits into international expansion and platform diversification. It is a bold play that comes with heightened risk.
Given the stock’s downward price momentum, I believe investors will likely have some time to let this story play out a bit more and provide some clarity on management’s ability to integrate the new acquisitions successfully. As a result, holding off for now seems a reasonable course of action.
