On Monday, Uber posted its financial results for the third quarter, and once again, the tech firm disappointed Wall Street. The corporation generated $3.81 billion in revenue in Q3 2019, which beat analyst estimates of $3.69 billion. However, the rideshare company also recorded a $1.16 billion net loss in the period ending September 30, up 2.9 percent from Q3 2018.
After posting its earnings report, Uber saw its stock price fall by five percent.
In an earnings conference call, CEO Dara Khosrowshahi said his firm would be profitable by 2020. Moreover, the executive offered guidance lowering Uber’s total 2019 losses from $2.9 billion to $2.8 billion. Khosrowshahi noted his company would use its technological resources to drive profitability.
Explaining Uber’s Massive Losses
Notably, Uber’s financial shortfall last quarter was not entirely due to falling income. The company issued $401 million in stock-based compensation in Q3. However, the firm’s $585 million adjusted loss increased by 17 percent from the same frame last year. On the bright side, Wall Street predicted the conglomerate would post adjusted losses of $808 million in the third quarter.
In addition to stock payouts, Uber also struggled last quarter because it failed to grow its business sufficiently. An average of 103 million users hailed a ride or ordered food using the company’s platform every month in Q3. Though the firm’s monthly active user base increased by 26 percent year-on-year, the company still fell short of analyst forecasts.
Wall Street projected the firm would have 107 million monthly active users in Q3. Moreover, market experts said the firm’s Q3 gross bookings revenue would hit $16.7 billion, but it only totaled $16.5 billion.
Growth Segments and Looming Problems
Although Uber’s core ridesharing business is struggling, the firm showed improvement in many of its other segments. As an example, the firm’s food delivery segment Uber Eats, earned $645 million, an increase of 64 percent from Q3 2018. The firm also saw a 78 percent revenue improvement in its Uber Freight, which brought in $218 million last quarter.
Furthermore, the company’s Other Bets segment, which included its scooter business, rose 1166 percent. In the third quarter of last year, that part of the firm made $3 million but took in $38 million in Q3 2019. As the corporation relaunched its credit card last week, the company should see continued growth in Other Bets next quarter.
That said, Uber is facing two serious problems that could affect both its near-term and long-term status. On Wednesday, shareholders and employees who bought stock in the firm will be able to sell their shares for the first time. Given that the company hasn’t posted a profit since Q1 2018, the corporation could experience a major stock sell-off.
Besides, California recently passed a bill requiring gig economy firms like Uber to reclassify their freelancers as employees. Set to go into effect in January, analysts predict the new law could increase the ridesharing companies operating costs in the state by 30 percent.
Currently, Uber, Lyft, and DoorDash are working together to collect enough signatures to get a counter initiative on the California ballots in 2020. In September, New York City passed legislation forcing the transportation company to institute new minimum pay standards for its drivers.
If other states and municipalities follow California and New York’s lead, Uber’s unproven business model will face an existential challenge.