Uber is very unprofitable. Indeed, Uber’s Q1 gross platform spend of $11.3 billion generated $2.6 billion in net revenue for the app-dispatched taxi company, leading to a net loss of $601 million. The company’s adjusted EBITDA was a slimmer -$304 million in the period.
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How Uber loses money is something that requires explanation. How a company takes a cut of fares, while non-employee drivers cover most operational costs is something that we have discussed before.
The short answer is that Uber’s cost of revenue (cost of goods sold) consumes about half its revenue, and the company spends more than its gross profit can support. That pedestrian explanation of losses aside, we have new numbers that help underscore the origin of Uber’s deficits.
The Information reported this week that Uber’s losses stem, in part, from high costs at its self-driving unit. Of course, it was known hat Uber was spending on building out self-driving tech, but the extent of the costs may surprise.
Per the report, Uber spent “between $125 million and $200 million a quarter on its self-driving car unit over the past 18 months.” If we take the midpoint between the two over six quarters, Uber has spent just under $1 billion on self-driving work in the last year and a half.
The Information details that “Uber has invested least $2 billion in [its self-driving] unit over the past three years.” From that spend figure and time frame, we can infer that Uber’s investment into self-driving has been steady from a cost perspective, as its 18-month and 3-year expense windows average out to roughly the same quarterly spend.
Prior leadership at Uber deemed self-driving tech as existential. Now, with the global landscape for self-driving more competitive than ever, and Uber heading for an IPO that will require as clean an income statement as possible, it may be that Uber winds up following Lyft’s model.
Top Image Credit: Li-Anne Dias