Uber Technologies Inc. (UBER) makes money by running a ride-hailing service, and takes a cut of the fares. The company also has a food order and delivery business, Uber Eats, and a freight shipping business, Uber Freight. These work similarly to ride-hailing, except that they match people with delivery drivers and freight shippers, respectively.
- Uber matches consumers looking for rides, food delivery, or shipping with people selling those services.
- Uber’s ride-hailing business is by far its biggest, but the Uber Eats and Freight businesses are growing substantially faster.
- Among its regulatory troubles, some cities have banned Uber outright, while California passed a law requiring Uber to treat its drivers as employees, not contractors.
Uber’s market cap is just under $50 billion. It has grown its revenue quickly, posting 42.1% year-over-year (YOY) growth in 2018. Despite this, it has consistently struggled to make a profit. While it was profitable in fiscal year (FY) 2018, bringing in approximately $1 billion in net income on $11.3 billion in revenue. Uber hasn’t sustained that profitability, having lost money in every quarter since Q1 2018, losing over a billion dollars every quarter so far in 2019. Uber’s EBITDA is better, but not much, registering a loss of $585 million last quarter.
Uber’s Business Segments
In Q3 2019 Uber reorganized the way it classifies its business segments . The segment breakdown below conforms to this new organization rather than the one at the end of fiscal year 2018.
Uber’s Rides segment is its flagship ride-hailing business. This segment is by far its largest, making up a full 76% of Uber’s revenue as of the end of Q3 2019, having grown 19% YOY. Uber reports earnings before interest, taxes, depreciation, and amortization (EBITDA). Even using this more generous measure of profitability, only Uber’s Rides segment is profitable.
UberEATS is an app that lets people order meals from restaurants remotely for either pickup or delivery. For delivery, customers are matched with drivers similarly to how they are for Uber’s ride-hailing business. UberEats was launched in 2014 as UberFRESH, before becoming UberEATS in 2015. UberEATS generated 17% of Uber’s revenue as of Q3 2019, seeing revenue grow 64% YOY.
Launched in 2017, Uber Freight connects truck drivers to shippers looking to move freight in the same way that its ride-hailing business connects drivers with people looking for a ride. Like Uber Eats, Uber Freight only makes up a small portion of Uber’s total revenue, or 6% as of Q3 2019. But it is also growing very quickly, having grown 78% YOY.
With a segment name lovingly cribbed from Alphabet, Uber’s Other Bets segment is a catch-all category for Uber’s early-development-stage projects. Examples include its JUMP electric bike rental service and Uber Work, which pairs people looking for shift work with staffing agencies. As this is a group of early-stage projects, the segment contributes just 1% of Uber’s total revenue.
Advanced Technologies Group (ATG) and Other Technology Programs
Uber’s ATG is its program to develop self-driving vehicles. The other major part of this segment is Uber Elevate, a program to develop vertical takeoff and landing (VTOL) aircraft ride-hailing. Like “Other Bets,” this segment is composed of very early-stage projects, and registered no revenue in the last quarter.
It’s an understatement to say that Uber is controversial. Most recently, the National Transportation Safety Board (NTSB) said that Uber was partially at fault for the 2018 death of Elaine Herzberg. Ms. Herzberg was killed when she was hit by an autonomous car owned by Uber, which had turned off the factory-installed automatic braking system.
In November 2019, the city of London, England refused to renew Uber’s license to operate in the city, citing safety concerns after Uber’s system allowed unauthorized drivers to pick up passengers.
Possibly the biggest threat to Uber is Assembly Bill 5, a law passed by the California state legislature in September that will go into effect January 1st, 2020. The law mandates that companies classify workers as employees and not contractors if the work they do is part of a company’s regular business or if the company exerts control over how they perform their tasks. This is important because Uber classifies its drivers as contractors, instead of employees. This allows them to deny workers minimum wages, health benefits, and sick leave.