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Future of Mobility
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How will Uber, which is still bleeding more than $1 billion a quarter, ever get to profitability? In an earnings call yesterday, CEO Dara Khosrowshahi suggested it’s all just a matter of leaning in.
Uber will lean into Uber Eats, he said, meaning it will be putting more resources into growing the food-delivery business before worrying much about margins. It will focusing on leaning into the right markets for ride-hailing, and leaning into No. 1 spot over the next-biggest competitor in each market. CFO Nelson Chai chimed in, adding that we can expect Uber to continue leaning into its Advanced Technology Group, the division working on self-driving cars. Uber also will be leaning into its high-margin services, such as Uber for Business, which saw big growth in the final quarter of 2019. The plans for the first quarter of 2020? Khosrowshahi says: “We’re going to continue to lean in.”
All told, the phrases lean in, leaning in, or leaned in were uttered 10 times on the 60-minute investor call, seven times by Khosrowshahi, twice by Chai, and once by an analyst who dutifully adopted the language when he posed a question to the executives.
But mostly what Uber seems to be leaning into is the idea that it needs to make money soon.
“We recognize that the era of growth at all costs is over,” said Khosrowshahi.
The sober approach seems to be working. Uber delivered a fourth quarter that met Wall Street’s expectations, with revenue up 37% from the previous year to $3.7 billion, and the company said it would achieve its profitability target at the end of this year. (Its target involves earnings before interest, taxes, depreciation, and amortization, so expect to see the net losses pile up for some time to come.)
The results and forecast were released after the close of regular trading yesterday; today the stock is up more than 10% at midday.
Uber has indeed been leaning into its Eats business, where gross bookings rose 71% over the prior year’s fourth quarter to $4.3 billion. Gross bookings for the ride-hailing division grew 18% to $13.5 billion. On the call, Khosrowshahi said Uber will be looking more closely into subscription models for both Eats and Rides this year.
It is leaning into more strategic geographic expansions, too. In Rides, Uber grew gross bookings in Argentina, Germany, Japan, South Korea, and Spain at four times the rate of growth for the rides business overall. With Eats, Uber says it is now in “first or second position in well over half ” of the countries where it operates, including the US, UK, France, Mexico, and Japan. (Seeking to cut back losses, Uber sold its struggling Eats business in India to Zomato in January.)
Uber for Business
Uber is also leaning into higher-margin businesses. In the fourth quarter, its airport business outgrew the overall rides business. It now serves more than 650 airports globally. Margins here are better than average, too, as customers hailing cars to and from airports are more likely to spring for a premium ride. Uber for Business, meanwhile, reported $1.2 billion in gross bookings, accounting for 9% of overall bookings for the rides division.
Despite all the growth, Uber reported a net loss of just under $1.1 billion for the fourth quarter, and a loss of $8.5 billion for the year.
As fast as its revenue is rising, Uber will be challenged to turn all that growth into profit. In addition, on the regulatory front, Uber will have to navigate labor law AB5 in California and will try to get back its license in London this year—just two more things the company will need to lean into in 2020.