Ocado shares plunge as technology licensing delays weigh on outlook

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Ocado shares plunge on tech delay

Highlights

Ocado's technology unit adjusted EBITDA falls 18 per cent to £60 million and sales drop 8 per cent to £256 million in H1, amid licensing headwinds.
Ocado lowers 2024 guidance for new technology module installations from 10–15 to around 10 modules, citing Kroger and Sobeys warehouse closures and project delays.
Ocado group revenue rises 15 per cent to £1.76 billion and adjusted EBITDA more than doubles to £73 million in H1, but shares plunge amid investor concern over the technology division's outlook.

Technology unit slowdown and project delays

As reported by Financial Times, adjusted EBITDA at Ocado's technology division falls 18 per cent to £60 million in the six months to May 31, reflecting weaker momentum in the group's core licensing business.

Excluding compensation payments from Kroger and Sobeys, sales in the technology unit fall 8 per cent to £256 million in the first half of Ocado's financial year. The division accounts for about four-fifths of group profits, making the decline a central concern for investors.

Ocado says recent decisions by Kroger and Sobeys to close warehouses using its technology have dented its growth plans. The company also cautions that planned projects with Kroger in Arizona and with Lotte in Seoul will be delayed.

As a result, Ocado cuts its forecast for the number of technology modules it expects to install for customers this year from between 10 and 15 to around 10. Each warehouse equipped with Ocado's systems contains several modules, so the lower target signals slower rollout activity.

Leadership stability and wider business pressures

Investor sentiment is also shaped by governance tensions that have surrounded chief executive Tim Steiner, who has led Ocado since co-founding the company in 2000. Some shareholders have called for his replacement after a 91 per cent drop in the share price from its pandemic-era peak five years ago.

This month, Steiner and the board, chaired by Adam Warby, agree that he will remain in the role until December 2027 before moving into an advisory position. Steiner says customers and shareholders are satisfied with the outcome and argues continuity matters for client relationships as partners expand their operations on Ocado's platform.

Bernstein analyst William Woods says the first-half results show little progress on new growth avenues and continued delays in the pipeline. Steiner says Ocado is in talks with potential new clients, particularly in the U.S., and rejects the idea that interest is limited to its lower-cost store fulfilment software.

Alongside its technology business, Ocado operates an online grocery retail venture with Marks and Spencer. The two companies remain in disagreement over the amount payable to Ocado by M&S, though Steiner says he hopes that dispute will be resolved very shortly.

At group level, revenue increases 15 per cent to £1.76 billion in the first half of the year, while adjusted EBITDA more than doubles to £73 million. Even so, the market reaction shows investors remain focused on whether the higher-margin technology business can return to dependable growth.

IBM shares came under heavy pressure after the company suffered a record one-day drop, with preliminary quarterly results missing expectations and management pointing to corporate IT budgets shifting toward AI-related infrastructure. We previously noted that the selloff quickly became a broader read-through for the tech sector, as investors debated whether the disappointment was company-specific or a sign of wider spending reallocation. Our earlier article also highlighted key technical levels that could shape near-term volatility in the stock.

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