(Bloomberg) -- Grab Holdings Ltd.’s shares slid the most in more than nine months after the ride-hailing leader forecast 2024 revenue below analysts’ estimates, suggesting a deeper-than-anticipated slowdown in its core online business.

The Singapore-based company, which competes with GoTo in mobility and services such as meal delivery, expects a 14% to 17% rise in sales to $2.7 billion to $2.75 billion this year. That lags behind the $2.8 billion average analyst projection. The disappointing forecast overshadowed plans to buy back as much as $500 million of stock and its second straight quarterly profit on an adjusted basis. Its shares fell 8.4% in New York, the biggest decline since May. 

After years of spending to gain market share and fend off competition, Grab is taking steps to become a more financially mature company. It’s focusing on the bottom line following a period of swift expansion into markets from Malaysia to Thailand. Like its backer, Uber Technologies Inc., it’s slashed jobs and reined in spending to pivot toward profitability. Uber also announced its first buyback this month.

The effort coincides with a dramatic slowdown in growth from past years, underscoring the impact of economic uncertainty and competition. Revenue rose 30% in the December quarter, its slowest pace of growth since at least 2022.

Read More: Grab, GoTo Are Said to Revive Talks for Ride-Hailing Mega Merger

What Bloomberg Intelligence Says

Grab’s robust margins in the deliveries and ride-hailing segments, as well as digital-bank ramp-up underscore bottom-line strength, despite an expected top-line slowdown in 2024. Rising engagement and economies of scale — driven by new products such as economic options and priority meal deliveries — and Grab’s dominance in Southeast Asia’s on-demand services should keep boosting adjusted-Ebidta margin, which widened in 4Q vs. 3Q. The two segments drove three-quarters of 2023’s incremental Ebitda. Such higher engagement should raise merchants’ adoption in Grab’s highest-margin business, advertising.

Growth might speed up in 2025 with the ramp-up of Singapore and Malaysia digital banks, as well as more tech-enabled advertising solutions and premium offerings in core segments.

- Nathan Naidu, analyst

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The challenging market has forced Grab and its rivals to consider aggressive options. Grab and GoTo have this year revived discussions about a merger of their core businesses, Bloomberg News has reported, an alliance that could help stem spending to chase consumers across the region. Grab had also been linked to talks to take over the Foodpanda brand in several markets, but negotiations fell through because parties couldn’t agree on deal terms.

On Thursday, it reported $35 million in adjusted earnings before interest, taxes, depreciation and amortization, lagging estimates for $38.9 million. The company posted its first-ever profit on that basis for the September quarter. 

Grab also reported positive free cash flow for the December quarter, though again on an adjusted basis. And it reported an $11 million net income — its first — though much of that stemmed from a one-time accounting gain.

Executives expect revenue to accelerate from 2025 as new initiatives they’re developing take hold, in areas from digital finance to their core delivery services. Grab, which has partnered with financial services firms for online lending and banking in Malaysia and Singapore, expects revenues from that slice of the business to ramp up in coming years.

“We’ll see improvements in the cost structure of our business as they start to generate revenue, especially from our banking and as we start to scale loans even further,” Chief Executive Officer Anthony Tan told analysts on a conference call. “We are incubating growth with a lot of initiatives.”

(Updates with share action and analyst’s comment from the first paragraph)

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