At first blush, Grab did not have a half-bad Q1. In the January to March period, its net loss narrowed to US$244 million from $423 million a year earlier. Delivery segment revenue tripled to US$275 million. Sales at its mobility arm rose 72% to US$194 million, while financial services grew at the fastest rate of any business unit, more than tripling to US$38 million.
Still, the company’s gross merchandise value grew just 3% in the first quarter to US$4.96 billion, missing analysts’ estimate of US$5.22 billion. Grab’s stock fell 15% to US$2.75 Thursday as investors reacted negatively to the company’s earnings report. It was the sharpest drop in the company’s share price since March 2022.
Ultimately, what is most concerning about Grab is the seeming lack of differentiating factors that could allow it to fulfill its goal of being Southeast Asia’s super app of choice. The company began as a Southeast Asian version of Uber. It added digital financial services to ensure that VC money kept flowing in as the cash-burning ride-hailing businesses began to come under closer scrutiny and to better compete with Gojek, which expanded into fintech around the same time.
While Grab has millions of users, it is unclear what about its app would ensure they use it for their everyday banking needs, other than a certain degree of convenience. Grab’s app integrates several different digital services into a single app, but is not more technologically advanced than its competitors, offer anything that cannot be approximated elsewhere, or have massive brand power.
It is fundamentally different than the Apple ecosystem, for instance, which features unique hardware and software as well as one of the world’s strongest brands. We suspect that this is why Apple’s new high-yield savings account attracted almost US$1 billion in its first four days available.
Overall, while we do not doubt Grab may reach profitability before long, and that its digital banking businesses in Southeast Asia have potential, it is important to consider that the company’s resources may be spread too thin between three business units and eight Southeast Asian markets. Especially when it comes to fintech, Grab is competing against many pure-play firms that focus on fewer markets and only one line of business. They don’t have the same costs as Grab. In the long run, Grab may have to downsize to ensure its competitiveness.