US car service on austerity course
Investors are putting pressure on Uber
05/10/2022 8:34 am
Fewer new employees and less advertising: This is what Uber’s new savings plan looks like. Investors seem to be putting pressure on the company. They want to see a clearer path to profitability, according to CEO Khosrowshahi.
According to CEO Dara Khosrowshahi, Uber plans to cut marketing spend and hire fewer employees to focus on making profits. Investors have become less tolerant of companies that are gaining market share but doing so at the expense of their profits, the CEO wrote in an email to employees Sunday night about his recent discussions with investors.
His email said that “the targets have changed”. Investors wanted to see a clearer path to profitability. “It is clear that the market is experiencing a seismic shift and we must respond accordingly.” The group will “take even tougher action on the costs in all areas”.
Uber shares fell nearly 12 percent on Monday after CNBC first reported on the email. Shares are down more than 40 percent so far this year.
Tech companies that have boosted the US economy during the pandemic are now grappling with some of the biggest challenges in years, including concerns about rising interest rates and the reversal of some pandemic trends.
Uber wants to achieve positive cash flow
Uber and rival Lyft aim to become profitable on an adjusted basis before certain costs. They achieved these goals in the past year. In the quarter ended March, Uber widened its net loss significantly to $5.93 billion from $108 million a year earlier, including due to losses on investments in Chinese ride-hailing giant Didi Global Inc. The company has not provided guidance when he expects a net profit.
Uber previously stated that it aims to be cash flow positive by the end of this year. If the group achieves this goal, it would be the first time the company has made more money than it spends.
In the quarter, Uber more than doubled its revenue. While ship orders rose 12 percent in the quarter, growth slowed sharply. A year ago, the growth rate had almost tripled. According to Khosrowshahi, the delivery service should “grow even faster”. Investors are worried about how the company will fare in a recession.