Uber, Still Unprofitable, Focused on 'Healthy Growth'

Matt Posky
by Matt Posky
uber still unprofitable focused on healthy growth

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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6 of 13 comments
  • Acd Acd on Aug 09, 2019

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

  • TheDumbGuy TheDumbGuy on Aug 09, 2019

    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...

    • See 3 previous
    • Snooder Snooder on Aug 12, 2019

      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.

  • Jeff I like these 3rd generation Camaros much better than the 2nd generation. I might be in the minority but I always liked these Camaros. As for the S-10 pickups I had a second generation S-10 for almost 21 years very reliable so I might be in the minority here as well but when something gives me good service and costs not much to keep up then I like that vehicle.
  • Art_Vandelay The 80s ended with this car and Nevermind. Be sure to grab the Motley Crue cassette that is surely stuck in the cassette deck
  • FreedMike As I look at this car I feel my hair longing to become mulleted.
  • Tassos just scrap the hillbilly-redneck-high school junior mobileand put it out of its miseryBefore Tim steals it and pretends it is his 'used car of the day'
  • Dukeisduke Oh, and I have one of those Chinese Club knockoffs - I got one recently for my youngest daughter's 2012 Forte Koup, that was for six years my oldest daughter's ride. It got her through her senior year of high school, four years of undergrad, and her one-year Master's program. She was then gifted my mother-in-law's 2017 Elantra Limited. It has pushbutton start, so it's not susceptible to the Kia Boyz thing.The "Club" is still in the package - there's no way in hell she's gonna remember to put that thing on every time she parks it.