By on August 9, 2019

The futuristic world of personal transportation sans ownership was, once again, called into question after Uber posted its largest-ever quarterly loss on Thursday. The $5.2 billion dollar dent was accompanied by a Q2 that also showcased slowed growth, the worst the ride-hailing firm has ever seen.

While Uber attributed a large portion of its losses ($3.9 billion) to the employee stock compensations it needed to issue after its initial public offering in May, the remaining $1.3 billion still represents increased losses over last year’s results. Uber also said it expects to lose $3 billion through the end of 2019.

Despite revenue continuing to grow to roughly $3.1 billion, up 14 percent from last year, it’s the slowest quarterly growth rate in Uber’s history. However, the company claimed that “healthy growth” is what it’s primarily seeking at this time — and made a point of noting so on numerous occasions. 

“While we will continue to invest aggressively in growth, we also want it to be healthy growth, and this quarter we made good progress in that direction,” said Uber’s chief financial officer Nelson Chai. “In Q2, Adjusted Net Revenue grew 26 [percent] year-over-year in constant currency and excluding our Driver Appreciation Award, which is an acceleration from Q1. Adjusted EBITDA also improved meaningfully from Q1, driven by a $337 million sequential improvement in Core Platform Contribution.”

Trips were also up by a sizable 35 percent vs last year while gross bookings were up 31 percent. However, translating Uber’s core business into profits continues to prove a challenge. CEO Dara Khosrowshahi told The New York Times he believes balance will be achieved in the next two years, claiming that 2019 necessitated spending other periods would not.

“We think that 2019 will be our peak investment year,” he suggested. “We want to make sure that the kind of growth we have is healthy growth.”

From The New York Times:

He said there were positives. Uber’s bookings — the money it gets from rides and deliveries before paying commissions to drivers — rose 31 percent from a year ago. The company also added customers, totaling more than 100 million monthly active riders for the first time.

The results continued to cast a shadow over Uber, sending its stock falling in after-hours trading. The company, whose growth once rose like a rocket ship as it upended traditional transportation and barreled into markets around the world, was expected to be valued at about $120 billion at its I.P.O. this year.

But Uber dropped below its $45 offering price on its first day of trading and has only briefly risen above that share price since. Mr. Khosrowshahi has been criticized for the way Uber went public and has faced questions about how he intends to revive growth.

It’s not really fair address Uber’s profitability issues without acknowledging that this is a broader problem among all ride-hailing firms. Lyft, the company’s biggest rival, lost $644.2 million in the last quarter — which it also attributed to investments. Both companies lured in employees via stock options, spent heavily on marketing and tech, are exploring new sources of revenue (rental scooters, food delivery, transit data, etc), and are heavily discounting rides to grow their customer base.

[Image: Jonathan Weiss/Shutterstock]

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13 Comments on “Uber, Still Unprofitable, Focused on ‘Healthy Growth’...”

  • avatar
    R Henry

    Investors are hoping ride-sharing will somehow be the next Amazon. The investments being thrown at Uber are clearly high risk. I hope the investors make a profit, but I certainly won’t be upset if their whole investment is lost either. Uber has put A LOT of traditional cabbies out of work. The risk of investing in ride-sharing is not hidden or unknown.

  • avatar
    SCE to AUX

    Wow, these guys burn money faster than TSLA. But there are positive signs.

    I am not a fan of either company’s reliance on ‘mobility’.

  • avatar

    My prediction is that more of their drivers will wise up and figure out their true compensation is pretty shabby. Driver cash flow might look ok until they have to realize true depreciation. That will just add to Uber’s costs from here.

    If you believe in Musk’s “full self driving” anytime soon, maybe it works someday.

    • 0 avatar

      I have talked to more than a dozen Uber drivers in the last year, asking them how they feel about their status and compensation. I have yet to meet one who was dissatisfied. With perhaps two exceptions none of them was viewing Uber as a full time job; as supplemental income it works just fine, allowing them to pick up extra cash when they feel like doing so. Obviously, the other two were feeling good enough to Uber full time; one had even bought a (used I think) car for the purpose. Except for that guy, the rest were just using an asset that was depreciating whether they used it for Uber or not.

      I do not think however there is any future for Uber in autonomous vehicles. The technology really isn’t ready, but more importantly, why on earth would Uber want to start buying their own vehicles and paying for the cost of the automated systems as well? Here is one situation where, at least for the foreseeable future, it’s going to be a lot cheaper for them to use humans who provide their own cars….

      • 0 avatar

        +1 Lokki – same experience here when I talk with Uber drivers. Most of the drivers I have had are retirees looking to get out of the house a few hours per day, or college kids making a few extra bucks.

        I think that the whole media storm over Uber’s practices makes for great headlines, and no doubt, those who rely on it as full time income hurt – but as supplemental income, it’s great.

  • avatar

    If you believe autonomous cars will be a reality before Uber runs out of cash, Uber is a winner. Otherwise both Uber and Lyft are already dead companies walking.

  • avatar

    Lose money on every ride but make it up in volume….

  • avatar

    OK, people call them up and ask for a ride. They call a driver who picks up the caller and takes them to their destination. Uber gets paid for taking the call, and gives some of the money to the driver and keeps the rest. How can you not make money on this unless you are sitting in a large, fancy, expensively furnished office with a city view- giving most of your moolah to your landlord ? Of course, you must also have some lawyers on retainer just in case, but how can this NOT make money unless you are wasting vast amounts of it somewhere ? Or maybe this is some kind of scam that I am not seeing…

    • 0 avatar

      Growth costs money.

    • 0 avatar

      They (currently) pay the drivers more than they receive from the customer, that’s how.

      The idea is you subsidize the rides long enough to gain market share. Then once you’ve cornered the market and your competition is toast, either you raise prices, or you lower costs. In this case, they’re hoping that autonomous vehicles will lower their costs, and if not, theyll just start increasing fares when they have to.

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