Uber reports $5.2 billion loss in Q2

Uber Technologies Inc reported its largest quarterly loss ever yesterday, announcing a second quarter deficit of $5.24 billion, while also revealing its slowest-ever revenue growth of 14%.

The news shocked Wall Street, which had expected a better showing, and saw the ride-hailing company’s shares initially slide 12%, before settling around 4%.

The ride-hailing industry has convinced investors that for now, the priority should be to increase market share through intensive investment, and that this necessitates and explains the losses. However, the revenue growth slowdown and persistent loss-making is leading to mounting concerns.

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According to CNBC, these single-quarter losses are larger than the entire 2018 losses for all but three S&P 500 companies. “General Electric, Kraft Heinz and Newell Brands are the only companies in the S&P 500 that lost more money last year than Uber’s… second-quarter deficit.”

“A major chunk of those losses, $3.9 billion, is from stock-based compensation to employees related to the company’s initial public offering in May,” Business Insider explains. “It’s a typical expense for companies who go public, and Uber previously warned in regulatory filings that this large expense would be occurring, so it likely isn’t a surprise for investors.”

The company spent $920 million in cash during the three-month period, but in the same quarter in 2018, only spent $153 million. It laid off 400 marketing employees last month in an effort to stem to expenses.

Earlier in the day, the mood had been positive, with stock up about 7%, following its competitor Lyft’s good quarterly report, revealed the day before. For Lyft, “revenues rose 72% to $867.3 million in the second quarter. The revenues easily beat analysts’ expectation of $809.27 million,” reports Market Realist.

Reuters quotes Haris Anwar, an analyst at financial markets platform Investing.com: “Losses are widening and the competition is cut-throat,” he said. “What’s sapping investor confidence and hitting its stock hard after this report is the absence of a clear path to grow revenue and cut costs.”

But Uber CEO Dara Khosrowshahi was defiant: "We could push the company to break even if we wanted to, frankly, but I think what you will see from us is... lower losses going forward while at the same time we aggressively invest in new growth levers," he said in a conference call with USA today reporters. "But there's no doubt in my mind that eventually the business will be a break even and profitable business."

According to the New York Times, Khosrowshahi added that “there were positives. Uber’s bookings — the money it gets from rides and deliveries before paying commissions to drivers — rose 31% from a year ago. The company also added customers, totaling more than 100 million monthly active riders for the first time.”