Uber’s Profit Figures Disappoint Wall Street, Stocks Plunge

The United States based ride hailing company Uber reported quarterly loss that was below the market expectations which sent the company shares soaring down. Increased competition resulted in the slowdown of revenue growth which led the company to report its highest quarterly loss ever.

There is heavy spending being made by Uber and its rivals for the purpose of expansion. However Uber’s CEO Dara Khosrowshahi has said that there was easing of competitive pressures.

However those words were not enough to stop the shares of Uber dropping by 13 per cent in after-hours trading.

On the other hand, Uber’s US rival Lyft’s quarterly performance was appreciated by analysts at Wall Street which raised the expectations that Uber would also be reporting good numbers for the latest concluded quarter.

However, in the three months to 30 June, Uber reported an increase of its loss to $5.2bn compared to the loss of $878m in the same quarter last year. Share-based compensation expenses related to its stock market listing earlier this year to the tune of $3.9bn was included in the figures.

There was however an increase of 14.4 per cent in the revenues generated by the company for the quarter at $3.2bn. That number was however lower than what was being expected by the analysts at $3.4bn. During the quarter, there was an increase of 147 per cent in the costs of the company which also included a steep rise in costs for research and development.

Since the first quarter, there was rationalizing of the competitive environment during the quarter and since the first quarter, the competitive environment has been “progressively improving”, Khosrowshahi said. Analysts now expect that the company would be spending less on promotions and incentives to win market share even though it is expected to continue to invest aggressively in this aspect.

Historically, subsidies to attract riders have been used by both Uber and Lyft and both the companies have also making heavy investments in new areas such as food delivery and the development of self-driving technology.

Prior to its launch of IPO earlier this year, Uber had said that it may never make a profit. Currently however the company is trying to impress upon investors that there would growth not only from its ride services but its logistics and food delivery services would also generate revenues and profits.

There was a 31 per cent year on year rise in gross bookings which is a measure of the total money generated from of rides before subtracting expenses for drivers and other costs, to reach $15.76bn which too was lower than whet the analysts were expecting at about $15.8bn. Globally, the company reported a growth in the number of monthly active users rose which came at 99 million compared to 93 million reported by the company at the end of the first quarter. In the same quarter a year ago, the number was 76 million.

Publicis Sapient analyst Alyssa Altman described the ride hailing company’s second quarter results thus: “Uber has turned into the magical money burning machine”.

(Adapted from BBC.com)

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