Uber’s Revenue Soars 20% in Q3, Yet Shares Drop on Missed Growth Expectations
Uber Technologies Inc. (NYSE: UBER) released its third-quarter 2024 earnings report on Thursday, presenting a rise in revenue and profitability alongside a few noteworthy challenges. While the company outperformed revenue expectations, it narrowly missed targets for gross bookings, a critical metric in assessing demand and growth potential.
This mixed result led to a 6% drop in Uber’s share price in early trading, reflecting investor caution over the company’s growth trajectory and exposure to global macroeconomic factors.
Uber reported $11.19 billion in revenue for the quarter, representing a 20% year-over-year increase from $9.3 billion in Q3 2023 and a 4.5% sequential rise from the $10.7 billion reported in Q2 2024. This gain surpassed analyst expectations of $10.98 billion (LSEG), highlighting Uber’s ability to maintain strong demand despite a competitive environment.
However, the company’s gross bookings—a comprehensive measure encompassing all ride-hailing, delivery, and freight transactions—came in at $40.97 billion, falling short of the $41.25 billion estimated by analysts. Although this marked a 16% year-over-year increase from $35.28 billion in Q3 2023, the miss suggests Uber’s growth momentum may be tapering, particularly amid foreign exchange headwinds and sector-wide pressures.
Uber’s net income surged to $2.6 billion, or $1.20 per share, bolstered by a $1.7 billion unrealized gain from equity investments, compared to $221 million, or 10 cents per share, in Q3 2023. This increase in net income is notable; however, it reflects gains that may be one-off or non-recurring in nature, raising questions about the sustainability of these levels.
Adjusted EBITDA jumped to $1.69 billion, up 55% from $1.09 billion in Q3 2023 and 3% higher than the $1.64 billion recorded in Q2 2024. This metric beat analyst projections of $1.64 billion, demonstrating Uber’s improved efficiency and scale across its business segments. Adjusted EBITDA margin as a percentage of gross bookings increased to 4.1%, up from 3.1% in the same period last year, indicating better cost management despite rising operational expenses.
Uber’s Mobility segment generated $6.41 billion in revenue, up 26% from $5.07 billion in Q3 2023 and a 4% increase from $6.15 billion in the previous quarter. Gross bookings in Mobility rose 17% year-over-year to $21 billion, though growth has moderated sequentially from the 19% year-over-year growth achieved in Q2 2024.
The Delivery segment performed similarly well, with $3.47 billion in revenue, marking an 18% year-over-year increase from $2.94 billion in Q3 2023 and up 5% from Q2 2024’s $3.3 billion. Gross bookings for Delivery reached $18.7 billion, growing 16% year-over-year. Although this growth is impressive, it’s somewhat softened by comparison with the 19% year-over-year growth seen in the previous quarter.
The Freight segment showed minimal improvement, with revenue of $1.31 billion—up just 2% year-over-year from $1.28 billion in Q3 2023 and a 3% increase from $1.27 billion in Q2 2024. Given the significant logistical and competitive challenges in the freight sector, Uber’s Freight division continues to face headwinds, underscoring the difficulty of achieving meaningful growth in a capital-intensive, low-margin business.
Uber’s Monthly Active Platform Consumers (MAPCs) reached 161 million, a 13% increase from 142 million in Q3 2023. Additionally, Uber reported 2.9 billion trips, up 17% from 2.4 billion trips a year ago, with each active consumer completing an average of 5.9 trips monthly, an all-time high.
Uber’s membership program, Uber One, recorded a notable 70% year-over-year increase in subscribers, reaching 25 million. These members spend three times as much as non-members, which significantly contributes to Uber’s revenue stream. The surge in Uber One subscriptions has also boosted Uber’s nascent advertising segment, which grew nearly 80% year-over-year, helping to offset cost pressures.
The company generated $2.2 billion in operating cash flow and reported $2.1 billion in free cash flow, a 123% increase year-over-year. The company has $9.1 billion in unrestricted cash and equivalents, positioning it well for strategic investments or acquisitions. However, Uber still carries significant debt and announced plans to redeem $2 billion by the end of 2024. This move reflects the company’s need to manage its leverage ratio while funding growth initiatives.
For the fourth quarter, Uber forecasts gross bookings between $42.75 billion and $44.25 billion, with the midpoint slightly below analysts’ expectations of $43.68 billion. The company expects adjusted EBITDA of $1.78 billion to $1.88 billion, a slight miss from the $1.83 billion analysts were hoping for. These projections indicate tempered growth expectations, influenced by continued foreign exchange challenges and potential demand pressures.
The cautious Q4 guidance and slight miss on gross bookings have amplified investor concerns about Uber’s growth stability and market competition, as evidenced by the initial 6% drop in share price. With smaller ride-sharing rivals like Lyft (NASDAQ: LYFT) experiencing similar pressures, Uber’s trajectory highlights the challenges the entire industry faces amid slowing global demand growth and cost inflation.
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