In the past 25 years it has been pretty normal for tech start-ups to remain unprofitable for quite some time as the business is growing. Big capital investments help them to scale and come into profitability. Uber is finding this rather difficult, though.
Reading through their financial report to the market, it is abundantly clear that they are burning through cash at an immense rate. Uber dubbed 2019 their “investment” year, where they pump as much cash into the business to stabilise revenue streams, bolster infrastructure and expansion plans and deliver impressive growth numbers across its various businesses. To this end, Uber have reported a loss of $5.2 billion in Q2 2019.
Uber CEO Dara Khosrowshahi said in a statement that “our platform strategy continues to deliver strong results, with Trips up 35% and Gross Bookings up 37% in constant currency, compared to the second quarter of last year. In July, the Uber platform reached over 100 million Monthly Active Platform Consumers for the first time, as we become a more and more integral part of everyday life in cities around the world.”
According to Wall Street analysts, this was expected. “It’s a routine cost for newly public companies—though Uber’s is much larger due to the company’s size – and investors are likely to forgive it as a one-off,” according to Bloomberg. It seemed this loss was already priced into the Uber stock price, as it actually increased slightly off of the news that its biggest competitor, Lyft, also made a nearly $1 billion loss. In after hours trade, however, it plummeted 12%.
They are hoping to follow the business model of Amazon, which also lost an immense amount of money after going public and as we all know are now very profitable. By their own admittance, Uber wants to be the “Amazon for transportation.”