In true unicorn fashion, ride-hailing giant Uber continues to lose money, all while putting a positive spin on it. The company’s Q3 earnings report shows that it lost $1.16 billion for the quarter—that’s up from $986 million this time last year, but still better than expected.
Part of what’s straining Uber is its effort to keep growing into new segments, including food delivery, where both growth and losses have been substantial. Uber also reorganized the company structure into five business segments, including Rides, Eats, and Freight, making it easier to see how each part of the business is doing.
Here are six interesting things we learned from the report and earnings call with CEO Dara Khosrowshahi:
1) The ride-share business is improving. Uber reported that the gross take for ride sharing for the quarter was up 20% to $12.55 billion, compared to the $12.51 billion expected by Wall Street.
2) Food is the next frontier. Uber Eats is growing fast, with revenue up from $2.1 billion to $3.7 billion. But the losses also ballooned, from $189 million in Q3 2018 to $316 million this past quarter. Nevertheless, Uber intends to keep pushing and aspires to be the biggest food delivery service, taking on competitors like DoorDash and Grubhub.
3) Uber doesn’t expect to win everywhere. Khosrowshahi said that Uber aims to be “number one or number two” in all the markets that it plays in. And if it can’t do that, it will withdraw, as it did with Uber Eats in South Korea.
4) It’s fighting, and downplaying, a new California law. A regulation known as AB5, going into effect this year, aims to reclassify gig workers as employees who will be subject to minimum wage and other protections. Khosrowshahi sought to calm investors first by saying that California accounts for a “negligible” part of earnings. Yet he also highlighted Uber’s push for a ballot measure to exempt it and companies like Lyft and DoorDash from the law.
5) The stock may continue to slide. Uber’s share price dropped about 6% after it reported earnings, since overall the company failed to meet expectations. And on Wednesday, 763 million shares will become eligible to trade on the public market. Dan Ives of Wedbush Securities told CNBC that could “cause an avalanche of selling as early investors and insiders hit the bid.”
6) Magic will make Uber profitable in about a year. Despite continued losses and fierce competition, Khosrowshahi predicted that Uber would become profitable for the year 2021. That’s in terms of what’s called EBITDA, which doesn’t count expenses such as taxes and depreciation of assets. Continuing, Khosrowshahi said that “magical companies” can achieve top-line growth at massive scale. “We’re working hard to be one of those magical companies,” he said. And if that fails, Uber still has about $12.7 billion in cash to carry it through more losses.