Uber’s growth strategy: $1 billion says there could be a weakness

Uber has been growing and perfecting their services, as well as gaining more and more customers and markets in recent years. The ride-hailing company’s customers have grown to more than 111 million and its total revenue has risen by 37% in a year. With this international success, over the past five years, Uber has started to take on several side projects on top of what it’s already got. But is this such a good idea at this time?

According to Reuters, the company is expecting to lose more than $1 billion this year. Apparently, even though its customer base has grown, it is at a loss on net revenue. Three-quarters of Uber’s revenue is coming from the ride-hailing service (especially Uber Comfort) and it should be enough for the company to be profitable. So why is this not happening?

Unfortunately, one of Uber’s side projects, Uber Eats, has been a strain on Uber’s finances, and Uber’s CEO, Dara Khosrowshahi, has promised that they will make more efforts for the service to become more profitable. This might not be easy given the fact that the food-delivery industry is very competitive. Some analysts are actually doubting the strategy. For example, Eric Ross, an analyst at Cascend Securities, has told Reuters he preferred the stock of Uber’s smaller competitor, Lyft, exactly because of the lack of demanding side projects.

It’s not only Uber Eats, though - Uber has been developing autonomous cars and commercial passenger drone shuttles among other projects as well. Unfortunately, Uber’s attempt at self-driving vehicles was halted after a fatal incident involving one of the autonomous cars.

In total, Uber’s net loss has amounted to $1.1 billion, which grew from last year’s $887 million.

To mitigate the situation, Uber has promised to leave markets where it’s unable to become a top player in regards to food delivery - as was the case in India, where the company sold their food-delivery business to a local competitor. According to Reuters, after the announcement, investors have been satisfied with the news and the company’s shares actually went up. It seems that investors have favoured Uber’s focus on profit rather than on growth at the moment.

Uber has also been experiencing certain difficulties in some countries in regards to regulatory actions, for example countries and cities requesting increased driver pay, lower congestion and better safety. However, Uber’s CEO states that he is confident that they can work towards a better regulatory environment. They are also planning to work on increasing the number of returning customers and premium ride use.