Uber reported one of its worst-ever quarterly results on Thursday, confirming estimates it gave ahead of its May IPO. The results reflected Uber’s scorched-earth strategy of killing its core-business margins to stand its ground against rising competition. CFO Nelson Chai said in a statement that Uber “started to see signs of less aggressive pricing by some ridesharing competitors, which has continued into” the second quarter. That may bode well for the current quarter but it is hard to see how it helped in the prior quarter and it does not address the increasingly fraught food-delivery business that Uber is betting on as a second act.
In short, Uber said it burned $851 million in cash from operations and capital expenditures, known as free cash flow, in the first quarter. That is more than double the amount of cash it burned in the same quarter a year ago—$387 million. At the same time, revenue rose by just 20% during this period.
Uber’s results show how hard it is becoming to grow the business. To boost revenue by 20% between the first quarter of last year and the first quarter of this year, Uber had to spend 54.6% more on sales and marketing, bringing the total cost of that line item to $1.04 billion. And the “cost of revenue” line item, which includes some subsidies for drivers and riders as well as other fees, expenses and insurance costs, climbed by 45.4% to $1.7 billion. For Uber’s food delivery business, the company had to triple “excess driver incentives,” an increase of nearly $200 million, to grow revenue by $253 million.