Uber Predicts Lower Profits as Discounted Rides Increase Service Usage
Uber Technologies has forecasted lower profits for the upcoming first quarter due to an increase in affordable ride options, which has boosted service usage. The company’s adjusted earnings per share are expected to fall between 65 and 72 cents, missing market expectations of 76 cents. Additionally, Uber reported that fourth-quarter earnings were also below estimates, leading to an over 8% drop in its stock during premarket trading.
Key Financial Metrics
For the fourth quarter, Uber’s earnings per share were 71 cents, which was below analyst estimates of 79 cents. Despite this, the company saw a significant rise in trip volumes, with an impressive 22% increase in rides. This surge was largely attributable to competitive pricing strategies, including shared rides and other low-cost mobility options.
- Fourth Quarter Earnings per Share: 71 cents (Expectations: 79 cents)
- First Quarter Adjusted Earnings Forecast: 65-72 cents (Expectations: 76 cents)
- Gross Bookings (Q4): $54.14 billion
- Revenue (Q4): $14.37 billion (up 20%)
Change in Leadership
In a significant corporate shakeup, CFO Prashanth Mahendra-Rajah will be leaving his position. He has served as finance chief since November 2023. Balaji Krishnamurthy, a former Goldman Sachs executive, will take over this role.
Shifts in Accounting and Revenue Projections
From January, Uber will modify its accounting methods for certain UK operations, resulting in a projected decline of about 350 basis points in mobility revenue margins for the first quarter and into 2026. However, this change will not impact overall profitability, according to company statements.
Growth Prospects
Despite the challenges, Uber’s CEO Dara Khosrowshahi remains optimistic about the future. He noted that enhanced pricing strategies and lower insurance costs are anticipated to accelerate growth and improve margins in the U.S.
The company is also positioning itself firmly within the autonomous ride-sharing sector. It is collaborating with companies like Alphabet’s Waymo and Lucid Motors to integrate robotic taxi services alongside traditional human-driven rides.
Overall Performance in Mobility and Delivery Services
Uber’s growth strategy has yielded positive results, especially in its delivery segment, which has outpaced mobility growth due to rising demand for convenience services. This trend indicates a shift in consumer preference, further reinforcing the company’s commitment to providing diverse mobility solutions.
As Uber looks to the future, its focus on affordability, technological advancements, and strategic partnerships aims to solidify its market position while navigating the challenges of a competitive landscape.