News has it that ride-hailing giant Uber Technologies has had to rack up heavy losses to bring its drivers back during the second quarter (Q2), after spending a large sum of money to do so. These losses have resulted in doubts about the reliability of the company’s work model, especially in the long term, with shares crashing by 8 percent during a single day on Wednesday.
In A Worse Shape Than Expected?
The losses for the quarter that ended in June came out to be US$509 million, even before taxes, interests, and other expenses were taken into account. These figures have come out to be narrower than last year, but wider than the previous quarter, as well as the expectations for Q2. A loss of some US$325 million was expected by analysts, and so, the actual figures can be said to be significantly higher than expected.
At the same time, Uber asserts that the losses in the next quarter will be much lower, and will stand at only around US$100 million, with gross bookings expected to range between US$22 billion to US$24 billion. This forecast seems to be in agreement with the expectations of analysts. However, the results may be subject to changes, owing to the raging Delta variant of the COVID, and the fear of a wider outbreak.
Investing In Recovery
Uber CEO Dara Khosrowshahi has said that the losses were incurred while the company tried to invest “in recovery” by investing in their drivers, and asserts that the firm “made strong progress.” This comes even after Lyft Inc., the 2nd most popular ride-hailing platform in the United States, reported its own forecast for the third quarter, which too, is quite weak. At the same time, however, the firm also generated its first adjusted profit during the second quarter. Uber too, believes that it will be able to generate its own quarterly adjusted profit before the year comes to a close.
These expectations might actually come true soon enough, since the pandemic has given Uber the chance to expand its focus on other business sectors, as people started going out less, and the need for rides decreased. The San Francisco-based firm has already invested a sum of $2.25 billion on freight, by purchasing Transplace. It has even ventured into the grocery and alcohol delivery industries through a acquisitions, and has struck up a convenience store item-ferrying partnership with GoPuff as well.