Unprofitable Uber turning things around?

Like many tech companies, Uber’s had a rough ride over these past 12 months. However, this quarter’s results could have marked a turnaround for the unprofitable outfit.

Why keep mentioning unprofitable? Because Uber’s chomped through $25bn of investor cash since launching in 2009 and still doesn’t turn a profit. CEO Dara Khosrowshahi notified Uber employees in May that the shift towards profitability needed to accelerate.

One line summed up the investor sentiment at the time:

“We are serving multi-trillion dollar markets, but market size is irrelevant if it doesn’t translate into profit,”

Put another way, if you keep growing a loss-making business, all you’re doing is growing losses…

This theme was present again in the CEO’s Q2 comments

“After meeting investors on the heels of our earnings report in May, I wrote to Uber employees that it was clear there had been a seismic shift in the market—and that investors were placing a high value on companies that can generate significant profits, cash flow and durable growth.”

“I challenged the team to meet our profitability commitments even faster than planned, and the team delivered.”

Judging by the reaction, markets seemed to agree. Uber’s share price gapped 13% higher on the open, and kept on running, closing 19% higher than the previous day.

There were plenty of positive signs from Uber’s perspective. One of the major factors was the company turning cash flow positive for the first time ever. Profitability is likely a way off yet, but it’s a step in the right direction.

The company actually lost $2.6 billion for the quarter, $1.7 billion of which was due to unprofitable equity stakes in companies including Zomato, the Indian food delivery firm.

Overall, Uber generated free cash flow of $382 million in Q2, way above analysts' expectations of $263.2 million.

In Q2, Gross Bookings hit another all-time high of $29.1 billion, up 33% year-over-year or 36% year-over-year on a constant-currency basis, driven by audience growth of 21% year-over-year, now at 122 million MAPCs, another all-time high.

Drivers are also signing up to Uber in greater numbers according to the CEO.

"We have a very strong flow of new drivers who are signing up, coming on to earn,".

Approximately 5 million Uber drivers are registered now, although the reason for the recent surge is a little more concerning. Khosrowshahi said that 70% of new drivers opted to join Uber to manage a hit from inflation and rising costs of living.

Revenues from their food delivery arm Uber Eats rose 37% to $2.69 billion, prompting questions about competition from rivals.

Amazon recently announced a partnership with Grubhub. Amazon Prime members will now get a year of Grubhub+ for free

The Uber CEO was defiant.

“We see zero material effect in the US. Because of our global scale we have a lot of chances to work with different players. Amazon is a great company and we will look to work with them however we can.”

Lots of progress to cheer for Uber, but is it too soon to call this a turnaround?