Uber losses increase with spending on new businesses
Uber’s losses widened in the second quarter as the car-booking company ramped up spending. The FT's Shannon Bond reports from San Francisco.
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Uber's losses have widened in the second quarter as the company is ploughing spending into new businesses - including food delivery and bike sharing - and spending heavily in international markets where it's facing competition from well-funded local rivals. All eyes have been on Uber's financial performance over the last year. Chief executive Dara Khosrowshahi, who came in a year ago at the end of this month, has been focused on improving Uber's financial performance.
It's aiming for an initial public offering next year, and he has made an effort to control financial discipline and show that the company can cut costs. At the same time, he's told investors he doesn't think it needs to be profitable before going public. And he's willing to spend in areas of growth and opportunity for the company, and we definitely saw that this quarter.
So overall, Uber's bookings are growing. That's the amount of fares it's taking overall from passengers. And it's revenue has been growing. Its revenue is actually growing faster than bookings, showing that it's able to take a larger portion of that to itself. But at the same time, costs have risen. Expenses were up 22% from the previous quarter, and more than 30% from a year ago.
And there's a number of areas in which Uber has been ramping up costs. It's investing in discounts and incentives for drivers in the US and to lure new passengers, and also get them to try new businesses, such as its food delivery. But it's also turning its eyes to competitive international markets, after doing a bit of retrenchment in the past year. It's particularly focused on India and the Middle East.
Mr Khosrowshahi is telling investors that those investments have paid off. It's doing better against local rivals, such as Ola and Careem. Uber's also spent money on its latest acquisition, the bike sharing company Jump, which has rolled out in the US and is rolling out in Europe. And we'll see more expenses in the coming quarters related to adding the Jump bikes and to its platform and marketing.
It's also, overall, spent more money on sales and marketing in the US, where it's been running a campaign advertising a softer, more responsible image, another big part of Mr Khosrowshahi's mandate going into the IPO. But overall, it meant that expenses grew faster than revenues. And so, adjusted losses widened to $659m in the quarter, from $577m in the quarter the year before. And Mr Khosrowshahi has told investors that those investments will continue.
He says the company doesn't need to be profitable before the next year's planned IPO, but it does need to show a path to profitability. I would expect he would need to give more information to investors, as well, on the amount of money that Uber is spending on autonomous technology, as it tries to restart its programme after a deadly crash earlier this year, and as it's trying to keep its it's trying to keep up competition with local rivals in the US, such as Lyft.
It's having to lure new drivers. It's having to pay them to join its platform. And those things all take additional cash.