Uber's ride-hailing service is losing the momentum it lost during the pandemic, but at a cost that's raising more doubts about the company's ability to make money.
At the same time, Uber's unprofitable delivery service is still growing at a torrid pace, indicating that some homebound habits are likely to stay, even though people are going out again.
Those two trends produced the best quarterly report since the Pandemic killed the San Francisco company 17 months ago.
The results announced Wednesday for the April-June period included a rare profit that investors glossed over to focus on ongoing losses in Uber's operations.
The second-quarter profit stemmed from a one-time gain of $1.4 billion to recognize recent increases in the values of Uber's stakes in what has been China's leading ride-hailing service Didi and self-driving car division that it gave recently to Silicon Valley startup, Aurora.
Those accounting adjustments eclipsed Uber's losses in its business, enabling the company to post a second-quarter profit of $1.14 billion or 58 cents share, reversing a loss of $1.78 billion suffered in the same period of 2020 in the early throes of the pandemic.
Revenue for the quarter was worth $3.93 billion, more than doubling from the dismal conditions at the same time last year when most people were still stuck at home and not looking for rides to go anywhere. The revenue figure exceeded the estimate of $3.76 billion among analysts surveyed by FactSet Research.
But Uber investors tend to focus on an unorthodox measure called adjusted earnings before tax, interest, taxes, depreciation and amortization.
The company had previously pledged to grow profitable under that yardstick during the final three months of the year — a promise CEO Dara Khosrowshahi reiterated Wednesday — only to take a step back during the second quarter with a loss of $509 million. While this was lower than a year ago, the adjusted quarterly loss came after an adjusted loss of $359 million during the first three months of the year.
The larger loss was largely due to the bonuses and other incentives that Uber is offering to drivers to rejoin its ride-hailing service after many quit because of safety concerns during the worst of the pandemic. It is also competing against Lyft in the U.S., which is also trying to attract back drivers.
If Uber's driver incentives taper off (again, it could reduce its adjusted loss for the final third quarter to $100 million or less) then turn into an improved profit during the current three months of the year.
Investors, though, remain skeptical. Uber shares became more bearish in extended trading after the mostly upbeat second quarter report came out. The shares had already fallen by more than 30% from their peak of $64 in February.
Regardless, Uber had nearly a positive story to tell during the past quarter. The highlights included a total of 1.51 billion rides performed — more than doubling from the same time last year. The revenue of the ride-hailing business more than doubled from last year to $1.62 billion.
Despite those strides, ride-hailing revenue was still about 30% below its levels at the same time two years ago, long before the pandemic hit the economy. The total rides were down about 10% from two years ago.
Khosrowshahi told analysts during a conference call that the ride-hailing service was soon back to full strength. But he conceded that a shortage of drivers in some major markets such as San Francisco and New York are causing higher fares than Uber believes will be acceptable to passengers over time.
Things are still shifting, Kusparovshahi said, with the number of riders and couriers increasing by about 420,000 in the U.S. since February, but drivers also started switching routes, Khosrowshahi added.
The service to deliver take out food and groceries is building even more money. The company's revenue delivery totaled nearly $2 billion, more than doubling from a year ago. The delivery service is piled up losses as it grows.