Meesho flags higher festive and tech costs in Q2 as margins improve
BENGALURU: E-commerce platform Meesho expects higher spending on customer acquisition and technology to weigh on its economics into the December quarter, tempering the improvement in contribution margins it reported for the September quarter.
“For Q3, growth spend will stay elevated through the sale and the weeks around Diwali, as it does every festive quarter, and technology costs will stay higher until our optimisations take effect,” Meesho said in its shareholders’ letter on Wednesday.
The outlook follows an improvement in contribution margin to 6% of net merchandise value (NMV) in the September quarter, from 4.6% in the preceding quarter. Meesho cautioned that the gains may not last. “We may not hold contribution margin at this level in the near term,” it said.
Consolidated revenue from operations rose 34.4% year-on-year to ₹4,131.6 crore in the second quarter of fiscal year 2027 (Q2FY27), while total expenses increased 24% to ₹4,382.3 crore.
Net loss narrowed 68% to ₹132.4 crore from ₹411.4 crore a year earlier, partly reflecting the absence of exceptional expenses and a lower tax charge recorded in the year-ago quarter. The loss was largely unchanged from ₹132.8 crore in the preceding quarter.
NMV rose 23% year-on-year to ₹12,911 crore in Q2, while placed orders increased 17% to 819 million. Meesho said both growth rates were partly affected by a shift in the timing of its Mega Blockbuster Sale, which took place in the September quarter last year but moved to the December quarter this year.
To account for the shift, the company compared the 90 days preceding Dussehra in both years, reporting NMV growth of 33%. NMV also rose about 11% sequentially in Q2, which did not include this year’s sale.
The timing of major promotional events can distort quarterly comparisons across India’s e-commerce sector, where demand is closely linked to festivals. A Bank of America report dated October 20 on India’s internet sector noted a strong start to the 2026 festive-sale season, with non-metro consumers and new users driving demand across online platforms.
According to the report, Meesho’s Mega Blockbuster Sale recorded about 75% year-on-year growth in first-day orders, while transacting customers rose roughly 60%. The number of customers from Tier 3 and smaller towns transacting through Meesho Mall nearly tripled.
Meesho’s annual transacting users grew 21% year-on-year to 284 million, while its annual transacting seller base rose 60% to 1.13 million. Average transacting-user frequency increased 7% to 10.4 over the trailing 12 months.
Its branded-products offering, Meesho Mall, which hosts about 1,800 brands, recorded 81% year-on-year NMV growth in Q2. Growth reached 89% in Tier 3 and smaller cities, and about half of Mall customers during the quarter were first-time buyers on the service.
Content commerce, which connects shoppers with products through creator-led content, grew 160% year-on-year by NMV. The number of content pieces generating orders increased 144% to 2.2 million, with more than 400,000 sellers participating in the ecosystem.
Marketplace revenue from operations rose 34% year-on-year to ₹4,119.9 crore. Meesho attributed its improving economics partly to lower logistics costs per shipment and better delivery efficiency.
Founder and chief executive Vidit Aatrey told analysts on Wednesday that Meesho would not charge customers a platform or convenience fee to “continue building trust”.
Technology costs rose ahead of the festive sale. Server costs increased to 2.3% of NMV from 1.9% in the preceding quarter as Meesho reserved graphics processing unit (GPU) capacity. GPU usage doubled year-on-year during the sale, while core systems maintained 99.99% availability.
The company expects costs to moderate as it releases excess capacity and improves model efficiency. It also reported a 171% increase in its internal engineering-productivity score between March and September, attributing the gain to wider use of AI agents in software development.
Consolidated free cash flow stood at ₹345 crore in Q2, helped by seasonal working-capital inflows. Trailing 12-month free cash flow remained negative at ₹565 crore, while cash balances stood at ₹7,048 crore at the end of September.
Meesho said it would continue reinvesting efficiency gains while gradually improving free cash flow generation. It also flagged pressure on household budgets from higher raw-material and fuel prices, alongside geopolitical uncertainty.
“We continue on the path of strengthening our flywheel by reinvesting efficiency gains while gradually improving FCF [free cash flow] generation.”
The company expects year-on-year growth in Q3 to benefit partly from the sale shifting into that quarter. It plans to provide a combined view of Q2 and Q3 with its next results, saying the periods are best assessed together to understand the underlying business trajectory.
Sowmya is a senior correspondent covering retail, FMCG, corporate strategy, and consumer technology, with a focus on how companies navigate demand, competition, and shifting consumption patterns across both urban and emerging markets. She reports on business decisions through both breaking news and long-form stories.<br><br>An alumna of the Asian College of Journalism, she has reported on a range of consumer-facing industries, including e-commerce, healthcare, and startups. Her work focuses on understanding how companies grow, compete, and adapt in a changing economic environment, as well as how broader trends translate into everyday consumption and business outcomes.<br><br>She is particularly interested in how business decisions show up in everyday consumer experiences, and often looks at trends through the lens of how they play out on the ground.<br><br>Prior to her current role, Sowmya was part of the editorial team at YourStory, where she covered startups and entrepreneurship. She has also worked on longform stories at The Morning Context and reported on technology at The Hindu in Chennai, gaining experience across different formats and newsrooms.<br><br>Her reporting aims to be accurate and accessible, with an emphasis on context and careful sourcing. She is particularly interested in stories that sit at the intersection of business strategy and consumer behaviour.<br><br>Based in Bengaluru and always curious about evolving consumption trends, she is often exploring new coffee and kombucha spots, both as a personal interest and a way to observe how consumer preferences are taking shape on the ground.
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