Grab Holdings

Grab's second-quarter revenue grew 21% year-on-year, driven by the expansion of its fintech business as the loan book increased by 227%. Its on-demand gross merchandise value also contributed to growth and increased by 21%.

Why it matters: Overall revenue was in line with our estimate. Grab slightly raised the high end of its 2026 revenue guidance to USD 4.15 billion from USD 4.1 billion, driven by its new acquisitions, fintech company Stash and foodpanda Taiwan. We expect its organic revenue forecast to remain the same. We expect the delivery business to continue to grow by 20% this year, driven by nonfood delivery. While Grab has added nonfood delivery and the Taiwan business to its platform, it still expects long-term delivery margins at 4%. Grab's loan portfolio is now USD 2.32 billion, as EBITDA loss for fintech narrowed to USD 15 million from USD 26 million year-on-year. We reiterate our view that the business should see profitability in the second half of 2026.

The bottom line: We maintain our fair value estimate at USD 5.60 for Grab and view shares as attractive right now. Grab now has a commanding position in Southeast Asia for on-demand services, as its largest rival, GoTo, is deemphasizing its business as its GMV grew only 2%. Grab shares rose 4% after the market on Monday, suggesting positive sentiment for Grab's long-term outlook despite management reiterating relatively the same guidance. We believe the next long-term catalyst from Grab will come from the fintech business. While we expect the business to achieve profitability this year and aggressively scale up long-term, its long-term margin profile is still uncertain. Management remains optimistic about its ceiling.

Big picture: Grab is investing in AI infrastructure, reflected by corporate costs increasing 13% year-on-year to USD 104 million. Management has not yet given specifics on its expectations from AI but indicated that we can see cost-driven margin expansion in the next 18 months.

Grab closed its acquisition of Stash in July 2026. Stash is currently a US-only registered investment advisor that provides 1 million users with investment, banking, and financial education tools. Post-acquisition, Stash will continue its US operations independently. We view the Stash acquisition as a signal to the market that Grab wants to become a meaningful stakeholder in the Southeast Asian financial-services industry.

We do not believe Grab is expanding into the US with Stash, but instead wants to integrate its IP into its main platform for the Southeast Asian market. We believe this sets up easier onboarding for underbanked potential customers without having to start from scratch.

Our fair value estimate for Grab is $5.60 per share, and valuation will largely depend on revenue and margins for the mobility and delivery businesses in the short to mid term. However, Grab is seeing the emergence of its advertising business as another key driver for valuation in the long term. The main drivers will be revenue, EBITDA margin, GMV growth, and the ability to raise take rates (the commission rate that Grab charges based on the overall ticket value) in these businesses. For 2024, we forecast overall revenue to grow 17% year on year, illustrating continued robust growth in Grab’s core businesses . For the next 3-5 years, we expect Grab’s GMV to grow significantly but begin to decelerate from 2023 levels as Grab becomes more saturated among users in Southeast Asia. As for margins, current adjusted EBITDA for mobility is close to 9%, which is already at the long-term levels that management is forecasting. The company indicated that it has the ability to increase its margin by raising the take rate or decreasing incentive levels for consumers, but it believes that demand could potentially decline if it was to do that.

For the delivery business,adjusted EBITDA margin is 1%-2%, and the company indicated that its long-term forecast is 3%-4%. We believe Grab can eventually reach the top end of that guidance given that competitors such as Uber and DoorDash have been able to charge net take rates up to 16% and 12%, respectively; Grab’s second-quarter 2022 rate is about 5% overall. We believe Grab should be able to increase its net take rate in the long term by increasing its commission levels or giving away less incentives.

In the financial services business, revenue and profitability would rely on Grab raising its profile in Southeast Asia, leading to additional users adopting its platform and using its insurance products or loans. We forecast modest growth and 5% adjusted long-term EBITDA margins in the financial services division.

Management indicated the segment should break even by 2026. Inclusive of all the segments and corporate costs of approximately $200 million per quarter, the company expects to break even in 2025. We forecast for Grab to reach its goal for now but acknowledge that there could be downside risks to our estimates given the uncertainty.

We see a wide range of outcomes for the shares, including a best-case scenario in which Grab can transform its app into the ubiquitous super-app that it had envisioned. The current app includes ride-hailing, delivery, and financial services—which the company hopes to leverage into an app that is pervasive in everyday life for individuals in Southeast Asia. However, given the wide range of outcomes we see for the business, this segment could be economically unviable and contribute minimally to our fair value estimate in a bear-case scenario. If this was to happen, Grab would abandon its efforts in its financial services business, which would leave only its core businesses standing.

