Ocado FY25 H1 results show strong EBITDA—will its technology push and retail recovery sustain investor confidence?

Ocado Group plc (LSE: OCDO) reported a strong financial turnaround in its half-year FY25 results for the 26 weeks ended 1 June 2025, with group revenue climbing 13.2% year-on-year to £674 million and adjusted EBITDA surging 76.5% to £91.8 million. The British online grocery technology provider, which now accounts for Ocado Retail Limited as an associate following its April deconsolidation, posted a statutory profit of £611.8 million, a sharp reversal from the £153.3 million loss recorded in the same period last year. The rebound was largely driven by a £782.6 million gain on the statutory valuation of its 50% equity stake in Ocado Retail. Despite the headline profit, the core focus remains on turning cash flow positive by FY26, with management reiterating that disciplined cost control and incremental partner growth will be key drivers over the next 12–18 months.

The company ended the period with liquidity exceeding £1 billion, including £745.8 million in cash and cash equivalents. Debt refinancing, including a £300 million issuance in June 2025, has allowed Ocado to manage its upcoming FY25–27 maturities from existing liquidity, improving investor sentiment around its balance sheet resilience. Analysts believe the liquidity position provides a necessary buffer as Ocado navigates ongoing cash outflows, which, while improved, still amounted to £108 million for the first half.

How are technology solutions shaping Ocado’s growth outlook and margin expansion in FY25 and beyond?

Technology Solutions, Ocado’s most profitable segment, delivered a 14.9% revenue increase to £277.3 million and more than doubled adjusted EBITDA to £72.8 million, lifting margins from 14.4% to 26.3%. This was driven by an 8.9% rise in average live modules to 122 and continued partner demand for the Ocado Smart Platform (OSP) and Re:Imagined technologies, including On-Grid Robotic Pick and Automated Frame Load. Non-recurring income of £16.6 million, following the cessation of Morrisons deliveries from the Erith Customer Fulfilment Centre (CFC), also contributed to the performance.

Operationally, total weekly volumes across Ocado’s CFC network grew 23% year-on-year, with Detroit expected to reach 50% above its original design capacity. Kroger has already ordered an additional module for the Detroit site, expected to go live in early 2026. Bon Preu in Spain will upgrade to an automated CFC outside Barcelona, while Coles in Australia continues to ramp up volumes. Early-stage markets such as South Korea and Saudi Arabia also progressed, with Lotte expected to go live with its first CFC near Busan in FY26.

Institutional investors see Technology Solutions as the backbone of Ocado’s long-term growth, with recurring capacity fees up 9.8% to £223.3 million. Analysts, however, have flagged the need for consistent cost discipline, as Ocado targets reducing technology R&D capex to 20% of recurring revenues by FY27 from the current ~40% levels.

What is driving Ocado Retail’s strong market share gains and can this momentum offset rising logistics costs?

Ocado Retail, now reported as an associate under equity accounting, remained the fastest-growing grocer in the UK for 12 consecutive months to June 2025. Revenue rose 16.3% to £1.53 billion, with weekly orders up 14.7% to 491,000 and active customers increasing 13.4% to 1.16 million. Average basket value rose modestly by 0.7% to £124.19, reflecting disciplined pricing well below UK grocery inflation of 3.1%.

Adjusted EBITDA for Ocado Retail jumped 60.9% to £33.3 million, with margins improving to 2.2% (3.3% excluding Hatfield CFC capacity fees). Migration to the Ocado Smart Platform improved productivity across key CFCs, with Luton reaching a peak of 287 units picked per hour. Ocado expects network utilisation, already at 92%, to sustain high growth through the year with minimal additional capex due to Re:Imagined technology upgrades.

Market watchers believe this retail momentum can partially offset logistics cost pressures, particularly higher last-mile delivery and support costs, but stress that the retail segment’s profitability remains sensitive to wage inflation and delivery density constraints.

Can Ocado’s logistics arm maintain profitability amid wage inflation and delivery optimisation challenges?

Ocado Logistics reported 12.1% revenue growth to £396.7 million, with adjusted EBITDA improving to £19 million. Labour productivity rose 8.1% to 239 units picked per hour, supported by OGRP and AFL rollouts, while delivery drops per eight-hour shift increased slightly to 21.2. Despite legislative cost pressures, particularly National Living Wage and National Insurance changes, analysts view Ocado Logistics as a stable, cost-plus model, generating reliable earnings for its UK partners, including Marks & Spencer Group plc and Wm Morrison Supermarkets Limited.

The logistics segment is expected to deliver high mid-single-digit revenue growth and an adjusted EBITDA of around £30 million for FY25. However, efficiency gains will need to accelerate to mitigate wage-driven cost inflation.

What do analysts expect for Ocado’s cash flow trajectory and investor sentiment through FY26?

Ocado’s underlying cash outflow improved by £93 million to £108 million in the first half, with reduced capex (£168 million vs £209 million in 1H24) and better operating leverage. The company maintained guidance for a full-year cash outflow of around £200 million, with capex of £300 million, but reiterated its core priority of turning cash flow positive during FY26.

Institutional investors appear cautiously optimistic about Ocado Group plc’s medium-term trajectory, pointing to the strong half-year EBITDA growth and disciplined cost management as early signals that the company is edging closer to its FY26 cash flow-positive target. The momentum in Technology Solutions, which now contributes over 79% of adjusted EBITDA, has been particularly well-received by long-term investors, who view recurring capacity fee growth and partner expansion as evidence of a maturing, high-margin platform business.

The stock (LSE: OCDO) reflected this improved sentiment in the days following the FY25 half-year announcement, with shares moving higher on above-average trading volumes. Market participants interpret the positive price action as an indicator that institutional funds, which had previously reduced exposure due to Ocado’s prolonged cash burn, are selectively re-entering positions in anticipation of improved free cash flow visibility by FY26. However, sentiment remains mixed, as Ocado’s history of significant capital outlays and high technology R&D spend continues to weigh on conservative investors who require proof of sustained cost discipline before materially increasing their exposure.

Analysts broadly agree that Ocado’s ability to consistently execute on its global CFC rollout will be a key inflection point for investor confidence. Successful delivery of new high-capacity CFCs in Warsaw, Charlotte, and Phoenix is expected to unlock incremental recurring revenues and improve overall operating leverage, helping the group expand margins beyond the current 26.3% achieved in Technology Solutions. Analysts further suggest that early-stage markets such as South Korea and Saudi Arabia, if scaled efficiently, could provide additional upside to valuation models by FY27, but caution that execution risks remain high given the complexities of managing multiple geographies simultaneously.

In this context, institutional investors are watching several operational metrics closely, including module utilisation rates, unit productivity per hour, and the pace of technology-driven efficiency gains across mature CFCs. Sustained margin expansion, coupled with a demonstrable reduction in technology R&D capex toward the targeted 20% of recurring revenues by FY27, is seen as a critical prerequisite for Ocado to transition from a growth-stage narrative to a cash-generative technology platform. Until these milestones are achieved, sentiment is expected to remain cautiously constructive rather than outright bullish, with any delays in CFC commissioning or signs of renewed cost escalation likely to trigger sharp short-term volatility in the stock.