Uber’s single-minded pursuit of growth has produced a towering monument.A net lossof $US5.2 billion ($7.7 billion) in the space of three months far exceeds anything reported in the past. What does the US ride-hailing group have to show for its vast spend in the second quarter? Slowing growth and more competition.
In a call with analysts, boss Dara Khosrowshahi dead-batted fretful demands to know when Uber would become profitable as just “a meme that’s out there”. That glib dismissal was unsettling.
Uber’s cash flow problem is stark. Mr Khosrowshahi said Uber can be cash flow positive when it is mature. He gave no timeline for a company that is already 10 years old to reach adulthood.
The bigger Uber gets, the more money it burns. Gross bookings rose 31 per cent in the three months to the end of June, reaching almost $US16 billion. But most of this went to drivers. Revenue left over was $US3 billion.
Even without thegigantic costs of the May listing— with $US3.9 billion in stock-based compensation — Uber would still have reported a net loss higher than the previous quarter at $US1.3 billion.
Uber always intended 2019 to be a year of investment. Yet revenue of $US3 billion in the second quarter was only 14 per cent above last year. If Uber’s total addressable market is $US12 trillion, as it once claimed, then why is not growth much higher?
Smaller US peer Lyft offered a glimmer of hope when it published its own second-quarter results last week and pointed to easing price pressures. Perhaps, investors wondered, ride-sharing was the sort of business that could become profitable even without driverless cars?
Uber’s results pour cold water on that idea. Even if price wars are ending, Uber cannot afford to raise its own prices by any meaningful amount.
The company claims cars, not other ride-sharing companies, are its real rivals. But so are public transport, taxis and walking around. Losses will mount for as long as Uber fails to recognise the breadth of the competition.