Ride-Hailing Giant Uber Posts $5 Billion Loss as Growth Slows
Ride-hailing giant Uber Technologies Inc, reported a Q2 loss of $5.2 billion on Thursday as growth of its core business slows. Revenue fell short of Wall Street targets however, sending Uber's stock price down 6%.
San Francisco-based Uber's net loss reflected $3.9 billion of stock-based compensation expenses related to its IPO in early May. Wedbush analyst Ygal Arounian said to Reuters that Uber's loss before interest, tax, depreciation and amortization was close to Wall Street targets.
Meanwhile Uber biggest rival Lyft, also based in San Francisco, raised revenue expectations and described an easing price war, sending up shares of both companies during regular trade on Thursday. Uber share price rose more than 8% on Thursday, while Lyft had gained 3% during the day.
During today's earnings call, Uber reported that its revenue growth slowed to 14%, and the company's core ride-hailing business grew revenue just 2% to $2.3 billion. Most of Uber's growth is now coming from its food delivery business.
Uber reported a 72% increase in revenue from its from food delivery unit Uber Eats, which boosted Uber's overall revenue. Total revenue fell short of the average analyst estimate of $3.36 billion, according to IBES data from Refinitiv.
Gross bookings, a measure of total value of car rides, e-scooter and bicycle-sharing trips, food deliveries via Uber Eats, as well as other services before payments to drivers, restaurants and other expenses is up 31% from a year earlier, reaching $15.76 billion. Analysts on average were expecting $15.80 billion.
Uber reported a 72% increase in revenue from its from food delivery unit Uber Eats.
Uber long term problems are its ability to reach profitability in its ride-hailing business. The company continues to lose money from each ride it completes. However, Uber reported the amount passengers spent on trips rose 20% while the amount Uber kept after paying its drivers increased just 4%.
Both Uber and Lyft relied heavily on subsidizing fares to attract riders. The two companies have invested heavily to expand services into areas such as self-driving technology for Lyft and food delivery for Uber.
Uber's costs rose 147% to $8.65 billion in the quarter, including a sharp rise in spending for research and development. Uber is racing to develop self-driving vehicles in the hopes that it might one day lessen its reliance on human drivers.
Uber CEO Says the Company's Pricing Has Become 'More Rational'
Chief Executive Officer Dara Khosrowshahi said in a press call the competitive environment is starting to rationalize and it has been "progressively improving" since the first quarter.
Lyft on Wednesday said pricing had become "more rational", meaning the company should spend less on promotions and incentives to win market share. Lyft raised its revenue outlook on Wednesday.
"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," Chief Financial Officer Nelson Chai said in a statement.
The company, which has not yet made clear whether it will make a profit, is trying to convince investors that growth will come not only from its ride services, but also from other logistics and food delivery services.
Uber continues to expand its Uber Freight logistics business. Uber Freight added new shipping customers across the enterprise, middle market, and small- and medium-sized business segment, Uber wrote in its Q2 report.
On a positive note, the number of Uber's monthly active users continues to climb, as ride-hailing becomes a popular option for people, especially in urban areas. Uber said its monthly active users rose to 100 million globally in July, from 93 million at the end of the first quarter and 76 million a year earlier. It was the highest number of monthly active users in the company's history.
Khosrowshahi said that Uber is becoming "more and more integral part of everyday life in cities around the world."
Still, both Uber and rival Lyft need to figure out a way to make money from their core ride-hailing business in order to achieve sustainable, long-term growth as public companies. This might be Uber's biggest challenge going forward.
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