The year 2023 marked a turning point for the technology giant Uber. For the first time since its IPO in 2019, the company is reporting an increase in profits, which is expected to continue in the first quarter of 2024. This marks the end of an era in which the company focused on growing at any cost while neglecting profitability.
CEO Dara Khosrowshahi emphasized: "2023 was a turning point for Uber and proves that we can continue to generate strong, profitable growth on a large scale."
The results from the last quarter of 2023 suggest that the demand for Uber's services, particularly in the ride-hailing and food delivery sectors, continues to be high. The total volume of transactions through the app increased by 22% to 37.58 billion US dollars.
Uber's Own Revenue, i.e., the Share of These Transactions, Grew by 15% to $9.93 Billion. The Quarterly Figures Slightly Exceeded Wall Street's Expectations.
Uber Expects Total Transaction Volume on the App to be Between $37 Billion and $38.5 Billion for the First Quarter of 2024, Aligning with the $37.43 Billion Expectation of Analysts Surveyed by FactSet.
For years, Uber and other start-ups benefited from readily available capital and were able to spend billions to gain market share. According to S&P Global Market Intelligence, Uber accumulated nearly 30 billion US dollars in operational losses from 2016 to the first quarter of 2023. It was not until the second quarter of 2023 that the company achieved its first operating profit. Uber was founded in 2009.
In 2019, the company began to lower its costs, but then the pandemic hit and decimated the ride-sharing services. Smaller business units, like food delivery, became the lifeline of the company.
During the pandemic, Uber reduced its workforce, sold off non-core business segments such as self-driving cars, thereby managing to overcome financial losses. Furthermore, the company responded better than its competitor Lyft to the longstanding driver shortage as the economy picked up again following the Covid-19 lockdowns. Thus, Uber was able to gain market share.
Lyft, which has reduced its losses over the years and is now led by a new CEO, has yet to report its first operating result. The results are to be presented next week.
In the last 12 months, Uber's stock price has more than doubled, while the tech-heavy Nasdaq Composite Index only rose by about 30%, and Lyft's shares fell by about 25% in the same period.
Uber has expanded its advertising on its own app in recent months. Through discipline in spending on consumer discounts and driver incentives, as well as improved assembly of deliveries and increased efficiency, the company has been able to improve its operational efficiency.
In the last quarter of 2023, revenue in the mobility sector grew by 34% and revenue in the delivery sector by 6%, while revenue from freight declined by 17%. Last year, Uber laid off hundreds of employees to stay lean.
In January, the company announced it would shut down the alcohol delivery service Drizly to fully integrate it into the Uber Eats service.
However, regulatory challenges could arise for Uber's food delivery service. Recently, New York City and Seattle passed new laws aimed at increasing pay for drivers, which resulted in Uber Eats having to impose new fees on consumers to offset additional costs.
