Uber’s ride-hailing business craters, but deliveries surge
OAKLAND >> Uber is synonymous around the world with ride hailing. But as the coronavirus pandemic shows few signs of loosening its grip, the company may become more closely associated with another business: delivery.
Uber said Thursday that its ridehailing business had cratered in the second quarter as people traveled less in the pandemic. The company’s revenue fell 29% to $2.2 billion from a year ago — the steepest decline since its initial public offering in May 2019 — as its net loss totaled $1.8 billion.
But its Uber Eats food delivery service surged, with revenue more than doubling from a year ago to exceed that of ride hailing for the first time.
Revenue for Uber Eats soared to $1.2 billion, while rides came in at $790 million.
Dara Khosrowshahi, Uber’s chief executive, called the delivery business “a natural hedge” to its ride-hailing service.
“As some people stay closer to home, more people are ordering from Uber Eats than ever before,” he said in a statement.
Uber has doubled down on food delivery in recent months. In May, Khosrowshahi sought to acquire Grubhub, a delivery service, but the companies struggled to agree on terms and to deal with potential antitrust scrutiny. Last month, Uber said it would instead acquire the delivery service Postmates in an all-stock deal valued at $2.65 billion.
Buying Postmates is expected to give Uber roughly 35% of the U.S. food delivery market, analysts said. That would allow Uber to challenge the delivery leader, Door
DoorDash, which is estimated to have a 45% market share.
The mixed results sent Uber’s share price down more than 4% in afterhours trading.
“Right now, they are swimming in the red ink,” said Dan Ives, managing director of equity research at Wedbush Securities. “Investors are still giving them the benefit of the doubt because of Uber Eats.”
Uber has consistently lost money, and Khosrowshahi remains under pressure to make it profitable.
The company’s net loss in the second quarter narrowed from $5.2 billion a year ago, when it was dealing with stock-based compensation costs from its initial public offering.
Uber said it still intended to become profitable sometime next year.
The company also said there were signs that its rides business was improving internationally.
In France, business had recovered about 70%, it said, while rides to work and to social gatherings in places such as Hong Kong, New Zealand and Sweden were higher than they had been before the pandemic.
But in the United States, which is one of Uber’s largest markets, rides were down 50% to 85% in many major cities.
Uber also faces legal challenges in California and Massachusetts, where the state attorneys general have sued Uber and Lyft for violating labor law.
Drivers in both states should be classified as employees, not independent contractors, and be entitled to full employment benefits, the states have said.
If the lawsuits are successful, they could diminish Uber’s business because it would make it more expensive to operate, analysts said.
“It will be hard to argue that Uber and Lyft are the future of transportation,” said Tom White, an analyst for D.A. Davidson. “These guys will look a lot more like tech-centric, tech-smart taxi operators.”