Washington. Uber lost more than $1 billion when it reported its first quarterly earnings as a public company Thursday. But executives said a ride-hail price war may be cooling, something that may result in fewer discounts for riders.
Industry competition appears to be waning, executives noted on a call with analysts, marking a departure from the typical pricing dynamics that send fares lower and lower, burning through cash in the process. That means Uber can shift strategy on its most discounted offerings including UberPOOL, which matches riders headed in the same direction.
“Historically we have priced POOL very aggressively in order to create (the) opportunity to match,” Uber CEO Dara Khosrowshahi said. “Now the majority of the work is improving our matching opportunities.” That ends up lowering costs to the company for each ride.
The company’s loss of $1.01 billion in the first three months of the year contrasted with a one-time profit of $3.75 billion in the same quarter a year ago after the sale of overseas investments. The company lost about $478 million on operations in the first quarter a year ago.
Still, Uber reported that bookings and the number of people using its platform climbed by more than 30%, both signs of growth.
Uber’s steep loss shows the hurdles the ride-hailing company faces in achieving executives’ goal of eventually becoming a global one-stop shop for transportation and logistics. The company has outlined a vision for itself as a competitor with tech giant Amazon, applying its vast data trove and routing software to rewrite how goods and people move from one place to another and using computer algorithms to remove what tech sees as inefficiencies in the world.
On its quarterly earnings call, executives said 2019 represented a year of investment, although they did not directly address the company’s losses. Analysts focused their questioning on how Uber plans to expand its footprint in the areas of ride-hailing, food delivery and freight on the heels of its IPO. Khosrowshahi said Uber was determined to prove its worth to investors.
“Our story is simple: We’re the global player,” Khosrowshahi said. “We’re the largest player in personal mobility ... Our job is to grow fast at scale and more efficiently for a long, long time.”
Uber has had a rocky start since going public, an embarrassing debut for what was projected to be one of the biggest initial public offerings in US history. Its shares started trading on the New York Stock Exchange priced at $45, which valued the company at roughly $82 billion, the low end of the company’s price range. But Wall Street showed its doubts, and stocks opened lower and haven’t hit that price since.
The stock’s poor performance raises questions over whether gig-economy companies that lose billions of dollars a year are sustainable — and whether the public pressure over profits puts a greater squeeze on the millions of people who work for them. Despite an extensive leadership overhaul at Uber, investors still consider the company a risky bet.
Analysts expressed concern that as the company focuses on turning an eventual profit, fares might go up and consumer incentives to attract riders could dwindle. Uber executives acknowledged that fares have risen in New York because of new caps on drivers and a city initiative requiring ride-hail companies to provide a higher wage to contractors. But they said market share there has remained steady.
Still, Khosrowshahi said, Uber won’t give up any ground to competitors who want to offer equally cheap rides as the ride-hail giant.
“Now if it is about dollars we’re gonna push back as hard as anyone pushes us,” he said.