Uber’s just-released, unaudited first-quarter financial projections make one thing very clear: it will burn significant cash to preserve its market share in the U.S. and elsewhere. Management and Uber’s investors are betting the farm that rivals such as Lyft and Didi will become more “rational” and reduce their own cash burn when they realize Uber isn’t willing to give them a sliver of market share.
Uber’s Q1 loss before interest, taxes, depreciation and amortization, adjusted for one-time factors, is expected to jump to as much as $954 million in the first quarter, compared to a loss of $280 million last year on the same basis, the company disclosed in a regulatory filing. Even the lowest end of Uber’s Q1 EBITDA loss projection, $847 million, would mark the worst such loss in more than two years. Meanwhile, margins for its core businesses worsened for the fourth consecutive quarter. Uber Eats revenue started growing again after shrinking between the second and fourth quarters of last year, but it took $300 million worth of “excess” driver bonuses in the first quarter to do so. And Uber’s core ride-hailing net revenue grew just 10.4% year-over-year in the first quarter.
On the plus side, after Uber scored a coup by getting outside shareholders led by Toyota to pay $1 billion for shares in its separate self-driving-car research unit, Uber disclosed on Friday that Toyota also plans to contribute $100 million per year to the R&D effort for the next three years. (It’s similar to a deal that rival Lyft’s R&D unit has with a different auto manufacturer.) That will help decrease cash burn a little.
After Uber set an expected price range for its public shares that would value the firm at about $84 billion at the low end, the question now is, will public investors be OK with Uber’s scorched earth strategy amid slowing growth?
(This brief has been updated to correct Q1 loss amounts.)