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What Uber’s Q3 Results Ask About Its IPO Timing

Morning Markets: Let’s take one more look at Uber’s third quarter, its continued losses, and its IPO timing before we head into the holiday torpor.

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Last week Uber reported its third-quarter financial results, including gross bookings of $12.7 billion (up 34 percent year-over-year), net revenue of $2.95 billion (38 percent greater than its year-ago result), and a GAAP net loss of $1.07 billion (down 27 percent from the year-ago quarter).

The figures look pretty good. Uber’s aggregate commercial platform spend is up more than a third, the company’s own revenue is up a similar amount, and losses are falling. However, things are a bit more complicated than it seems from the top line, year-over-year figures.

Uber grew quickly from its year-ago third quarter. But compared to the second quarter of this year, its most recent growth was a bit slack.

We can show that by comparing its third-quarter, sequential growth pace to its second quarter result. Here’s TechCrunch’s Megan Rose Dickey on the company’s recent figures: “Revenue for Q3 was up five percent quarter over quarter at $2.95 billion [while] gross bookings were up six percent quarter over quarter[.]” In contrast, Uber grew its revenue 8.2 percent in the second quarter from the first, and its gross bookings 6.2 percent.

So revenue growth fell from over 8 percent on a sequential-quarter basis to 5 percent in the third quarter. That’s steep. (Uber’s second quarter also featured higher year-over-year growth results, and even then deceleration was the story.)

And the company’s net loss appears small compared to its year-ago figure, falling 27 percent. However, the greater-than-one-billion-dollar deficit is larger than its Q2 2018 net loss by over $100 million and far greater than Uber’s first quarter results which touted divestment-juiced profit.

Uber has lost more money in prior quarters, but for a company to see its losses expand in a quarter in which its growth slows, while it is prepping for an IPO, is a bit much.

That’s the question I can’t get out of my head. If Uber is still investing in its business, letting its losses scale as it seeks to grow new revenue sources before it goes public, that’s fine. But to do that while hurtling towards an IPO feels odd.

And that’s why I think that Uber broke out Uber Eats’ revenue this quarter. The Uber effort is now about a sixth of its full gross spend. And it’s growing quickly. Over there, the company seems to be saying, is growth.

If the revenue slice will be enough for investors to get past a company that is currently running a net margin of worse than negative one third isn’t clear.1

Uber is nearly 10 and has raised tens of billions in capital and debt. And it just posted a $1 billion loss in a quarter that saw, again, slowing year-over-year growth, replete with sequential-quarterly growth slowdowns. Yeesh.

Top Image Credit: Li-Anne Dias.

  1. I am a huge Uber Eats user, and I dig the service. But here I want to remind readers that two burritos and delivery can run you over $25 in San Francisco. That’s a good way to grow gross spend, I reckon. How much net revenue that order generates for Uber, and the resulting margin, isn’t clear.

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