In 2023, Uber achieved a major milestone: for the first time it made more money than it spent for a full year. It was widely seen as a sign that the always cash-strapped business was finally on a more sustainable path.
Today, there are signs that the journey may be longer than we thought.
The transport and delivery company reported a surprise net loss of $654 million during the first quarter of the year, as legal settlements and capital investments turned out to be a bigger drag on Uber's business than many expected.
The transportation and delivery company reported a surprise net loss of $654 million.
Wall Street analysts expected a profit of $474 million. tech/uber-q1-earnings-report-2024-5741e2c0″>according The Wall Street Journal. In particular, the company's endless legal battles over the classification of its drivers, as well as declining demand in certain markets, were seen as slowing 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 increased 82 percent year over year. Uber's gross bookings, or the value of transactions on its app, grew 20 percent to $37.65 billion. Revenue also rose 15 percent to $10.1 billion.
So why the loss? In short, legal agreements, shareholdings in other companies and less travel in key markets such as Latin America. All of these factors appear unrelated to Uber's business of delivering people and goods, but they also largely reflect 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 simply as an app that connects customers with entrepreneurial freelancers who work for multiple transportation and delivery companies. And yet, for years, the company has fought 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 opposing these efforts, and while it occasionally wins, it appears no closer to ending the problem.
The last iteration is playing in minneapolis, where local leaders announced new pay legislation for Uber and Lyft drivers, prompting the company to threaten to leave the city if it passes. Fights are breaking out over driver classification in Massachusetts and California.
And when things look especially bleak, Uber settles, which is why the company's profitability seems shakier than it should. More 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, and it argues that its scale gives it leverage as it fights to bend local labor rules to its will. And although there have been successes, it still seems that the fight will continue and continue, without obstacles.
The Biden administration has Uber and other sharing economy companies in your sights. Depending on the application of the law, it could increase the financial uncertainty surrounding the company and further disrupt its plans to make sustainable profits.
People don't seem to care that Uber is more expensive. But if the company were to suddenly start paying drivers full benefits and a living wage in major markets, that provision could erode in the face of a much more expensive ride or takeout order.