In a best-case scenario, we expect its financial services business to take off as well, where its fintech payment services would be pervasive throughout Southeast Asia. The flywheel effect from its services could cause its users to spend more time on the platform, where it starts to become the everyday super-app that the company visualizes. Grab could potentially generate incremental ad revenue similar to WeChat where the app is ubiquitous in everyday Chinese life, offering everything from payments, purchasing, a mini-browser, social media, and more. Our bull-case scenario assumes the success of its financial services business but does not yet assume that Grab can become the WeChat-like behemoth for Southeast Asia.

We assign a no-moat Morningstar Economic Moat Rating to Grab as the company is still incurring heavy losses—and is still in the growth stages of ramping its business where there is still uncertainty about its long-term profitability, despite having leading market share in ride-hailing and food delivery in several Southeast Asian countries. We think that its core businesses—ride-hailing and food delivery—both demonstrate a positive network effect, and have accumulated large amounts of consumer data at this current stage but are vulnerable to minimal switching costs. This is especially for its food delivery business, given significant competition with Delivery Hero-owned Foodpanda, GoFood, and ShopeeFood in Southeast Asia. For the overall company, current heavy operating losses outweigh its developing network effect and factors into our moat rating despite pockets of positive return on investment, or ROI. We believe Grab’s current strategy is to cultivate switching costs for its business so that it can develop a moat around its platform, and in order to do so, it wants to combine everyday consumer services into one comprehensive super-app—that includes its ride-hailing, food and grocery delivery, hospitality booking, and also its nascent financial services business that provides digital payments and bank loans. By incorporating different services, Grab hopes to capture a cross-selling flywheel effect on its platform where users will subsequently increase the time spent on its app, which ultimately transforms the platform into a ubiquitous ecosystem that plays an important part of daily life for Southeast Asian individuals.

However, we view Grab as a platform providing two separate services that share operating expenses, rather than the all-encompassing ecosystem in its long-term vision. The platform app is still a work in progress that satisfies consumer demand for the services rendered, but not ubiquitous like its counterpart WeChat in China—the latter provides search, payment, purchasing, and social media functions. We are encouraged by Grab’s dominant market share in several of its core countries but believe there is too much uncertainty to determine whether it can be successful in its endeavors as the platform will take time to build out. Outside of its operations in Singapore, Grab operates in emerging markets where consumers are likely to be price-sensitive, given lower disposable income. We think that commoditized services such as ride-hailing and food delivery are susceptible to low-cost strategies where competitors can offer incentives or vouchers that expose low customer switching costs and lack of brand loyalty. In addition, its financial services business is in its nascent stage, incurring the most operating loss out of its segments as Grab hopes to incorporate this element into its super-app similar to WeChat Pay. It is too early to determine whether its fintech venture can be successful, as the competitive landscape is likely to be challenging and already saturated, unlike the near duopoly of Alipay and WeChat Pay in China. However, we view Grab’s ride-hailing business to have at least a narrow moat given its network effect and consumer data from years of operations similar to its American counterparts, Uber or Lyft, which also have narrow moats.

We believe that even if Grab is unable to transform itself into the super-app that it has set in its long-term vision, the platform could at least position itself as Uber, which has a first mover advantage, substantial network effect, and intangible assets from years of data collection from its users. Following Grab’s acquisition of Uber’s Southeast-Asian operations in 2018, the company has a dominant market share in Singapore, Malaysia, Thailand, and the Philippines for ride-hailing. There are some local alternatives for ride-hailing in each country, but there are none that are as pervasive across Southeast Asia that is close to the size of Grab’s ride-hailing operations currently. Outside of Indonesia where the closest competitor is Gojek, which is the ride-hailing arm of multinational GoTo—there is no other multinational operation for ride-hailing such as Grab. To illustrate Grab’s market share, Gojek entered Singapore in 2018, and still lags Grab and local-based ComfortDelGro in terms of ride numbers. While users have no switching costs and are likely to prefer the cheapest option, the lack of existing established competitors that have large war chests should mean that new entrants will need some time and capital to set up initial outlay costs. This may be more difficult in the current inflationary environment.

