In 2023, Uber achieved an important milestone, earning more money than it spent for a full year for the first time. It was widely seen as a sign that the perennially cash-strapped business was finally on a more sustainable path.
Today, there are signs that the journey may be longer than we thought.
The ridehailing and delivery company reported a surprise net loss of $654 million for the first quarter of the year, as legal settlements and equity investments proved to be more of a drag on Uber’s business than many expected.
The ridehailing and delivery company reported a surprise net loss of $654 million
Wall Street analysts had been expecting a profit of $474 million, according to The Wall Street Journal. In particular, the company’s never-ending legal battles over the classification of its drivers, as well as the waning demand in certain markets, were seen as slowing down Uber’s financial momentum.
Still, the core aspects of Uber’s business appear to be strong. The company’s adjusted earnings of $1.4 billion were up 82 percent year over year. Uber’s gross bookings, or the value of the transactions on its app, grew 20 percent to $37.65 billion. Revenue was also up 15 percent to $10.1 billion.
So why the loss? In short, legal settlements, stock holdings in other companies, and fewer rides in key markets like Latin America. All of these factors have the appearance of being unrelated to Uber’s business of delivering people and goods — but they are also extremely reflective of the company’s core business model.
It’s no secret that Uber classifies its drivers as independent contractors as a way to reduce labor costs and position itself as simply an app that connects customers to enterprising freelancers who work for multiple ridehailing and delivery companies. And yet, for years, the company has fought against attempts by local legislatures and courts to reclassify its drivers as employees and pay them better.
Still, the core aspects of Uber’s business appear to be strong
The company has spent tens of billions of dollars to oppose these efforts, and while it occasionally wins, it doesn’t seem to be any closer to putting the issue to rest.
The latest iteration is playing out in Minneapolis, where local leaders have announced new wage legislation for Uber and Lyft drivers, prompting the company to threaten to leave the city if it passes. Driver classification fights are surfacing in Massachusetts and California.
And when things look especially grim, Uber settles — which is why the company’s profitability is looking shakier than it should. Most recently, Uber agreed to end its fight with Australian taxi drivers by agreeing to pay them $178 million.
Unlike its much smaller rival Lyft, Uber is a global company, arguing that its scale gives it leverage in its fight to bend local labor rules to its will. And while there have been successes, it still seems as if the fight will keep going on and on, unimpeded.
The Biden administration has Uber and other gig economy companies in its crosshairs. Depending on enforcement, it could increase the financial uncertainty swirling around the company and further disrupt its plans for sustainable profits.
People don’t seem to care that Uber is more expensive. But if the company had to suddenly start paying drivers full benefits and a living wage across major markets, that willingness could erode in the face of a much more expensive trip or takeout order.