Uber records first annual profits as market value approaches $250b

Uber said it had swung from a loss in 2022 to a NZ$1.8b operating profit in the year to December 31. Photo / Jeff Chiu, AP

Uber has reported its first annual operating profit, marking an “inflection point” in the tumultuous history of the ride-sharing company and sending its shares to fresh highs.

The San Francisco-based company’s earnings on Wednesday surpassed analysts’ expectations, thanks to strong demand for ride-hailing and deliveries, as well as its growing advertising business.

Operating profit in 2023 was $1.1 billion (NZ$1.8b), compared with a $1.8b loss in 2022, with fourth-quarter operating income of $652 million comfortably beating forecasts. Uber also reported a net profit of $1.9b for 2023 compared with a $9.1b loss in 2022.

Dara Khosrowshahi, chief executive, celebrated the results as “an inflection point for Uber, proving that we can continue to generate strong profitable growth at scale”.

Uber’s shares rose about 1 per cent by midday trading in New York. The stock has enjoyed a meteoric rise in the past 12 months, more than doubling and sending the company’s market value to almost $150b (NZ$245.6b).

It is almost five years since Uber flopped at its initial public offering, first failing to meet expectations of a $120b value and then delivering the worst-ever first-day dollar loss for a debuting US company.

Steep losses and fundamental doubts about the business model have dogged Uber since, as it has spent billions of dollars fighting ride-hailing rivals such as Lyft, food delivery competitors such as DoorDash, and hostile regulators around the world.

As the world emerged from the Covid pandemic, however, Uber’s margins fattened as competitors fell by the wayside and the company ground down costs. Such is the turnaround that Uber has signalled it will announce plans for a share buyback at an investor day next week.

Analysts at Citi said this month that they expected Uber to unveil such a programme and “wouldn’t rule out” its first-ever dividend announcement.

Uber’s potential move to return cash to investors comes after it racked up more than $30b in operating losses since 2014, the first year for which it disclosed details of its finances.

Under co-founder Travis Kalanick, the company had raised huge amounts of capital in an aggressive global push to dominate the ride-sharing market. He was replaced by Khosrowshahi, the former chief executive of Expedia, in 2017 with a mission to avoid heated conflict with regulators, cut costs and prioritise profitability.

The final quarter of the year — typically the strongest for ride-share companies — was “a standout quarter to cap off a standout year”, said Khosrowshahi. Revenues rose 15 per cent to $9.9b.

Forecasts for the first quarter of 2024 were in line with analysts’ estimates, with gross bookings — or the value of fares paid — expected to jump to between $37b and $38.5b from the same period a year earlier.

Uber’s user base was “bigger and more engaged than ever”, said Khosrowshahi, with the number of monthly active users reaching a record high of 150m.

Uber’s quarterly gross bookings were up 22 per cent to $37.6b, just ahead of analyst expectations and an acceleration from the 21 per cent growth in the previous quarter.

The number of Uber trips in the fourth quarter surged 24 per cent to 2.6b, while adjusted profit margins for both the ride hailing and the restaurant, grocery and retail delivery businesses improved year on year.

The grocery and retail delivery sector, which Uber has sought to push further into, accounted for a fifth of annual growth in the delivery segment, the company said.

However, $1b of the earnings boost was due to a rise in the carrying value of the company’s equity investments — largely an increase in the worth of its stakes in self-driving car company Aurora and Chinese ride-hailing group DiDi.

Written by: Camilla Hodgson in San Francisco. Additional reporting by Yasemin Craggs Mersinoglu

© Financial Times