Uber, battling losses in its ride-hailing and food delivery businesses, finally achieved the milestone of operating profit. However, its performance in the second quarter remained lackluster. After the financial results were published, Uber's stock opened lower on Tuesday, with midday losses approaching 7%, retreating to its lowest closing level since July 17 after hitting a two-year high on Monday.
Q2 Revenue Up 14%, Yet Below Expectations; Operating Profit of $326 Million Spurs Quarterly Net Profit
On the morning of August 1, Eastern US time, Uber reported its second quarter revenue for the period ending June 30 was below market expectations, and its earnings per share (EPS) showed a loss significantly higher than anticipated:
- Q2 revenue grew 14% YoY to $9.23 billion, compared to the $9.33 billion forecast by Refinitiv.
- Q2 EPS showed a loss of 18 cents, exceeding the 1 cent loss Refinitiv had projected.
- Adjusted EBITDA for Q2 was $916 million, up about 66% YoY.
Uber revealed that it had posted a net profit of $394 million in Q2, marking a turnaround from the $2.6 billion net loss a year ago. It reported an operating profit of $326 million in the second quarter, and a net gain of $386 million from revaluing its equity investments.
Q2 Highlights: Q3 Orders and Profit Guidance Above Expectations
Uber's CEO, Dara Khosrowshahi, pointed out two key highlights in the Q2 results during the earnings announcement: Firstly, Uber achieved an operating profit under GAAP for the first time in its history. Secondly, quarterly free cash flow exceeded $1 billion for the first time. He attributed the Q2 performance to robust market demand, new growth initiatives, and ongoing cost management.
The report showed that the number of trips on the Uber platform increased 22% YoY to 2.3 billion in Q2, and the monthly active consumers on the platform rose 12% YoY to 137 million.
Khosrowshahi also mentioned a significant increase in user trips during Q2, with driver and courier earnings reaching a record $15.1 billion for the quarter.
Media commentary suggested that Q2 was the first time Uber reported a profit from its core business since its founding in 2009. Operating profits drove Uber's net profit in Q2. Uber had previously reported net profits, but they were achieved by investment gains exceeding operating losses.
In Q2, Uber's total order value increased 16% YoY to $33.6 billion, highlighting robust consumer demand.
In its guidance, Uber predicts Q3 total order value to be between $34 billion and $35 billion, with the median value above the $34.09 billion expected by FactSet analysts. Uber also forecasts its Q3 adjusted EBITDA to be between $975 million and $1.025 billion, also exceeding analyst expectations.
Strong Ride-Hailing and Food Delivery Businesses, Freight Revenue Down 30% in Q2
However, compared to its core businesses, Uber's freight business continued to underperform.
According to the business breakdown, Uber's ride-hailing business had a total order value of $16.73 billion in Q2, up 25% YoY, with Q2 revenue for the business at $4.89 billion. Its food delivery business's total order value was $15.6 billion, up 12% YoY, with Q2 revenue for the business at $3.06 billion. The freight business's revenue was $1.28 billion, down 30% YoY.
CEO Khosrowshahi stated that freight still presents a challenge for Uber, as consumer spending on services outpaces spending on deliveries. He said spending on services ultimately benefits the company's mobility and delivery businesses, but Uber is currently adjusting its freight costs.
Uber has already laid off several hundred employees this year, primarily in human resources, freight, and overseas food delivery. The layoffs total less than 3% of the total workforce, far less than layoffs at other tech companies.
CFO is Highest-Ranking Executive to Depart
Since IPO, AI Chatbot Development Underway On the earnings call, Khosrowshahi revealed that the company's Chief Financial Officer (CFO), Nelson Chai, will leave the company in January 2024. Uber is currently seeking Chai's successor.
Chai is the highest-ranking executive to resign from Uber since its IPO. He has served as Uber's CFO since 2018, assisting the company in completing its IPO in May 2019. He oversaw significant transactions for the company, including the acquisition of food delivery service Postmates in 2020.
Khosrowshahi also stated that Uber will focus on its scale of operations over the next five years. Autonomous trucks will be a significant part of the company's business in the future. Uber is developing an artificial intelligence (AI) chatbot and using AI technology to enhance the productivity of its development and engineering departments.
He believes that the company's "super app" vision is making progress.
