Key Morningstar Metrics for Ocado Group
- Fair Value Estimate: GBX 259
- Morningstar Rating: ★★★
- Morningstar Economic Moat Rating: None
- Morningstar Uncertainty Rating: Very High
What We Thought of Ocado Group’s Earnings
Ocado’s full-year 2025 results included year-over-year top-line growth of 12%, with technology revenue up 13% and logistics revenue up 12%. Adjusted EBITDA margin was 25%, up from 16%. Shares fell around 6% at the market open on Feb. 26.
Why it matters: North American site closures (Kroger and Sobeys) due to capacity underutilization led to lower-than-expected module growth guidance over 2026 and 2027. We see the concern of a negative flywheel effect, where shutdowns and slower customer fulfillment center rollouts deter potential partners from adopting Ocado solutions.
- 2026 guidance excluding closure impacts includes £500 million in technology revenue and mid- to high-single-digit growth in logistics revenue. Technology EBITDA is expected to be 30%. We think this is achievable with Ocado’s initiatives to lower costs by £150 million, including headcount reductions as technology investment slows.
- Ocado’s strategy update detailed plans to better meet customers where they are, as it promotes automated offerings, including in-store fulfillment and micro fulfillment centers with lower capital requirements. While it is still early days, we think this direction is critical to secure future growth for Ocado.
The bottom line: We reduce our fair value estimate for no-moat Ocado to GBX 259 from GBX 270 and view the shares as fairly valued. Our fair value decrease stems from lower module growth and EBITDA projections for fiscal 2026 and 2027, while our long-term profitability estimates remain unchanged.
- Ocado plans to pull back on capital spending over 2026 (£250 million in 2026), as it has completed its technology investment cycle in Ocado Re:imagined. In the long term, we expect elevated technology investments to remain necessary to stay competitive.
- We expect the ending of exclusivity in the majority of Ocado’s markets to support future growth; however, we are cognizant that many grocers have been ramping up automated fulfillment solutions over the last decade.
