Uber posts first operating profit following $31.5bn in losses

Uber announced its first operating loss on Tuesday, but a better cost control strategy has helped the company turn the corner after years of spending heavily in an ill-advised bid for growth.

The long awaited landmark was revealed after the ride-hailing service had accrued a total operating loss of $31.5bn since 2014, its first year of disclosing financial details.

Uber was one of the first tech startups to embark on a global expansion. It used cheap capital and subsidies for rides in order to gain market share. Uber’s aggressive push included it flouting the taxi regulations in several countries. To critics, Uber became synonymous with Silicon Valley arrogance during the decade of cheap money between the financial crises and the Coronavirus pandemic.

In a conference call with analysts, Dara Khosrowshahi, the chief executive of Uber, admitted that for most of its history profit wasn’t something people thought about when they asked questions. Many observers have boldly predicted that Uber would never be profitable.

Khosrowshahi said that the easy access to capital in the last decade had obscured the poor economics of some businesses. He claimed this was not true for Uber, despite the fact that it burned through cash to gain the majority of the ride-hailing industry and forced smaller competitors to retreat.

Uber’s financial turnaround is a result of the rebound in demand for Ride-Hailing after the pandemic, and its successful expansion into the food delivery business. Khosrowshahi stepped in as co-founder Travis Kalanick’s replacement six years ago after a series scandals forced him out. The company also increased prices and aggressively cut costs to boost its profit margins.

Uber reported profits after tax in previous quarters, but only due to gains from the sale of equity investments or their revaluation.

For the second quarter this year, the company reported $326mn of pre-tax profits from its operations. This is a significant turnaround from the $713mn operating loss it suffered the year before. Khosrowshahi stated that the company’s return to profitability and its quarterly free cash flows of more than one billion dollars reflected “disciplined implementation, record audiences, and strong engagement.”

Uber’s figures, despite being on a more stable financial basis, continue to reflect the price wars which have characterized the ride-hailing business and the food delivery industry for years. Uber’s growth in its ride-hailing service was impacted by price cuts made earlier this year, by Lyft, the struggling US competitor.

Uber’s latest quarterly revenue of $9.23bn was down 14 percent from Wall Street expectations due to competition with DoorDash, a delivery service.

The steady increase in demand for Uber services, despite the price increases, has bolstered Wall Street’s confidence that Khosrowshahi will be able to maintain his turnaround. This is why its stock price rose 90 percent in the last year despite a nearly 6 percent fall on Tuesday.

Uber has also released a more optimistic forecast for the current quarter. It forecast that earnings before taxes, interest, depreciation, and amortization would reach $975mn-$1.025bn compared to a Wall Street estimation of $915mn. Its bookings estimate of $34bn-$35bn was higher than the $33.9bn forecast by analysts.

Uber, along with unrealised gains from investments, reported a profit for the quarter of $394mn, or 18c per share. This compares to a loss of $2.65bn the previous year. Analysts expected a loss of one cent per share.