Grab’s ride-hailing adjusted EBITDA margin hovers around 12%, which the company indicated is its long-term target and similar to Uber. This leads us to believe that operations are scalable given Uber’s ROI increases along with the number of rides. Uber increased its EBITDA margin due to its operating leverage brought forth by the network effect, especially during the pandemic as the delivery side grew significantly. Uber’s sales and marketing expenses as a percentage of revenue declined during the recovery last year. Given a leading market share in its core countries like Uber and an expanding network effect unimpeded by a lack of major competition, we believe that Grab can also follow a similar pattern, leading to favorable future ROI.

As for food delivery, Grab leverages its drivers to perform 3P delivery functions which should provide cost synergies favorable to long-term ROI. According to management, over 60% of drivers who work in ride-hailing also perform food delivery tasks, which highlights some of the cost overlaps between the two businesses. However, lack of profitability and volume of high-margin marketplace orders leads us to a no-moat rating for this segment for now. Current adjusted EBITDA margin remains negative (negative 1%), and the competitive landscape for this business is more crowded than that of ride-hailing. Foodpanda, Deliveroo, ShopeeFood, and emerging peers such as LINE Man or Lalafood hold significant market share in Southeast Asia. This means food delivery should be more susceptible to incentive wars and low switching costs, as other peers are already established in the market. There are signs that Grab’s food delivery requires the constant use of vouchers to maintain its market share, as there is a strong correlation between the deceleration of consumer incentives and the GMV growth of Grab’s food delivery business. This is different from the relationship between ride-hailing and incentives used. According to third-party think tank Snapcart, promotions and cheap delivery fees are two of the top three factors in choosing which platform to use. We view food delivery as a commoditized service, as customers are likely to be more price-sensitive and prefer cheaper options given competitors are substitutes.

Grab now has leading market share for delivery like it does with ride-hailing. However, margin uplift is limited, as management indicated its long-term forecast for adjusted EBITDA is about 3%-4%. We believe the low ceiling outlook is likely due to a need to protect its market share using incentives to ward off competition and keep customers on the platform. This is given the strong correlation between voucher use and GMV growth, which illustrates the lack of loyalty and low switching costs.

The third major Grab business, financial services—which includes fintech payments, insurance products, and business loans—has a no-moat rating. The financial services business currently is in its early stages and incurs major heavy losses, and we estimate that Grab’s fintech payments business occupies less than 2% market share in Southeast Asia. We consider the industry in Southeast Asia saturated with plenty of competitors, as the payments business competes both with localized competitors for each country, as well as with global peers such as PayPal, Stripe, and Apple Pay. In order to reach a dominant share or become ubiquitous, Grab would likely have to increasing spending on sales and marketing for customer acquisition. Greater user adoption is not necessarily guaranteed, as there are virtually zero switching costs to use another payment service.

Grab’s digital lending business in Southeast Asia serves the 480 million unbanked or underbanked population, but despite a relatively unsaturated market, it also has heavy competition and must compete not only with other e-commerce platforms (SeaMoney, GoTo) and digital-only banks such as Timo in Vietnam or Eon in the Philippines but also physical banks that have set up virtual operations such as OCBC and DBS in Singapore. Grab has a digital bank license in Singapore and Malaysia, and has a minority stake in Bank FAMA in Indonesia. In Singapore, it partners with Singtel to form GXS Bank for its digital bank operations. Currently, it has about USD 600 million in its loan portfolio compared with Sea's USD 4 billion.

None of Grab’s businesses outside of ride-hailing warrant a moat given the heavy competition, lack of switching costs, and negative returns for the moment. We are uncertain whether Grab can form a super-app in the long term, and at the moment there are limited data points that measure its adoption other than for ride-hailing or food delivery. However, we believe that at worst, its ride-hailing business on a stand-alone basis has a narrow moat, given its differentiating network effect and intangible data. Ultimately, if Grab can create an ecosystem that establishes a moat and switching costs, we believe the company is positioned for robust growth, given its leading market share and eventual ubiquity of its application, if we use WeChat as an example.

Grab operates mostly in emerging markets, which should see above-average GMV growth in the short to mid term relative to developed peers.

Seventy percent of Southeast Asia’s population is either underbanked or unbanked, which facilitates growth for Grab’s financial services business.

The mobility business has no major competitors, which could facilitate continued robust GMV growth.

The delivery business competes with several other peers with low profitability in the industry.

We think there are legitimate questions about the roadmap to profitability of the financial services business and its weak market positioning.

Possibility of bigger conglomerate with massive war chest as market entrant if capital allocation is not an issue to new competitor.