What's going on?
When Uber reported its better-than-expected fourth-quarter results late last week, the ride-hailing company also revealed it would become profitable even faster after having tweaked its inner workings.
What does this mean?
Uber saw the bookings revenue from its various different services grow 30% in the last quarter of 2019 compared to a year before. Almost half that growth came just from Uber Eats: the food delivery service saw its quarterly revenue grow 70%, even as its losses ballooned by a similar amount. Still, the company’s overall loss was smaller both than investors’ expectations and the loss it made in the same period the previous year.
Consider Uber’s handbrake disengaged, because now it’s on a roll: the company also announced it’s aiming to become profitable by the end of 2020. That’s one year sooner than its previous plan of 2021 (we did the math), and might’ve come about as the company’s cost-cutting measures are exceeding even its own expectations.
Why should I care?
For markets: Ready, willing, and profitable.
Revenue growth is great, sure, but what investors really seem to want these days is for that growth to be profitable. And those shifting priorities may be why Uber’s stock rose more than 8% on Friday after Uber moved its profitability goalposts. The company’s new CEO said he recognized that the era of “growth at all costs” is over, and he seems to be putting Uber’s money where his mouth is: he’s cut back on marketing expenses, laid off more than a thousand workers, and abandoned some unprofitable food delivery businesses.
The bigger picture: Hola, competition!
Uber is already facing intense competition from other ride-hailing peers like Lyft, Bolt, and even self-driving service Waymo One. But last week, it had a new competitor in its biggest European market to worry about: India’s SoftBank-backed Ola announced plans to launch in London. As if Uber didn’t have enough problems in the English capital already…