January 20, 2021

Uber: Uber’s ride-hailing enterprise craters, however deliveries surge in pandemic

By Kate Conger

OAKLAND: Uber is synonymous around the globe with experience hailing. However because the coronavirus pandemic reveals few indicators of loosening its grip, the corporate might develop into extra intently related to one other enterprise: supply.

Uber mentioned Thursday that its ride-hailing enterprise had cratered within the second quarter as individuals traveled much less within the pandemic. The corporate’s income fell 29% to $2.2 billion from a yr in the past — the steepest decline since its preliminary public providing in Could 2019 — as its internet loss totaled $1.eight billion.

However its Uber Eats meals supply service surged, with income greater than doubling from a yr in the past to exceed that of experience hailing for the primary time. Income for Uber Eats soared to $1.2 billion, whereas rides got here in at $790 million.

Dara Khosrowshahi, Uber’s chief govt, referred to as the supply enterprise “a pure hedge” to its ride-hailing service.

“As some individuals keep nearer to house, extra individuals are ordering from Uber Eats than ever earlier than,” he mentioned in a press release.

Uber has doubled down on meals supply in current months. In Could, Khosrowshahi sought to accumulate Grubhub, a supply service, however the firms struggled to agree on phrases and to take care of potential antitrust scrutiny. Final month, Uber mentioned it will as a substitute purchase the supply service Postmates in an all-stock deal valued at $2.65 billion.

Shopping for Postmates is anticipated to present Uber roughly 35% of the U.S. meals supply market, analysts mentioned. That might enable Uber to problem the supply chief, DoorDash, which is estimated to have a 45% market share.

The combined outcomes despatched Uber’s share worth down greater than 4% in after-hours buying and selling.

“Proper now, they’re swimming within the pink ink,” mentioned Dan Ives, managing director of fairness analysis at Wedbush Securities. “Buyers are nonetheless giving them the advantage of the doubt due to Uber Eats.”

Uber has constantly misplaced cash, and Khosrowshahi stays underneath strain to make it worthwhile. The corporate’s internet loss within the second quarter narrowed from $5.2 billion a yr in the past, when it was coping with stock-based compensation prices from its preliminary public providing. Uber mentioned it nonetheless meant to develop into worthwhile someday subsequent yr.

The corporate additionally mentioned there have been indicators that its rides enterprise was bettering internationally. In France, enterprise had recovered about 70%, it mentioned, whereas rides to work and to social gatherings in locations corresponding to Hong Kong, New Zealand and Sweden have been increased than that they had been earlier than the pandemic.

However in the USA, which is one in all Uber’s largest markets, rides have been down 50% to 85% in lots of main cities.

Uber additionally faces authorized challenges in California and Massachusetts, the place the state attorneys basic have sued Uber and Lyft for violating labor regulation. Drivers in each states must be categorized as workers, not unbiased contractors, and be entitled to full employment advantages, the states have mentioned.

If the lawsuits are profitable, they may diminish Uber’s enterprise as a result of it will make it costlier to function, analysts mentioned.

“It will likely be onerous to argue that Uber and Lyft are the way forward for transportation,” mentioned Tom White, an analyst for D.A. Davidson. “These guys will look much more like tech-centric, tech-smart taxi operators.”