Uber’s ride-hailing services are gaining momentum again after the pandemic. However, it is doing so at a price that raises more questions about its financial viability.
Uber’s non-profitable delivery service, however, is growing at an alarming pace. This suggests that some homebound habits could be here to stay even as people go out more often.
These two trends resulted in Uber’s most successful quarterly report since 17 months ago when the pandemic decimated San Francisco.
Investors ignored the rare profit in Wednesday’s April-June results to concentrate on ongoing losses at Uber’s operations.
The second quarter profit was a result of a $1.4 billion one-time gain to reflect recent increases in Uber’s stakes China’s top ride-hailing service, Didi. Also, the self-driving car division it recently transferred to Silicon Valley startup Aurora.
These accounting adjustments surpassed Uber’s losses in its company, enabling it to post a second quarter profit of $1.14 Billion, or 58cs share. This reverses a loss in the same three months of 2020, when Uber was still in the early stages of the pandemic.
The quarter’s revenue was $3.93 billion. This is more than double the amount of revenue compared to last year, when many people were stuck at home and didn’t want to travel. According to FactSet Research, the revenue exceeded $3.76 billion as estimated by analysts.
Uber investors are more interested in an unconventional measure called “adjusted Earnings before Interest, Taxes, Depreciation, and Amortization.”
The company had previously promised to be profitable by the end of the year using that yardstick — Dara Khosrowshahi repeated Wednesday this promise — but the company suffered a setback during the second quarter, which saw a loss in excess of $509 million. Although this was less than last year, it still represents a loss of $359m in adjusted earnings over the first three months.
Uber’s bonuses and other incentives Uber offers drivers to join its ride-hailing service were a major reason for the larger loss. Many drivers quit due to safety concerns during the worst pandemic. It is also competing with Lyft in the U.S. to attract drivers.
Uber expects driver incentives to decrease, which will allow it to lower its adjusted loss for September to $100m or less. It also plans to turn a small adjusted profit in the last three months of the calendar year.
However, investors remain cautious. Uber stock fell more than 4% during extended trading following the release of the second quarter report, which was mostly positive. Shares had already fallen more than 30% since February’s peak of $64
Uber had a mostly positive quarter. Highlights included 1.51 billion rides — nearly doubling the number of rides than last year. Ride-hailing revenues increased by more than twofold to $1.62 Billion last year.
Even with these strides, ride-hailing revenues were still 30% below their levels two years ago. This was long before the economic collapse. The number of rides was down by 10% compared to two years ago.
Khosrowshahi stated to analysts on a conference call, that the ride-hailing company was almost back at full strength. He acknowledged that Uber is experiencing a shortage in drivers in major markets such as San Francisco and New York, which has led to higher fares than Uber thinks will be acceptable over the long-term.
Khosrowshahi stated that things are changing, however, as the U.S. has seen an increase in ride-hailing drivers, and couriers, to the tune of approximately 420,000.
The Uber service, which Uber created to deliver groceries and take-out food, is making more money than it has in recent quarters. Uber’s delivery revenue grew more than two-fold from last year to nearly $2 billion. The delivery service is also experiencing losses as it expands.