Uber’s Too Fast, Too Furious Days Could Be Ending


UBER 8.24%

may be losing some speed, but there is plenty of power under its hood.

The ride-hailing giant reported mixed second-quarter results amid stiff competition. On the bright side, gross bookings of $15.8 billion were in line with analysts’ estimates, while monthly active consumers and trips beat them.

Uber said total adjusted revenue in the quarter was impacted by roughly $300 million in driver appreciation awards associated with its initial public offering, without which revenue would have been largely as expected. Similarly, stripping out “excess driver incentives and referrals,” core platform revenue of roughly $3 billion topped estimates.

Using Uber’s profitability metric for adjusted earnings before interest, taxes, depreciation and amortization, losses appeared to moderate compared with the first quarter. Still, a quarterly operating loss of nearly $5.5 billion was its largest ever. And while that includes expenses related to its offering, it also reflects intense competition. That is all the more disappointing to investors after the company suggested in the first quarter that promotions and aggressive pricing by ride-hailing competitors could ease. Uber’s shares initially fell more than 10% in after-hours trading before rebounding somewhat.

In a conference call on Thursday, Chief Executive Dara Khosrowshahi said he is seeing improvement in the competitive environment. Adjusted net revenue as a percentage of bookings may offer a more revealing lens into how Uber is faring: This yields a core platform “take rate” of 18.2% for the second quarter, in line with analysts’ expectations. But embedded in that calculation is a ride-share take rate of 19%, down slightly from that of the first quarter. And while Uber Eats’ take rate improved 2 percentage points sequentially, Uber attributed that improvement to new delivery fees.

In other words, Uber lost a lot of money before complicated adjustments and competition remains intense.

Uber’s shares are up just 3% from the closing price of its first day of trading back in May. Investors shouldn’t rule out a significant improvement in business economics, though, much like


demonstrated on Wednesday.

It may do better than that. While Uber has multiple competitive marketplaces to juggle, its strategy of leveraging the novelty of Uber Eats to bring new riders to its legacy platform appears to be working. The company said that 40% of new Eats consumers in the quarter had never used Uber’s platform. Moreover, Lyft’s $417 million in cash and cash equivalents looks like chump change compared with Uber’s $11.7 billion.

The good news, then, is that Uber may ease off the gas but can always throw more money at the problem whenever Lyft’s headlights get too bright in the rearview mirror.

Write to Laura Forman at laura.forman@wsj.com

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