Uber revealed it lost US$1.01 billion in the third quarter, which was a lot less than the US$5 billion the quarter before, and it remains a loss-making public company whose growth is slowing.

By Ian Horswill


Posted on November 8, 2019

Dara Khosrowshahi, CEO of Uber, a household name and once a posterchild for new business, still faces a monumental task to turn the business into a profit.

Uber revealed it lost US$1.01 billion in the third quarter, which was a lot less than the US$5 billion the quarter before, and it remains a loss-making public company whose growth is slowing.

The San Francisco-based company priced its IPO at US$45 in May and today the share price is US$27.38.

Major institutions have invested heavily in Uber. Japan’s multinational conglomerate holding company SoftBank was the biggest buyer of pre-IPO shares. US financial firms like Morgan Stanley, Fidelity, TPG and Tiger Global also bought into Uber, as did Baidu and CTIC from China. This year PayPal agreed to buy US$500 million worth of shares in a private placement at the IPO price. PayPal said on its third-quarter earnings call last month that the investment in Uber, as well as MercadoLibre, resulted in a hit to profit and “created more earnings volatility”. SoftBank sold 5.5 million shares (2.5% of its holdings) in the offering and TPG unloaded 1.4 million (4.3%).

Khosrowshahi said the business is targeting “total company EBITDA profitability for the full year 2021”.

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Uber

Uber’s innovation has been copied extensively and it is facing competition in its ride-sharing business and in its food delivery business. Gross bookings for Uber Eats grew 108% from the year ago quarter to US$3.07 billion, but its adjusted net revenue, which is revenue after payments to the drivers and restaurants, only grew 31% to US$239 million. In a conference call with analysts and journalists, Nelson Chai, Uber’s chief financial officer, blamed India for dragging down the take-up rate because of the level of incentives Uber has to offer to compete in the market.

“Today it is challenging in that there are many players that are well-funded and well operated and they’re competing to win,” Khosrowshahi said.

To add to the company’s woes, it said it “will likely” have to strike a licensing deal with Waymo or opt for costly changes to its autonomous driving software, after an independent expert found the ride-hailing giant still used technology from the Alphabet business. Uber admitted a detour in its software development “could limit or delay our production of autonomous vehicle technologies”.

Waymo told Reuters in a statement that the independent software expert’s findings “further confirm Waymo’s allegations that Uber misappropriated our software intellectual property. We will continue to take the necessary steps to ensure our confidential information is not being used by Uber”.

The company’s self-driving car program has suffered numerous problems. In March 2018, one of its self-driving vehicles struck and killed a pedestrian, causing the company to temporarily suspend its autonomous vehicle program. Documents released earlier this week suggest that the company’s cars were not programmed to react to people jaywalking, and its cars were involved in three dozen crashes prior to the one that caused the fatality.

In addition, 96,000 New York City drivers are seeking repayment for fees deducted from their fares and have taken their employer to the federal court.