Late last year I posted about how Lyft lost $127 million in the first half of 2015 on $46.7 million in revenue. I realize tech companies just operate in their own world and in many cases investors are willing to throw more money at them even when they’re losing almost three times as much as their total revenue in a year. At the same time, outside of the tech world that’s not typically a thing, at least not long term.
Well, if you thought Lyft’s losses were bad, Bloomberg just ran a story this morning about Uber’s losses (which are much worse in absolute terms, though as a ratio of revenue aren’t quite as bad).
Last Friday, Uber’s head of finance shared some details about their financial performance in the first half of 2015:
In the first quarter of this year, Uber lost about $520 million before interest, taxes, depreciation and amortization, according to people familiar with the matter. In the second quarter the losses significantly exceeded $750 million, including a roughly $100 million shortfall in the U.S., those people said. That means Uber’s losses in the first half of 2016 totaled at least $1.27 billion.
Uber’s losses and revenue have generally grown in lockstep as the company’s global ambitions have expanded. Uber has lost money quarter after quarter. In 2015, Uber lost at least $2 billion before interest, taxes, depreciation and amortization. Uber, which is seven years old, has lost at least $4 billion in the history of the company.
Uber’s net revenue in the first half of the year was just under $2 billion, and they lost about $1.27 billion. Somehow the company’s latest valuation is $69 billion.
A majority of the losses from Uber come from the subsidies that they’ve created for drivers as a way of encouraging them to join Uber and drive a certain amount. I’ve sometimes felt guilty about how low Uber fares are in some cities (like Los Angeles), though perhaps if they’re racking up such big losses largely due to subsidies, the drivers are in many cases making more than I think through various incentive programs.
I know largely that this is just how tech companies work, but it still blows my mind that Uber has such a valuation when they’re losing $1.27 billion with about $2 billion in net revenue over a six month period. I know their goal is growth, but the more they grow, the more money they seem to lose.
Sure, they’ve been fighting a lot of legal battles, and presumably they’ll be able to save on some costs as they scale more and figure out which markets are worthwhile. I also know their goal long term is probably to eliminate as much competition as possible and then raise prices across the board to a more sustainable level, but there will always be competition. After all, this is “just” a tech company, and the barriers to entry are pretty low, especially on a regional level.
Do you think Uber will ever turn a profit?